On 14 February 2020 the OECD published the Tax Report to the G20 Finance Ministers, in advance of their meeting on 22 and 23 February 2020. The report covers recent international tax developments.
Tax challenges of the digital economy
Pillar One
The OECD Secretariat released its proposed “Unified Approach” in October 2019, including new nexus and profit allocation rules. On 29 and 30 January 2020 the G20/OECD Inclusive Framework on base erosion and profit shifting (BEPS) endorsed the Outline of the Architecture of a Unified Approach on Pillar One. There are still differences of opinion including a view from the US that Pillar One should be implemented on a safe harbour basis. A final decision on this issue will be taken when the other elements of the approach to the digital economy have been agreed.
Pillar Two
Rules are being drafted to provide jurisdictions with a right to “tax back” if other jurisdictions have not taxed the relevant amount or it is subject to a low effective tax rate. A Progress Note on Pillar Two agreed in January 2020 noted that various design options are being considered.
Further meetings will take place on the technical design of both Pillar One and Pillar Two, with the aim of agreeing key policy issues at the next plenary meeting of the Inclusive Framework on 1 and 2 July 2020.
Tax Transparency and exchange of information
In 2019, more than 6,100 bilateral automatic exchanges of information (AEOI) took place between 95 jurisdictions. More than EUR 100 billion of additional tax revenues have been identified by tax administrations and the ongoing implementation of AEOI will continue to increase tax revenues.
There have been almost 30,000 information exchanges on previously secret tax rulings since 2016 and 84 jurisdictions have exchanged Country by Country reports on the activities, income and assets of multinational groups.
Almost 100 jurisdictions exchanged information on financial accounts in 2019.
Prevention of Treaty Shopping
The Multilateral Convention to Implement Tax Treaty Measures to Prevent BEPS (the Multilateral Instrument) has now been signed by 94 jurisdictions, including all the treaty shopping hubs. There is evidence that taxpayer behaviour is changing as a result of the changes to tax treaty provisions.
Review of BEPS Minimum Standards
The review of the BEPS Minimum Standards – countering harmful tax practices, preventing tax treaty abuse, country by country reporting and improving tax dispute resolution – takes place in 2020. Work is being done to ensure that developing countries benefit from tax transparency and BEPS standards and that they can participate in the discussions on tax and digitalisation.
Training and Capacity Building
By the end of 2019 more than 1,000 financial crime investigators from more than 100 countries had been trained by the OECD’s International Academy for Tax and Financial Crime Investigations.
The OECD/UNDP Tax Inspectors without Borders (TIWB) initiative has completed 29 programmes completed, and still has 47 ongoing programmes with 20 more in the pipeline. The Platform for Collaboration on Tax (PCT), set up by the IMF, OECD, United Nations, and World Bank Group, – is developing toolkits with practical guidance on BEPS issues relevant to developing countries.
