On 17 July 2023 the OECD published the report prepared for the meeting of G20 finance ministers and central bank governors held in India on 17 and 18 July 2023.

Update on the Two-Pillar International Tax Solution

The report noted that on 11 July 2023 a total of 138 members of the Inclusive Framework approved an Outcome Statement on the two-pillar international tax solution. The Outcome Statement summarises the package of deliverables developed to address the remaining elements of the Two‐Pillar Solution. This includes the text of a Multilateral Convention (MLC) to allow jurisdictions to exercise a domestic taxing right over a portion of the residual profits of the largest multinationals under Amount A of Pillar One; a proposed framework for Amount B of Pillar One for the simplified application of the arm’s length principle to in-country baseline marketing and distribution activities; the subject-to-tax rule (STTR) and its implementation framework, to allow developing countries to update their tax treaties to tax back in respect of certain intra-group income subject to low or no nominal taxation in the other jurisdiction; and a comprehensive action plan that will be prepared to support the co-ordinated implementation of the two pillar solution.

Indirect Tax

More than 90 countries have now implemented the internationally agreed OECD standards on collecting value added taxes (VAT) on digital trade. These measures allow governments to secure critical VAT revenues and to ensure a level playing field between e-commerce and traditional businesses.

The OECD and the World Bank Group together with the African Tax Administration Forum (ATAF), released the VAT Digital Toolkit for Africa in February 2023. The regional toolkits provide step-by-step guidance on designing and implementing the framework for collecting VAT on digital trade, in a regional context. There is also a technical assistance programme for interested jurisdictions.

Tax Transparency on Real Estate

The OECD report included in the Annex a report exploring options to enhance international tax transparency on real estate, including acquisitions of real estate abroad. The report assesses the tax compliance risks associated with real estate held abroad and sets out proposals for improvements.

Standards on Exchange of Information

The Global Forum has commenced a new round of more detailed peer reviews on the automatic exchange of information (AEOI), designed to obtain a higher level of assurance that jurisdictions are effectively ensuring compliance by financial institutions with the due diligence and reporting requirements. The peer reviews also examine whether the information reported is being exchanged effectively in practice.

The Global Forum is implementing a programme of confidentiality and data safeguards assessments. These assess the position prior to the commencement of exchanges and after the exchanges are underway, to gain assurance that the data exchanged under AEOI is correctly safeguarded by tax administrations.

Since the previous report to the G20, the Global Forum has published seven new peer review reports on the exchange of information on request (EOIR). More than half of the member jurisdictions of the Global Forum have been fully reviewed in the second round of EOIR peer reviews. Compliant or largely compliant overall ratings have been assigned to 87% of the jurisdictions, with 11% assessed as partially compliant and 2% as non-compliant.

Sharing information for non-tax purposes

The sharing of treaty-exchanged information with other relevant law enforcement agencies for non-tax purposes helps to fight against illicit financial flows (IFFs), money laundering and corruption. Institutions often face operational challenges in implementing this wider use of the information, such as obtaining the consent of the jurisdiction providing the information.

The Global Forum has prepared for the G20 a report outlining an approach to advancing the wider use of treaty exchanged information between interested jurisdictions. This could involve the implementation of co-operation agreements, such as agreements between competent authorities for the exchange of information for tax purposes, and agreements between tax and non-tax authorities at the domestic level.