Portal Combat 2: Pillar Two compliance post-mortem

[MUSIC] Welcome to Cross-Border Tax Pots, where we discuss the latest trends in international taxation, from geopolitics to the OECD's latest developments. I'm Doug McConey, PWC's International Tax Services Global Leader. PWC's Pillar 2 engine, powered by Beacon, is a game changer for pillar 2 compliance, provision, and modeling calculations. Built on a graph system utilizing over 20 years of international tax technology, this cloud-based centralized rules engine is developed by a team of pillar 2 tax experts from around the globe. PWC's Pillar 2 engine is currently available as a service and is also available to license. On this week's episode of Cross-Border Tax Talks, we're back in PWC's policy on demand studio in Washington, D.C., where I'm excited to welcome Pat Cogland to the podcast. Pat is a Chicago-based director in PWC's quantitative solutions and technology's practice, which is a subset of our international tax services practice. Pat, welcome to the podcast. I'm happy to be here. Long time listener, first time caller. I love it, Pat. I'm very excited to have you on. We've been working very closely for four years on Pillar 2, but before we dive in, I wanted to share with listeners that you played running back for Notre Dame College football in 2010 and 2011. Now listeners will need to Google you for your career statistics, but we're not going to dive into those. There's not much there. It's, hey, you're on, you're on the list name. And for particularly for international listeners, the fact that Pat made the Notre Dame football team as an amazing accomplishment in and of itself. It's just, it's absolutely amazing. And the fact that he wasn't hitting the head too many times to do international taxation as a career is also saying something. Yeah. So Pat, how do you compare learning the Notre Dame football playbook to learning the Pillar 2 rules? I mean, now that you mention it, I think there's there's a lot of similarities. It starts with the simple, the the base plays in Pillar 2. It's the model rules. And then it gets more complex. You get the commentary. You get all of the different variations of plays. And then you get just general changes and things that you weren't even expecting when you were looking at the initial playbook. And in Pillar 2, it's the admin guidance. It's the GIR. It's everything released by local tax authorities. And I would say in both, you kind of look back after a couple of years and you're like, how do I even explain this to someone who doesn't have a foundation to begin with? All right. So then if that's how you compare the, the actual rules and the playbook, what about the actual game play? So like once you get into a football game versus once we get into the compliance cycle, this might be a tortured analogy. But I think it might be closer than what Lister's might just say. Yeah. And honestly, I didn't think anyone would ask me ever to give football metaphors for Pillar 2, but I do have them for every aspect. So I would say the gameplay is very similar to what we've experienced the last three to six months of actually getting on the field. There's a phrase in football, but it's really across all sports where you take what the defense gives you. And so you can be as prepared as you possibly can, but once you get on the field or in boxing, they say once you get hit in the mouth, you have to make changes. And I think that's exactly what happened with Pillar 2. You know, once these jurisdictions actually started opening filing portals and giving us kind of the detailed rules that maybe we're missing the first couple of years because they were still figuring it out. All of a sudden, it becomes even more complex and you have to take what the defense gives you. I think our problem was that in football, you have a week to prepare for each defense. You get a scouting report. And in our case, I think we were playing against 37 different defenses at one time and a lot of them were almost contradictory where you couldn't do one thing in one jurisdiction, but you had to do that thing in another jurisdiction, which I know will unpack a lot as part of this, but it's all similar. And I think there's a lot of metaphors in football and in Pillar 2. That went way better than I anticipated when I thought that. I can keep going if you want. Let's get into some of the details. So this really is intended to be our Pillar 2 June 30, 2026 compliance post-mortem. We want to share with listeners and really kind of open up the hood as to the process that PWC went through and I'm sure you know, other service providers as well. But maybe before I, we've got some very specific recommendations for the secretary at the OECD for taxing authorities. But before we get into those and we're going to unpack those at some depth, Pat, how would you describe your role in the PWC Pillar 2 compliance process? Because you really sat in the center of things, but how do you describe your role of what you've done over the last four? We've been working on this together for four years. Yeah. So like a little quick background. I was a client service manager in the Chicago office and I joined our tech team in the US to help build business rules when tax reform hit in the US back in 2017. And so I spent a couple years doing that and actually I was kind of ready to go back to the practice I wanted to get into client service again and then Pillar 2 hit and I started leading the team that built the business rules for Pillar 2. So those came out back in December of 2021. It was relatively simple, not super complex yet. And so what we did was we started building the business rules. And just for listeners so that they understand what business rules means, that's really the tax technical logic. Exactly. Exactly. The technical coding, right, which is what we needed for our Pillar 2 engine. But in addition to actually having that technology, somebody's got to go in and build the actual tax technical. We call those the business rules. Yes, exactly. And Mike and I joke, I wouldn't call myself a developer. We have a development team that builds the technology. I'm a configure. I think I would say I'm a configure of the technology into what we need it for based on the technical rules that we're building towards. And so that's essentially what I've been doing is kind of building the technology around the business rules that we need for Pillar 2. Obviously starting with the model rules and the commentary. And then over the course of the, you know, last four years, it's been building those out specific to each jurisdiction and the legislation that has been released for each jurisdiction. Because at the end of the day, the model rules are just that. They're meant to be a model for jurisdictions to then pass their own rules. And what my team has done has essentially built those rules specific to each country. So that taxpayers don't need to worry about, well, if I operate in Ireland versus the UK versus Japan versus Singapore, there might be slightly different rules that they've adopted based on the model rules. And so our Pillar 2 engine needs to essentially be able to apply those rules properly. No matter, you know, where you operate, who your parents are based on your corporate structure and all that. Exactly. And that's something we've talked a lot about. I've talked a lot about of the last three, four years on the cross-border text talks is that we have these model rules, right? And the administrative guidance, but it's still very different. Every country is different. And some, as you mentioned, are different because of intentional policy decisions. Some are different because just some jurisdictions haven't yet enacted administrative guidance yet. I have brought it into law. And of course, we have to program the Pillar 2 engine to be what an active law is at the time. And so you also mentioned the team that we have that you have. And for people all over the world, right? And just an amazing amount and experts in each of the 37 countries for 2024. We've got Pillar 2 experts in all of the 56 countries now through 2025 that we're building for that. Spend just a couple minutes about the process. Particularly, you mentioned the rules, but also the forms and that, you know, how the team at the center, and we have this global center team, working with each of the respective jurisdictions to really understand what those compliance requirements were. Yeah. I mean, that is an ever-evolving landscape. Even for 2024 jurisdictions, we're still working with teams to determine what the filing requirements are, what the forms are, you know, how they need to be filed. And this really did start, you know, four years ago with just the rules and it's evolved into the forms. I think a lot of local jurisdictions are still kind of figuring out the right, you know, local filings. Some of them are still figuring out how to, you know, actually receive the GIR, the Globe Information Return. And I think the best thing that we did from the start is we, while we do have, you know, a central team, a global development team, and that team is great, and I feel like I'm almost just like a spokesperson for that whole team at this point. Yeah. But we knew that, you know, just in 2024, 37 jurisdictions, We were not gonna be able to build everything ourselves. And so we got the local teams involved early. And that involved weekly calls, a lot of evenings with AsiaPak, jurisdictions and teams, early mornings with European teams. But I think the best thing that that did was it also got by and from all of our local teams to say like, okay, these are our rules that were helping interpret that are just being configured by the global development team into the engine. We did an incredible amount of testing. Every local team kind of came up with their own fact patterns based on what clients, what fact patterns are, a lot of clients in that territory have to make sure that we were applying the rules properly. And then the fact that we did that early really helped us in terms of just building relationships and being able to call someone in every local territory typically when forms were released, which you know better than anyone, there were a lot of forms released in June. A lot. We're gonna talk more about that. And within a day of those forms being released, we already had the rules applied. And those rules could be as technical as something around intergroup finance and arrangements and how they're interpreted. But a lot of it was, well if you have top up tax, how is it allocated? If you have special circumstances or entities like JVs and investment entities, how do those top up taxes need to be paid? Because it's not always by the entity itself. And so that helped us kind of already have the logic in there to build out those forms and release them for taxpayers really quickly in a very tight deadline. - So I think that's a good transition, Peta. What are recommendations are for the Secretariat and taxing authorities as part of this post-bortum. And so that's a cue for them to either get out there, their pens or to note this within the podcast. So I'm gonna go through quickly, Pat, four short term recommendations and then one long term recommendation. And then I'm gonna ask you to unpack each of these because there is a general overall theme that we experienced from going through this June 30th compliance cycle of, we're taxing authorities ready. Did they really even understand some of the technology complexities of the GIR? Do they understand some of the technical complexities associated with the rules that were enacted in those jurisdictions? And then as forms came out, as portals came open, very, very late in the day, it was quite challenging for us to be able to build all of that. And I will mention that we filed over 50,000 returns and the success rate was well over 99%, and but there are a number of jurisdictions that also postponed their deadlines too. And so, all right, let's, without further ado, the first short term constructive feedback, I feel a little bit like David Letterman in the top 10 list for just only four. Number one, OECD, please, release guidance that timely filed GIR in a country that extended its deadline, whether it's because of portal issues or whatever, is timely filed everywhere. So say again, release guidance that timely filed GIR in a country that extended its deadline is deemed to be timely filed everywhere. I mean, the fact is penalties and lost elections should not be in play, particularly if a US multinational or a Chinese multinational picked, for example, Belgium as its designated filing entity who didn't open its portal till June 29th. So we'll dive into that. Number two, we really believe that there should be an extended deadline for 2025 compliance. Originally it was 15 months, so March 31st, 2027, we just believe it's too soon. Based on the experience knowing that we've got another 20 countries that we're adding, UTPR, all the additional complexities associated with the 2025 compliance cycle, that there needs to be an extended timeline for 20, 25 compliance. Number three, GIR validations need to be coordinated and updated to be consistent across the globe. I never thought that the word validation error would become a PTSD trigger. It might be my fingers are wriggling to some people. It is a triggering for many of us that have been through this process. But we've got to get the GIR validations. And I think service providers like us and we've offered that we can help, but there's some real coordination and you can shed some light on that. And then finally, 'cause we've gotten a lot of questions from this, amended returns should not be necessary until at least information is actually exchanged. That's what's in the rules, but there's been some questions from a number of jurisdictions about for taxpayers that know they didn't get something right that they don't really need to amend. They should be able to refile 'cause amending creates these complexities that you'll describe. But that's number four. And then finally, the long term constructive feedback and recommendation is that we need real simplification and coordination, both with respect to the GIR. And then we'll talk about PETI. I think when we were trying to do an inventory that there were almost 180 different returns for pillar two. So obviously GIRs, GIR notification, top up tax returns, income inclusion returns, QDMTT. I'm guessing we're gonna have some UTR returns. But this was a massive burden for taxpayers given all, everybody needs, in theory, the same information, just 180 different ways to provide it to taxing the way. And I think we can unpack that a little bit towards the end, but what I think most listeners and taxpayers would agree with and tax authorities is that this is essentially an administrative burden for everyone, not just taxpayers and simplification is just absolutely necessary. - I mean, it begs the question of what are taxing authorities going to be able to do with all of this information? - Yes. - Which we can get into in the extended filing deadline for 2025 because it's just starting now, the 2024 for tax administrations. - All right, so let's go back to the first short term recommendation, which is release guidance, the timely filed GIR in a country that extended its deadline should be timely filed everywhere. Maybe give a couple of examples. We already mentioned Belgium, which their portal didn't even open until June 29th. UK, I think they had some issues. June 24th, we talk about it, it was kind of the magic opening door, but they still had validation issues. But talk about, talk about it. - I mean, I think ultimately there's a mix right now of jurisdictions that have extended their deadlines from June 30th. Belgium is now September 30th. The UK has just released guidance extending theirs to June September 30th. - It was originally July of the end. - It was extended to the gas. - Exactly. And so there are other jurisdictions though, where we know we could not timely file or taxpayers could not timely file a GIR by June 30th because of the filing portal issues in those jurisdictions or validations in those jurisdictions that essentially didn't allow a completely valid XML to be transmitted because they weren't able to update their validation issues and make the corrections that they needed to in time. - So give some, let's unpack that a little bit. So give some examples or give it a couple examples of that. - So one thing is that the OECD released guidance in June, essentially with 14 issues of the XML, the GIR XML versus the GIR PDF, the template I refer to it as, as well as validation issues. And they essentially said there were four validations in there that they explicitly said these need to be removed. They should not be applied. And we had done a lot of work with local tax authorities to get to that place to say, there's a validation here. And if I pass this validation, I will fail this validation. So they were contradictory. You could not pass both and you could not transmit an XML with all of the validations that were required to be applied. - And to pause you there, 'cause I want you to come back to this. But just for listeners to note is that a number of the different jurisdictions around the globe that had enacted these rules did work with us. And it was great. We were working with our local teams. They were working with local, and not just us, other public accounting firms and other stakeholders. And in that respect, I thought that was fantastic. That there was some real, we were able to provide feedback. I mean, I think some of the validation issues that you and your team found were eye-opening for some of these other jurisdictions that then provided some feedback. And we also provided some of that feedback to the OECD. So I do appreciate it. I think there was some good dialogue between practitioners as well as texting authorities to try to make things smoother. - Oh, good. - But, so that document came out and keep going with here these 14 things that needed to be fixed. - In that document really was a culmination of probably three to four months of work that our team was doing. Local teams were doing. Other service providers were doing, having conversations with texting authorities, trying to say, "Hey, we need to be able "to transmit XMLs. "How do we do it in this case?" And you say, like you mentioned, we filed 99% plus of GIR successfully. It was really in those cases where you had these specific fact patterns that you fell into these contradictory validations. At the end of the day, I feel confident to say that we just need to look at those validations as a whole and determine what the right amount of validations is. I think we're overvalidating or taxing authorities are overvalidating GIRs right now, but I think the bigger concern and the bigger thing that needs to be corrected is the taxing authorities didn't fully understand the validations or the XML kind of schema as a whole. And so, you know, going into June, we just didn't have enough time to explain everything to every tax authority. I think tax authorities were hesitant to remove validations because like we haven't even gotten into this yet, but the whole point of the GIR is the exchange of information. Right. You file it one time and the tax authorities then share it with all the other jurisdictions that are required to receive pieces or sections of the GIR. They were very hesitant to remove validations because they don't want to be stuck in a position where well, they removed this validation and now they can't share it with other jurisdictions and they're kind of left holding the GIR based on, you know, unvalidated results. Whereas we were confident that, hey, this validation should not be applied or it needs to be applied differently. There were, I think that's the other thing that there's a lot of validations that should be applied, but they were not being applied correctly. And we just didn't have enough time to get through all those. Exactly. And which is why that these number of these jurisdictions have extended or maybe will extend because of some of the, and one of the the one that was kind of the, frankly, the easiest for me to wrap my head around was like who is a good, who is supposed to be a receiving jurisdiction in the GIR. Based on the exchange agreement. Based on the exchange agreement and who's supposed to be a receiving jurisdiction. And what we found is that in a number of different jurisdictions as part of the validations, if the certain country, for example, I think it was Germany that requires the US to be listed as a receiving jurisdiction. Well, we know that the US has not enacted pillar two. It's not going to be signed. Going to, it's not going to spoil or want any information. No, they don't want any information. And, but they were still listed and that particular example. And so if you did not have the US listed as a receiving jurisdiction in the GIR that was filed in Germany, they would say, well, it didn't pass the validation. And it actually blocked it from being transmitted. And on the opposite side of that in Switzerland, you could not put Turkey or Cyprus as a receiving jurisdiction, despite conversations that we have had with our local teams and they've had with the local tax authorities that we are going to sign the MCAA. We're going to ratify it. We expect to get the GIR. And so that's one of those things where depending on what jurisdiction you were in, they were asking us to put jurisdictions as receiving jurisdictions that we knew should not be. And others saying we actually could not put jurisdictions that we knew should be. And so it was just this whole massive trying to figure out, well, what is a valid XML? And I think the biggest problem with the June 30th deadline is that that answer was different in almost every jurisdiction that we filed. All right. We're going to come back to that on the GIR validations too, as far as what that actually means for the administration of this whole Texas. And just one thing to add there because while we're on the timely filed GIRs, I think the first thing which you mentioned is it should absolutely be respected if Belgium accepts GIRs until September 30th that that should be a timely filed GIR. I don't think there's any question there. I don't think we're going to get a lot of pushback from tax authorities and local jurisdictions on that. I think the bigger problem that we need to make sure that taxpayers have certainty on is those jurisdictions that did not extend their deadline, but could not, you could not transmit a valid XML because of their filing portal issues like Germany, like Luxembourg, like a couple others that we discussed. It's no fault of the taxpayer. They had a valid XML and it was the filing portal that caused what could be deemed as a late filing. And so that's where taxpayers need certainty that those will be considered timely filed GIR. And then just to put an exclamation on that pad. And when we talk about taxpayers need certainty, common understandings, even administrative guidance, that's not certainty. We need the laws in the 37 countries that had enacted Pillar 2 to enact this. And because the consequences of penalties of misdelections, some of those potential misdelections could have material consequences to Pillar 2 top-up tax liabilities in certain cases. Law selection comes to a number of different things that if you are unable to make the election because it's late, those have real consequences. And so getting some administrative guidance that would be helpful, but actually we need that to become law in those 37 countries to give the taxpayers the relief that they need. And this is why this is such an administratively complex tax system, but taxpayers should not have to pay the consequences for the fact that these taxing authorities were not ready. Yes. And that's why you bucketed it in a short term ask, because I think this needs to happen pretty immediately as well. Okay. And then kind of a long to same lines is like the extended, we need an extended timeline for 2025 compliance. And you already mentioned this, but we didn't get a lot of these forms, right? Until June. And so when are these forms actually going to come out? We don't know. And we also know now that the UTPR, which didn't apply for the 2024 fiscal year calendar year cycle is now applicable for 2025. Further, we've heard, I've heard with a number of conversations that financial statement auditors understandably are saying telling taxpayers, hey, you should really try to get all of your pillar two compliance done before, if you're a calendar year before year end, because trying to do your pillar two compliance with a March deadline is going to interrupt and be part of your year end. And so, hey, it's an interview risk to the pension audit procedure to the year on audit procedures. And so, hey, you should get this done before December 31. And I've had to have conversation with auditors like that's great in theory. But if we don't have the forms, there's no way we can get all the compliance done. So what other examples or reasons why that the timeline should be extended for 2025? Well, I think because of these extended deadlines, right? And there are, you know, GIRs into September of this year. This is also the first year of filing. We really, and when I say we, I mean like service providers, we have no idea how the exchange of information is going to work. Right. If it's going to go well, I know from my experience that there are, there's one GIR, but there's 37 jurisdictions to file it in. There are more than 12 different schemas, XML schemas, that we had to account for to get GIRs filed, you know, in Korea versus the UK versus Belgium versus Luxembourg. And I think we're going to run into similar issues we did with initial filings. The tax authorities are going to run into those same issues with the exchange of information. I'm not saying that they'll need an extended deadline, but the expectation is that everything will be shared by 1231. I think that's going to be a sprint and we're still going to be, you know, figuring out those tax authorities are still going to be figuring out how to do that into 1231. So like you said, for, you know, financial statement auditors who are saying you need to file year two by 1231 of this year, we're not going to have all of the information that we need to make sure that we're filing year two correctly. Well, will portals even be open in these 20 countries? Well, that's the other thing. Well, will they have the forms released? And there's just so many. Yeah, there's still so much happening from a year one perspective that will continue. It's a great one. Really to the end of this year and maybe beyond depending on how it goes. And then to your point, you have another 20 plus jurisdictions that will have to have their filing portals, you know, local returns for all of those jurisdictions. And at the end of the day, UTPR is in play for 2025. It was not in 2024. That is its own animal that we're going to have to account for. And now I think that introduces complexities that I think everyone understands that UTPR is very complex, but it introduces complexities into the XML schema with taxing rights and reportable differences. And once you have, you know, every jurisdiction having taxing rights over one jurisdiction that falls into the UTPR, it's going to be a mess of an XML to get these things trans. And that also creates the most risk for taxpayers because all of a sudden you could have multiple jurisdictions that are all going after the same pot of top up tax, right? And then the allocation is complex in and of itself. But you can imagine you're going to have a number of different jurisdictions saying, well, is my portion of the top up tax right if they're subject to the UTPR? And so there is a lot of controversy. I believe there's more controversy risk just inherent in the 2025 cycle than in the 2024 cycle. So we should make sure that the GIR and all these different compliance forms are accurate. So I think that's a good time then to the third short term ask, which is GIR validations. We've already touched on this. GIR validations need to be coordinated and updated to be consistent across the globe. And listen, I think this is important just from an administrative ease perspective. But what I'm not sure that the secretary it understands is the point that you made earlier that I want you to dive into a little bit more is, if we have 12 different XML schemas currently, and then we also have even some of those with the same schema with different validation processes, how is the OECD actually going to be able to share all of these GIR returns as part of the MCAA? How is the EU going to share it as part of DAC 9? And because of less, if we don't have one truly consistent XML and validation process, inherently, this probably just can't be shared, which is defeats the entire purpose of having a GIR XML consistent across the globe. Yeah. And honestly, I think-- like I mentioned, we don't know exactly how that's going to work yet. We've talked about the receiving jurisdictions and having to put that into the XML. And we expect that to be shared based on how the XML was populated with the receiving jurisdictions. But based on the validations of various countries, like we mentioned, Germany and Switzerland, I'm not sure the tax authorities understand how all of that works. If they did, why would you ever put the US as a receiving jurisdiction code? But ultimately, I think there are issues at the OECD level. So if you think about the globe information return, we got a PDF template and instructions of the globe information return itself, right? What I call the template, the GIR template with all the schedules. And then we received the XML schema guidance. So this is essentially how you fill out the actual XML, the schema design file, and things like that. That's also a PDF. Then we received the third PDF, which is validations. And it's essentially lists 160 plus validations to validate basically every single element within the XML. The most frustrating thing that we came across in the last six months is that if you look at those three documents together, there are contradictions. So something in the validation PDF will actually contradict something directly in the schema instructions document. And then there's also the PDF of the template itself. I mean, there's rows in the PDF that say, this is for this election. In the XML schema, that doesn't exist as an element. And so one of the things the OECD did do is they released a guidance in June with 14 issues, essentially saying we've identified these issues. Some of them were-- there are things in the template that aren't in the XML. And this is how you deal with them. A couple of them, there were four that essentially said, we've recognized there's four validations that should not be applied, because you essentially can't transmit a proper XML if they are. We've identified 25 plus additional validation issues. And that's just in the OECD. If you get into the local tax authorities and how they're applying some of these validations, that number grows. And so we took what the defense gave us and ended up having to file slightly different XMLs in different jurisdictions in order to be able to transmit. But like jurisdictions like the UK, right? They extended their deadline. And I mean, that's a whole other thing going back to the timely file. They actually didn't extend to their deadline. They just said, no filing penalties. Fair enough. And so that's another saying that we need certainty on. But we're now working with HMRC in the UK. And they're starting to look at their validations and saying, OK, we are not going to apply these, because either they don't understand them or they can't fix them and they have questions on them. But they know that, OK, I can look at this XML. And it's a valid XML. And we should not be applying this validation, at least the way we're currently applying it. And that's where we're doing it with the UK. We're doing it with various jurisdictions right now, Belgium, all the jurisdictions where we're still filing. Even Germany, we're still kind of pointing out where there are issues. But this needs to be a coordinated-- Exactly. So this I think can be the role and should be the role in my humble opinion of the secretary at the OECD to help coordinate this. Because to your point, we have these 37 countries. Now we've got another 20 that are going to be coming online for 2025. And there's very big inconsistencies again. It's a bigger problem for them, because they're going to have issues with the information sharing of how they actually get this shared. But we also know that we've heard that the EU apparently had released something from a validation perspective to all the EU member countries. And I think some of those countries were hesitant to change the validations, because they were concerned, well, how is information sharing going to work under a DAC9 perspective? If a country changes, what was recommended from the EU? So there really needs to be coordination. Maybe the last thing I'll mention on this point, Pat, because I think maybe you were too polite to, is that that validation document that came out in the first week in June was a week after the common understanding document, or almost two weeks after the common understanding document, that said that 32 countries will be ready by the end of May to be able to submit the global information return. And then it was a week later, they're like, we need to change and fix some of these validations. No, no XML is actually-- No XML was-- --as you need to make these updates. And so listen, this is a complex task. And so I do have some sympathy. We've been working on this a long time. This is incredibly complex. But taxpayers should not have to penalties, late deadlines, and all of these different inconsistencies for forms that really for GIRs, particularly that should be consistent. Taxpayers should not have to bear the brunt of tax and authorities, the OEC did not pay that price. And that's really what the biggest thing is, is that taxpayers are bearing the brunt right now of the frustration of potential late filings, despite it not being their fault. Lost elections, because-- I mean, yeah, we had conversations with taxpayers in June, and they were asking us, why are you updating your engine two weeks before the deadline? And I understand that frustration. But it's like, we just received-- The goalposts received-- Yeah. --like issues that we have to update for. And it was just like an extremely-- We're kicking 60-yard field goals in the way with the goalposts. Yes, exactly. And doing our best. It was a very difficult-- And pretty cool. --more operating and more-- --made more than I anticipated. So-- All right, so the last one on the short term recommendations deals with amended returns. And because we're already hearing them from a lot of questions from taxpayers that for different reasons that they want to change, update whatever they're 2024 filing. And don't want to dive too deep into this maybe a couple of minutes on why is it important that amended returns should not be necessary at this point? And because we know that the model rules talk about it, it's not even necessary after information is exchanged. Yeah, and I think-- I mean, at the end of the day of the 170 pages of guidance we have on the XML schema and how to submit returns, there's two pages on corrections. And obviously, this is very complex. And once you start submitting amended returns, and there's kind of two different ways you can amend a return. There's amendments or there's deletions. And so between those two, we're trying to figure out, like, OK, well, if you can amend a partial return, right? You only amend the sections that you want to amend. Well, I know that if you try to actually file a partial return, you're not going to be able to file it. Because all of the validation issues are going to kick in. And a lot of them are between sections. If you have something in this section, you have to have something in this section. And so we just are still gathering information around how exactly can you file an amended return? I think validations should not apply to amended returns, or at least there should be a very small subset that do that are only within that section. With deletions, that seems to me like it would be the easier thing to do, right? Oh, if I just filed something in June, but I noticed something that needs to be corrected, I'm not going to be able to file a partial amended return because I'm going to run into validation issues. I can actually delete that entire XML and just submit a new one. And then I don't have to worry about all the doc ref ID connections that need to be made to the prior one. But the problem is, again, we would need certainty that if you use the deletion process and then you file the new return, but you filed it in July, do you still get credit for the fact that, well, you filed the initial return in June before the deadline and then you use the deletion process and essentially filed an amended return in July. I don't think that tax authorities can answer that question right now. I'm to no fault of their own. But the problem is, is that we do have tax authorities who are saying yes use the amended return process and then all it takes is a couple questions of how exactly do you expect us to do that? The answer is I don't think anyone knows. Right and the deletion is scary because the one record that you had that you had filed this return in a timely manner you now deleted that return and now and then what record does the taxing authorities to your point have that the original return was timely filed but then you added a new return. And this is something that again we're going to be figuring out everything around this exchange of information through the end of this year and maybe beyond that. A spoiler alert. Yeah, maybe beyond that. It's going to be beyond that. It's just it's very difficult to build a process based on two pages of guidance without understanding exactly how these tax authorities will share the information. How they'll parse the XML to be able to you know be shared by section and things like that. All right so the last one then is the long term recommendation for the secretary and as well as taxing authorities is that you know I believe that we are at an inflection point after the first June 30th deadline and let's see once we get past the second one it'll certainly be another inflection point of does this system and from a compliance perspective still makes sense. I question Pat whether taxing authorities particularly that don't believe they're going to get a lot of revenue from this. How much are they investing in this both from a people perspective technology perspective and it just creates you know these collateral implications. And so I think we need real GIR simplification. I don't believe that the the simplification the the post transitional safe harbor simplification is enough. We need real simplification from an administrative perspective and then some consistency between jurisdictions on the non GIR. First of all we've already spent most of this podcast talking about why we need to have consistency from a GIR. But I believe there also should be consistency on GIR notifications. So should it be a top up tax return a QDMTT, a income inclusion rule you know we could have in some jurisdictions now three or four different taxing forms. So a UTPR return an IR return a QDMTT return in addition to like PioAs and other things that might be necessary. Just the compliance burden and inconsistencies needs to be to be simplified and ideally there should be one QDMTT form that can be used by by everywhere. Now we may have missed the boat on that but any last minute kind of suggestions that you have from a long term simplification perspective. Well to start with local filings I will bring up the fact that the OECD did release guidance saying that they're basically giving some guidance around the local filings and they should be you know simple they should not duplicate information that's already on the GIR and they also said that local filings should be released at least 90 days before the filing deadline. This was the document of the OECD put out 60 days before the deadline. So obviously it was too late for 2024 jurisdictions. My hope would be that 2025 jurisdictions that have not released forms yet are taking that into account and actually will apply that 2024 jurisdictions hopefully again after they get all the information from the GIR after 1231 hopefully they'll be able to see I have way too much information. I'm never going to be able to go through this and I don't need all this information in the GIR that I received as well as the local top up tax return that I created. So an extension of the 2025 deadline would also give the local tax authorities the ability to receive all the information and kind of reassess what is my local filing actually need to look like now that I know what I'm going to get from the GIR. That's local filings. From a GIR perspective I think it's very clear I mean you mentioned this I mentioned this before this is a massive administrative burden not just for taxpayers but for tax authorities right now as well and I think we saw to your point I don't think these tax authorities have the budget to build these complex you know systems filing portals checks to even be able to go through all the technical analysis of all the validations and everything like that and so when we talk about simplification I think we do need true simplification of the XML itself. I don't think an ETR safe harbor and adding another you know safe harbor and an additional XML elements for that safe harbor that's not going to simplify the XML that's going to make it more complex and so what we need is a true simplification I'm talking about the amount of rows in XML that's what needs to be simplified and again I think it was aggressive with the GIR to have everything all your covered taxes your globe income adjustments at a jurisdiction level as well as at an entity level that's a duplication a duplication of information all your cross border information at some point there has to be a tax return and there has to be supporting workpapers and those two need to be separated I like that and the tax return needs to be simplified. All right so last question for you Pat what advice do you have for taxpayers starting the 2025 I don't mean to laugh for the what advice do you have because bugle your CPL Pat here we go again what advice do you have for taxpayers starting the 2025 pillar to compliance cycle? Start early start early start now I mean I think where we saw the most success with taxpayers is maybe not necessarily starting the process of populating forms early because that's going to change you know that you don't want a waste time getting to a GIR based on the current XML schema and the process because that might change right hopefully it does based on our recommendation but I think getting your calculations in order making sure that you know you have a calculation engine that you have your whole structure you're comfortable with your calculations where does QDMTT apply where does I apply where does UTPR be confident on the transitional safe harbor this is your first year filing make sure you've got a qualifying country by country report for example just there's a lot of blocking and tackling that can be done before you actually get to the forms and for those taxpayers that are calendar year that are concerned about the year end a lot of that work can be accomplished before December just from a calculation perspective and then it'll be chaos presumably when the forms come yeah but but I think like we've gotten a lot of questions which are completely understandable where it's like how do I review the GIR and we're like it's it's difficult but like the way you can review it is by understanding your calculation and what applies to you right so there's section one which is your corporate structure hope you know we still have material uncertainty on how that will be yeah have to be populated in year two since we every taxpayer populated section one in year one do you even have to populate section one if there are no changes things like that but then you have section two which is your safe harbors in section three which only applies if safe harbors are not passed right and so to the extent you can understand your facts and where section three might apply then you can start to whittle down okay I'm only going to have to really review section three for maybe three jurisdictions but then of those three jurisdictions I have a UTPR applying to one whereas another might be QDMTT safe harbor or just an IIR and kind of understanding scoping out where you're going to have to spend your time will help tremendously versus just kind of trying to put it all together once we receive you know final guidance opening of new filing portals and things like that well Pat you know I've been doing this for almost 30 years to practicing international tax and I will tell you I've had the opportunity to work on mega deals and mergers and restructurings and business model changes for some of the world's largest multinational organizations and I will tell you this is the most complex thing that I've ever worked on and and it's been a pleasure working with you you've done an amazing job and it's this is really as I've told you and the team I really a once in a career opportunity call it that yeah exactly I'm trying to be a fly I mean I'm a glass is half full kind of yeah even working with me for a long time but I do appreciate all the work that you've done and and just to state again I I appreciate the taxing authorities and the secretary at the OECD's willingness to engage with us and to engage with service providers to try to make this better and so hopefully this didn't come across as too critical but more wonder some practical suggestions of recommendations that we have so thank you very much for this won't be the hopefully the last time Pat that you're on the cross-border tax tax five gets happy to finally be on all right so thanks for tuning in to this week's episode of cross-border tax talks thank you Pat Coglin director in PWCs quantitative solutions and technology practice I'm Doug McConey PWCs International Tax Services Global Leader stay tuned for another exciting edition of the cross-border tax talks podcast This podcast is brought to you by PWC, all rights reserved. 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