For the meeting of G20 Finance Ministers on 13 October 2021 the OECD prepared a separate report entitled Developing Countries and the OECD/G20 Inclusive Framework on BEPS and included this as an attachment to the main report to the meeting.

The report was the result of extensive consultation with developing countries, including some countries that were not members of the Inclusive Framework. Consultation took place at regional events held virtually between May and July 2021, and further input was received from developing countries and the development partners through capacity building and technical assistance programmes organised with the African Tax Administration Forum (ATAF) and the World Bank Group (WBG).

The 140 member countries of the Inclusive Framework monitor the implementation of the measures to combat base erosion and profit shifting (BEPS) and provide input for the development of further measures. The report considers the participation of developing countries in the Inclusive Framework; reviews the support available to them for capacity building; and assesses how far the Inclusive Framework has made room for developing countries in its deliberations and governance arrangements. The report outlines the views of developing countries on how the Inclusive Framework can continue to support their priorities in relation to domestic resource mobilisation.

Some developing countries considered that they were not given enough chance to participate in the development of the original BEPS package. Through participation in the Inclusive Framework these countries have had a much greater impact on the development of the two-pillar approach to taxation of the digital economy. The rapid pace of work on the international tax reforms has however given rise to problems for developing countries because their limited resources, and limited capacity in the tax administration, has restricted their ability to provide timely input into the process. This problem has been increased by the difficulties caused by the pandemic.

The report recommends that regular assessments should be carried out on the progress of developing countries, preferably in the form of an annual ministerial dialogue involving developing countries and G20 members.

Also, Inclusive Framework member countries and other stakeholders should consider how Country by Country reporting could be made more accessible to developing countries, with appropriate safeguards for confidentiality.

The report calls on the development partners and the G20 to support a major initiative in 2022 to give capacity building support enabling developing countries to implement the agreed measures on the taxation of the digital economy and the global minimum tax. All stakeholders are recommended to look at governance arrangements within the Inclusive Framework to ensure that developing countries are included appropriately, for example through representation in leadership.

Developing countries are concerned about safeguarding their value added tax (VAT) or goods and services tax (GST) revenues in the increasingly digitalised economy, as these are the largest sources of tax revenue for developing countries. The OECD International VAT/GST Guidelines and related guidance have been implemented in over 70 jurisdictions to date, and the OECD and World Bank Group are developing regional toolkits with guidance on the design and implementation of a VAT/GST strategy to address the challenges arising from the digital economy. The report recommends that the work of OECD Working Party No. 9, which is concerned with consumption taxes, should be integrated into the scope of the Inclusive Framework.