The OECD has published on its website the report prepared for the meeting of G20 Finance Ministers and Central Bank Governors held on 27 February 2021.
Taxation of the Digital Economy
Unless an international consensus solution is found for the taxation of the digital economy, countries are likely to continue introducing unilateral digital service taxes which will have negative consequences on the world economy and could reduce global GDP by 1%.
The OECD considers that the conditions for finding a consensus-based solution by July 2021 have been met. The Blueprints on Pillars 1 and 2 contain a solid technical basis for a solution, but the comments received from interested parties have indicated that simplification of the proposals is required. The work of simplification can be completed by the time of the G20 Finance Ministers’ meeting in July 2021. Also, the US administration has sent positive messages on its willingness to participate in reaching a solution.
In addition to the corporation tax challenges of digitalisation the OECD is also working on tax challenges arising from new technologies in the digital space, for example the total market capitalisation of virtual currencies is more than USD 1 trillion. A new tax reporting framework for crypto assets is being developed and a comprehensive implementation package will be presented later in 2021.
Following the issuance of model reporting rules for sellers in the sharing and gig economy the work is now continuing on a framework for the international exchange of the information provided by platform operators under the rules, to facilitate tax compliance.
Covid-19 crisis
Following the publication of a report on tax and fiscal policy in response to the crisis in April 2020 the OECD is continuing to track the tax policy responses to the crisis worldwide and will deliver a new report on the subject to the G20 Finance Ministers at their meeting in April 2021.
The Inclusive Framework has published new guidance on the transfer pricing aspects of the pandemic to support taxpayers and tax administrations as they apply the transfer pricing rules to the situation in the pandemic. In January 2021 the OECD updated its guidance on the impact of the crisis on the interpretation of tax treaties with the aim of providing more certainty to taxpayers.
Carbon Neutrality
Currently 70% of all energy related CO2 emissions in G20 and OECD countries are untaxed and some of the most polluting fuels are the least taxed. If well designed energy and carbon taxes are introduced they can strengthen domestic resource mobilisation and support sustainable tax systems. The OECD will shortly release the latest update of the report on Effective Carbon Rates containing a view of how energy and carbon taxes and emissions trading systems result in price signals to reduce the amount of carbon emissions. Work is continuing with the IMF to look at ways of measuring carbon pricing and this will be reported to the meeting of G20 finance Ministers in April 2021.
Tax and Development
The OECD has so far launched 43 programmes to support new members of the Inclusive Framework in implementing the BEPS recommendations and in building capacity in their tax administrations. The OECD/UNDP initiative Tax Inspectors Without Borders (TIWB) has been operating during the COviD-19 crisis to assist developing countries in collecting the correct amount of tax from multinationals operating in their territory. TIWB currently has 84 ongoing or completed programmes and 21 more forthcoming programmes.
