OECD Tax Talk #12 - 11 June 2019

At first, Pascal Saint-Amans referred to the meeting of the G20 finance ministers and central bank governors in Fukuoka (Japan) that took place on 8-9 June 2019. Four new documents were presented to the G20 finance ministers:

• The "General tax report" from the OECD Secretary-General
• The "2019 Progress Report on Tax Certainty"
• The "Progress Report" about the Inclusive Framework
• The detailed work programme on the tax challenges of a digital economy (Action Point 1), which Pascal Saint-Amans had already announced in the last OECD Tax Talk #11.

The G20 reiterated its political support for the BEPS project at this meeting. It used strong messages, particularly with regard to the current efforts regarding the tax challenges arising from digitalisation, as Pascal Saint-Amans noted with satisfaction:

"We welcome the recent progress on addressing the tax challenges arising from digitalisation and endorse the ambitious work program that consists of a two-pillar approach, developed by the Inclusive Framework on BEPS. We will double our efforts for a consensus-based solution with a final report by 2020.

(G20 communiqué)

The G20 also praises the progress regarding tax transparency and the automatic exchange of information (AEOI). Over 47 million bank accounts have AEOI already been exchanged within the framework of this, 21'000 tax rulings have been exchanged within the framework of the spontaneous exchange of information and 80 countries have now enacted legislation to exchange country-by-country reports (CbCR).

Tax Challenges of a Digital Economy (Action Point 1)

The rest of the webinar was mainly about the detailed programme of work, which sets out how the OECD intends to move forward by the end of 2020 and find a common solution to the challenges with taxes in a digital economy.

As already explained in the last OECD Tax Talk, the consensus-based final solution is to be based on the following two pillars:

According to the second pillar, a minimum tax shall be introduced for internationally active companies. The first pillar indicates where this minimum tax is to be paid, whereby three different methods of profit allocation are currently being evaluated («modified residual profit split», «fractional apportionment» and «distribution-based approaches») and a new nexus regulation is being devised.

The individual proposals which are currently under consideration will also be subjected to a comprehensive analysis. What are the possible impacts and the advantages and disadvantages of the proposed methods? An interim report on these analyses and evaluations is to be published by October or November 2019.

New BEPS website

At the end, a short video introduced the new BEPS website, which was created by Japanese G20 presidency. It contains a lot of information and explanatory videos about the BEPS project, as well as an interactive map where you can find the different countries can compare. It is definitely worth taking a look!

Conclusion

Pascal-Saint Amans concluded by emphasising that within the BEPS project, the 129 participating states all have equal rights. It is not a platform where only the big, powerful countries call the shots. And this should also be the case in the search for a solution to the fiscal challenges of a digital economy. All countries work together and are involved to find a common consensus and compromise. This is very ambitious, especially in the short time frame until the end of 2020, but Pascal Saint-Amans is positive that they will succeed thanks to the political support they receive from all sides. In September 2019, Pascal Saint-Amans and his team plan to report back in another webinar.

Do you like to learn more about the individual BEPS Action Points?