On 17 July 2023 the OECD produced a report on tax and development issues for the meeting of G20 finance ministers and central bank governors.
The report looks at the participation of developing countries in the ongoing work of the Inclusive Framework on BEPS, focusing on the implementation of the BEPS minimum standards and the finalisation of the two-pillar solution on taxation of the digital economy.
The global minimum tax for large multinationals opens up opportunities for developing countries to reform their corporate tax bases, but they need technical support. The implementation of country by country (CbC) reporting and the GloBE rules have been highlighted as priority issues for developing countries, and capacity building on these measures has therefore been stepped up. Technical support on the practical implementation of the global minimum tax rules will be available by 2026 for any developing countries requesting assistance.
As developing countries mobilise domestic resources to help them meet the sustainable development goals (SDGs) the corporate income tax measures alone will not provide sufficient tax revenue. Taxes on consumption or production will also need to be reformed to ensure that adequate resources are available to governments to fund their objectives.
Developing countries could derive advantages from enhanced international co-operation on environmental taxes and related pricing mechanisms, and on consumption taxes such as VAT or GST.
Other priorities for reform include personal income and wealth taxes and the taxation of non-renewable extractives. In addition to this the digitalisation of tax administration can increase the efficiency of tax collection.
The Inclusive Forum on Carbon Mitigation Approaches (IFCMA) aims to improve the global impact of emissions reduction efforts by increasing the amount of through data and information sharing, engaging in evidence-based mutual learning and promoting multilateral dialogue.
A large number of countries have introduced reforms to extend the scope of VAT or GST to e-commerce based on the OECD’s international VAT/GST standards and guidance. By implementing the standards developing countries can ensure that they collect VAT from all businesses and maintain a level playing field between e-commerce and traditional businesses. There are however challenges in this area for countries with lower administrative capacity.
The implementation of the standards allows developing countries to secure crucial VAT/GST revenues, while also ensuring a level playing field between e-commerce and traditional businesses. The OECD has worked with the World Bank Group and regional organisations including development banks to produce regional VAT Digital Toolkits for Latin America and the Caribbean, the Asia-Pacific region and Africa. The toolkits contain detailed guidance on the design and implementation of the framework for collecting VAT on digital trade with consideration of the circumstances of each region.
The OECD is offering technical assistance covering aspects of VAT reform for digital trade. This includes an assessment of the country’s requirements and development of policy suggestions to achieve the objectives, including the required administrative and compliance processes and the related audit and enforcement strategies
