The OECD Secretary-General's report to the G20 Finance Ministers, published in March 2017 in Baden-Bad, Germany, outlines significant advancements and challenges in the international tax system. The report is divided into two parts: an update on the international tax agenda, particularly focusing on the Joint OECD/IMF Report on Tax Certainty, and a Progress Report by the Global Forum on Transparency and Exchange of Information for Tax Purposes.
Key Points:
Part I - International Tax Agenda
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Tax Certainty: The report emphasizes the importance of tax certainty in promoting investment and trade. It highlights that uncertainty around corporate income tax and Value Added Tax (VAT) significantly influences business decisions. The OECD and IMF conducted a survey of businesses in 2016, revealing that uncertainty around tax policies and administration is a major driver of investment and location decisions for over 50% of respondents. The report recommends practical actions to enhance tax certainty, including:
- Reducing complexity and improving clarity in tax policy design.
- Enhancing tax dispute prevention and resolution mechanisms domestically and internationally.
- Improving dispute resolution mechanisms specifically at the international level.
- Utilizing innovative tools like cooperative compliance programs and advance pricing agreements.
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Base Erosion and Profit Shifting (BEPS) Implementation: The report acknowledges the successful implementation of the BEPS package, which aims to prevent aggressive tax avoidance. It highlights the establishment of the Inclusive Framework on BEPS, gathering over 90 countries and jurisdictions for equal collaboration. The focus is on peer review of BEPS implementation and addressing remaining challenges. A comprehensive update on the Inclusive Framework's work will be presented to G20 leaders in July.
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Digital Economy Tax Challenges: Recognizing the evolving nature of the digital economy, the report notes that the work on the tax challenges related to the digital economy continues under the Inclusive Framework on BEPS. An interim report is expected in 2018, updating the 2015 report with the latest developments.
Conclusion:
In summary, the OECD Secretary-General's report underscores the progress made in enhancing tax transparency, reducing tax uncertainty, and combating base erosion through the BEPS initiative. It also points out critical areas requiring continued attention, including ensuring the timely implementation of automatic exchange of financial account information, signing the BEPS multilateral instrument, and fully exploring the tax implications of the digital economy. The report emphasizes the importance of coordinated action among countries to foster a more stable, predictable, and inclusive global tax system.
