The tax report by the OECD Secretary General to the meeting of G20 leaders on 9 to 10 September 2023 outlines the latest international tax developments in international tax reform, including the work on the two-pillar international tax plan; developments in indirect tax; capacity building efforts; tax transparency; tax and crime; and digital tax administration.

Two Pillar Tax Solution

On 11 July 2023 138 members of the Inclusive Framework approved an Outcome Statement summarising the package of measures agreed upon to resolve remaining elements of the two-pillar international tax proposals. The text of a multilateral convention (MLC) has been developed to allow jurisdictions a domestic taxing right over part of the residual profits of large multinationals under Amount A of Pillar One. On Amount B, a framework has been proposed for the simplified and streamlined application of the arm’s length principle to baseline marketing and distribution activities. A subject-to-tax rule (STTR) has been drawn up so countries can update bilateral tax treaties to “tax back” in relation to intra-group income if it is subject to low or no taxation in another jurisdiction.

The 138 Inclusive Framework members have agreed not to impose new digital services taxes (DSTs) or relevant similar measures before 31 December 2024, or the entry into force of the MLC if earlier, provided that the MLC has made sufficient progress by the end of the year.

Indirect tax

The OECD, the World Bank Group and the African Tax Administration Forum (ATAF) released the VAT Digital Toolkit for Africa in February 2023. This toolkit and the other similar toolkits previously prepared for other regions provide step-by-step guidance for designing and implementing the recommended framework for the collection of VAT on digital trade, taking account of specific regional circumstances.

Developing countries and international tax

The Inclusive Framework is supporting developing countries with work on tax incentives and methods of measuring the economic impact of the global minimum tax rules in each jurisdiction. The support work includes consideration of simplifications and safe harbours that could assist jurisdictions and multinationals, and work on adjusting incentives to encourage investment, R&D and innovation. The report notes that an increasing number of developing countries are continuing to advance in applying internationally agreed rules and standards, and in contributing to the ongoing development of those rules. The Inclusive Framework continues to play an important role as a forum for developing countries to engage on the effective implementation of the rules.

Transparency

To increase tax transparency on real estate a summary has been annexed to the report assessing the tax compliance risks and needs associated with real estate held abroad, setting out proposals for short-term improvements and longer-term structural enhancements.

Information sharing for non-tax purposes

The Global Forum has produced report for the G20 leaders outlining an approach to streamlining the wider use of treaty exchanged information between jurisdictions. This could be done by implementing co-operation agreements, for example agreements between competent authorities for exchange of information for tax purposes and agreements between tax and non-tax authorities at the domestic level. Confidentiality and data safeguarding requirements are taken into consideration.

Tax and Crime

The OECD supported the G20 High-Level Tax Symposium on Combating Tax Evasion, Corruption and Money Laundering on 16 July 2023, considering the links between tax and serious economic crime, and methods to improve detection and investigation including through improved mechanisms for cross-border information sharing.

The OECD Task Force on Tax Crimes and Other Crimes (TFTC) is currently preparing a series of reports and toolkits looking at the development of whole-of-government strategies to tackle tax crime and sophisticated fraud manoeuvres such as dividend stripping.

Tax Administration and Digital Transformation

The OECD’s Tax Administration 3.0 report published in 2020 envisaged digital transformation by moving taxation processes increasingly into the systems that businesses use in their normal daily record-keeping operations. This can reduce compliance burdens on taxpayers over time and build tax compliance into the everyday systems. The concept is increasingly being included by tax administrations in their long-term reform strategies.

The Forum on Tax Administration (FTA) Commissioners agreed at their annual plenary meeting in September 2022 to set up a group of tax officials, businessmen and academics to guide the next phase of Tax Administration 3.0. The group met on 23 and 24 May 2023 in Paris and is assessing potential collaborative projects to accelerate digital transformation and develop common technical solutions.