The 11th plenary meeting of the OECD/G20 Inclusive Framework on base erosion and profit shifting (BEPS) was held on 27 and 28 January 2021 as a virtual meeting. The countries involved in the Inclusive Framework are working towards implementation of the OECD’s BEPS package, including the monitoring process for the four minimum standards and the review mechanisms for other parts of the BEPS package.

Issues discussed

The meeting examined the changes that have transformed international tax policy and administration in the past few years, and discussed issues currently faced by the international community. Presentations included a discussion of the current global economic outlook and post COVID-19 challenges faced by countries as they rebuild their economies.

Senior international experts looked at the progress towards achieving the Sustainable Development Goals and contribution of tax policy in domestic resource mobilisation. Business, government and NGO representatives looked at the importance of tax morale among businesses and discussed ways in which it could be strengthened. They looked at the possibility of common ground between tax administration and business in this area. Tax and the environment was also addressed by considering options for a sustainable and resilient tax system and looking at ways to achieve greener, more inclusive growth through tax policy in the period following the pandemic.

Taxation of the digital economy

A panel discussion was held on the tax challenges arising from the digital economy and the future of international taxation. A presentation was given on the public consultation on the Blueprints for Pillar One and Pillar Two. Pillar One would provide a new taxing right to allocate a percentage of residual profits of multinational companies to market jurisdictions; and Pillar Two would ensure that a global minimum tax was paid by large multinationals.

The G20 has asked the Inclusive Framework to agree on the way forward on the proposals by mid-2021. If this cannot be achieved the Secretary-General noted that more than 40 countries are considering the introduction of a Digital Services Tax (DST), under pressure from public opinion. Countries do however agree that a multilateral, consensus-based solution is to be preferred to unilateral measures and in most cases the unilateral DSTs would be withdrawn if an international agreement is reached by the Inclusive Framework.

With regard to the efforts to obtain the participation of the US in the proposed multilateral measures, the new US Secretary of the Treasury indicated during the confirmation hearings in January 2021 that the US is committed to the multilateral effort to address BEPS and to working towards resolving digital taxation disputes through the OECD/G20 initiative.

Carbon Pricing

The Secretary-General noted in his opening address that 70% of energy-related CO2 emissions from advanced and emerging economies are currently entirely untaxed, and that some of the most polluting fuels are subject to the least taxation. Adequately pricing on carbon is an effective way to combat climate change as it creates an incentive to decrease emissions.

Other

The meeting was also updated on the ongoing work on BEPS and tax certainty; tax transparency exchange of information; and tax administration 3.0.