On 10 June 2019 the OECD published its report on international tax to the G20 Finance Ministers and Central Bank Governors. The report set out progress made on international tax issues.

Taxation of the Digital Economy

In January 2019 the OECD/G20 Inclusive Framework on base erosion and profit shifting (BEPS) issued a Policy Note, setting out proposals on taxation of the digital economy under two pillars. The first pillar was concerned with modifying the current rules based on concepts of “user participation”, “marketing intangibles” and “significant economic presence”, allocating more taxing rights to the jurisdictions where the users are located. The second pillar looks at a global anti-base erosion mechanism to combat profit shifting to low tax jurisdictions.

A public consultation took place in March 2019 involving more than 400 participants and more than 2000 pages of comments were received from business, civil society, and academia. At its meeting on 28 and 29 May the OECD/G20 Inclusive Framework on BEPS agreed the work program and this will guide the work of the Inclusive Framework and its technical groups, opening the way for a long term consensus to be arrived at by 2020.

Tax Transparency

Of the 100 jurisdictions committed to start automatic exchanges of financial account information in 2017 or 2018 the OECD noted that 90 had done so by the end of 2018.

Over EUR 95 billion in additional tax revenue (including tax, interest and penalties) had been identified by jurisdictions as at the beginning of June 2019. Information relating to more than 47 million financial accounts with a value of approximately EUR 4.9 trillion was exchanged in 2018. The OECD notes that deposits in international financial centres have fallen by around 34% in the past ten years, around two thirds of this decrease being due to the automatic exchange of information.

BEPS Implementation

The OECD/G20 Inclusive Framework on BEPS now has 129 member countries representing over 70% of non-OECD and non-G20 jurisdictions. The greater inclusiveness allows developing countries to influence the way in which the BEPS measures are implemented. The core elements of the BEPS package are the four minimum standards, which are those contained in Action 5 on harmful tax practices; Action 6 on tax treaty abuse; Action 13 on transfer pricing documentation; and Action 14 on dispute resolution mechanisms.

On harmful tax regimes, since 2015 more than 250 such regimes have been reviewed and almost all the tax regimes that were found to be harmful have been either amended or abolished.

On tax treaty abuse, the multilateral instrument (MLI) to implement tax treaty related BEPS measures entered into force on 1 July 2018 and now covers 88 jurisdictions. When all the signatories have ratified the instrument more than 1500 bilateral tax treaties will be covered.

With regard to transfer pricing documentation the first exchanges of country by country reports commenced on 1 June 2018 and a total of 80 jurisdictions are involved. The first aggregated statistics compiled from data in CbC reports is revealing patterns in relation to the locations where multinational groups are active and locations where they are reporting profits and paying tax.

The work on dispute resolution aims to improve the operation of the mutual agreement procedure. So far 45 jurisdictions have been reviewed, around 990 recommendations for improvement have been made and stage 2 of the peer review process (to monitor implementation of the recommendations) has already begun.

Capacity Building

The OECD/UNDP initiative Tax Inspectors Without Borders is providing practical audit support to developing country tax administrations, allowing tax experts to transfer practical skills to developing country tax administrations in relation to the tax audit of multinational enterprises.

The Platform for Collaboration on Tax (PCT) which is a partnership between the IMF, OECD, UN, and World Bank Group is expanding its secretariat and continuing to implement its action plan. Further progress has been made on developing more toolkits to provide practical guidance for developing countries on BEPS issues.