OECD Taxation Working Papers N. 37 – UNINTENDED TECHNOLOGY-BIAS IN CORPORATE INCOME TAXATION: THE CASE OF ELECTRICITY GENERATION IN THE LOW-CARBON TRANSITION

OECD Taxation Working Papers N. 37 – UNINTENDED TECHNOLOGY-BIAS IN CORPORATE INCOME TAXATION: THE CASE OF ELECTRICITY GENERATION IN THE LOW-CARBON TRANSITION. This paper shows that corporate income tax (CIT) provisions can lead to different effective tax rates for different technologies producing the same output but having different cost structures, under otherwise identical CIT provisions. The paper develops a framework for analysing the sources of the differences in effective tax rates and adapts existing models to calculate and compare forward-looking average effective tax rates for carbon-neutral and carbon-intensive electricity generation technologies. Considering CIT provisions for cost recovery in 36 OECD and partner economies, it finds that most tax systems calibrate the treatment of capital costs in a way that produces technology-neutral results when investments are debt-financed. This is because most tax systems offset the fact that deductions for capital costs are based on nominal (rather than real) capital costs by allowing deductibility for the full nominal (rather than real) cost of debt. In contrast, when an investment is equity-financed, the capital cost deduction may effectively be seen to be inadequate in the typical circumstance where the cost of equity is not deductible. As a consequence, immediate deductibility of variable costs but not of capital costs implies that average effective tax rates are relatively high for capital-cost-intensive electricity generation when investment is financed via equity. Since low carbon electricity generation tends to be relatively capital-intensive, this result can be seen as a form of unintentional misalignment of the CIT system with decarbonisation objectives. Whether or not there is an overall bias against carbon-neutral technologies in the CIT system, abstracting from technology-specific tax incentives, depends on several other parameters, such as countryspecific fiscal depreciation schedules and the sources of finance. (…) This paper has benefited from support, comments and suggestions provided by Nils Axel Braathen, David Bradbury and Giorgia Maffini at the OECD and by Delegates of the Joint Meetings of Tax and Environment Experts and of Working Party No. 2 on Tax Policy Analysis and Tax Statistics. The authors would like to thank the following experts for their very insightful feedback on earlier versions of the paper: Matt Benge (New Zealand Inland Revenue), Edith Brashares (U.S. Department of the Treasury), Graeme Davis (Department of the Treasury, Australia), Marc Séguin (Department of Finance, Canada), Øystein Bieltvedt Skeie (Ministry of Finance, Norway), Christian Thomann (Ministriy of Finance, Sweden) and Christian Valenduc (Ministry of Finance, Belgium). The paper is part of a broader set of OECD projects on tax policy, the environment and technology choice in a low-carbon transition. (Luisa Dressler, Tibor Hanappi and Kurt van Dender).

OECD Taxation Working Papers N. 40 – Tax policies for inclusive growth in a changing world

OECD Taxation Working Papers N. 40 – Tax policies for inclusive growth in a changing world. This paper, Tax policies for inclusive growth in a changing world, has been prepared in support of Argentina’s G20 Presidency. While this paper is focused on taxation policy, it forms part of a broader contribution that the OECD has made in support of Argentina’s G20 presidency. Against a backdrop of increased inequality and persistently low productivity growth, this paper considers the challenges and opportunities confronting policy makers in a rapidly changing world as a result of globalisation, technological change and the changing world of work. The paper focusses on: · The impact of the tax system on the market distribution of income, by supporting employment, skills investments, and labour market formality. · How shifting tax mixes towards growth-friendly taxes can be combined with measures to improve progressivity, particularly through base-broadening and through removing inefficient and regressive tax expenditures. · Ways in which personal income taxes and social transfers can foster inclusive growth by raising the efficiency and equity of labour and capital income tax systems. · How tax policy can foster business dynamism and productivity, including through support for investment and innovation, and can raise efficiency by continuing to combat BEPS. · How tax capacity can be raised, and how tax administration can be strengthened, including through international co-operation The paper provides tax policy advice and recommendations to support governments in their pursuit of tax and transfer policies conducive to inclusive growth, while supporting innovation and increased productivity growth; preserving the revenueraising capacity of the tax system; and ensuring the sustainability of public spending. (Pierce O’Reilly).

OECD – Model Mandatory Disclosure Rules for CRS Avoidance Arrangements and Opaque Offshore Structures

OECD – Model Mandatory Disclosure Rules for CRS Avoidance Arrangements and Opaque Offshore Structures. 1. The purpose of these model mandatory disclosure rules is to provide tax administrations with information on CRS Avoidance Arrangements and Opaque Offshore Structures, including the users of those Arrangements and Structures and those involved with their supply. Information disclosed pursuant to the application of these model rules can be used both for compliance purposes and to inform future tax policy design. These rules should also have a deterrent effect against the design, marketing and use of arrangements covered by the rules. 2. The model rules require an Intermediary or user of a CRS Avoidance Arrangement or Opaque Offshore Structure to disclose certain information to its tax administration. Where such information relates to users that are resident in another jurisdiction it would be exchanged with the tax administration(s) of that jurisdiction in accordance with the terms of the applicable international legal instrument. 3. The mandatory disclosure rules do not affect the substantive provisions of a jurisdiction’s CRS Legislation or impact on any reporting outcomes under the CRS. Rather these rules are information gathering tools that seek to bolster the integrity of the CRS by deterring advisors and other intermediaries from promoting certain schemes. The rules seek to accomplish this by providing tax administrations and policy makers with information on schemes, their users and suppliers, for use in compliance activities, exchange with treaty partners and tax policy design. 4. Consistent with the concepts on mandatory disclosure articulated in the BEPS Action 12 Report the model rules are not limited to situations of non-compliance with the tax law (including the rules on CRS reporting). Thus, a disclosure under the rules does not necessarily imply a violation of any tax rule and will not always result in the tax administration taking compliance action in respect of a disclosed Arrangement. Equally, the fact that a tax administration does not respond to a disclosure does not imply any acceptance of the validity or tax treatment of the Arrangement by the tax administration. Jurisdictions implementing these model rules would need to take into account domestic specificities in their own CRS Legislation and the interaction of these model rules with existing anti-avoidance rules. OECD (2018).

OECD WORK ON TAX AND DEVELOPMENT

The work of the Centre for Tax Policy and Administration (CTPA) has changed dramatically in recent years, including in relation to the role of development and developing countries in our work. I am proud that an increasing number of developing countries are now integrated into our work, as equal members of the Global Forum on Transparency and Exchange of Information for Tax Purposes (the Global Forum) and the OECD/G20 Inclusive Framework on BEPS (the Inclusive Framework), with a voice on the creation and implementation of new international tax standards. This has been an evolving process. As globalisation increased, the challenges of cross-border taxation have extended beyond the OECD membership, and the CTPA accelerated our dialogue with developing countries accordingly. This started with our Global Relations Programme (GRP) in the early 90’s which has provided training and capacity building for over 25 000 tax officials from the developing world. Since then, we have created a Task Force on Tax and Development, we have expanded our Global Revenue Statistics database to cover more than 90 countries by the end of 2018, we have established audit programmes through our Tax Inspectors Without Borders (TIWB) initiative and we have set up tax crime investigation academies throughout the world. Of greatest significance however has been the establishment of the Global Forum and the Inclusive Framework, which have brought dozens of developing countries into the heart of the work of the CTPA. This has fundamentally changed the nature of how we operate, ensuring development is an integral concern across all of our work. It has also raised expectations as the CTPA is now seen as a key actor in the Domestic Resource Mobilisation (DRM) agenda. This process has been inspired by the wider development landscape, most recently with the Addis Ababa Action Agenda (AAAA) and the Sustainable Development Goals (SDGs). These agreements provide both a framework and a vision for how we can continue to develop international co-operaton in taxation to benefit development. The CTPA has been, and will continue to be, inspired by that vision that sees development as a universal agenda, and we will continue to mainstream development across all of our work. This booklet sets out how we have been doing this, and how we intend to do more in the future. (2018-19).

OECD – REFORMS OF FISCAL RELATIONS IN BRAZIL: Main issues, challenges, and reforms

OECD – REFORMS OF FISCAL RELATIONS IN BRAZIL: Main issues, challenges, and reforms. Ana Luisa Fernandes and Pricilla Santana (2018). 1. This document is submitted to delegates for information and discussion at the 14th annual meeting of the OECD Network on Fiscal Relations across Levels of Government. It supports the discussion of the roundtable session on fiscal federalism reforms, presenting proposed reforms of fiscal relations in Brazil. 2. Brazil is a three-tiered federation since the Federal Constitution of 1988 decentralised the political power and strengthened federalism, turning the municipalities into a member of the federation with administrative and political autonomy. The federal pact is based on the distribution of power and assignments among the levels of government established by the Constitution. Due to this division, Brazil is characterized by a relatively high degree of political and fiscal decentralisation compared to other countries (Ter-Minassian and de Mello, 2016). 3. Tax assignment in Brazil is clearly defined in the Constitution, and most of the transfers to subnational governments (SNGs) are made according to non-discretionary constitutional rules. On the other hand, there are competition and overlap in the division of some attributions, such as the provision of health and education services. 4. The purpose of this document is to introduce one of the main issues regarding fiscal relations in Brazil and discuss possible reforms. The second section gives an overview of the fiscal relations and their main difficulties and challenges. The third section presents the reforms that have been recently implemented or are being carried out to address the problems presented. Finally, in the fourth section, possible complementary reforms to the previous ones are discussed. (…) CONCLUSION. 58. Brazil is a federation with a relatively high degree of decentralisation. Its tax burden and indebtedness are also high compared to its peers; thus, there is not much room for tax revenue increases. A reform to improve the subnational governments’ finances should focus on reducing the budgetary rigidity by decreasing the mandatory expenditure and procyclical mechanisms, such as earmarked revenues. 59. Another important measure is to improve the accounting standardisation and enforce the Fiscal Responsibility Law. In this sense, progress has been made, such as the reformulation of the Fiscal Adjustment Program and the implementation of the Matrix of Accounting Balances. An important additional measure would be the construction of the Fiscal Management Board. Moreover, for a transparent and effective control of the indebtedness of the states, reforms have been made such as the revision of the analysis of payment capacity and the establishment of a limit for new loans with an objective rule based on the states’ fiscal scenario.

OECD Taxation Working Papers, N. 36 – Domestic Revenue Mobilisation: A new database on tax levels and structures in 80 countries

OECD Taxation Working Papers, N. 36- Domestic resource mobilisation is critical to fund government services and to support development. Taxes are a critical domestic revenue source that can also impact other social or economic outcomes. Understanding differences in the level and structure of tax revenues is therefore foundational to discussions of domestic resource mobilisation and of tax reform. This paper presents evidence on the level and structure of tax revenues in 80 countries, drawing on the new Global Revenue Statistics Database. It compares tax-to-GDP ratios and tax structures across countries, regions and over time. Links between tax-to-GDP ratios, GDP per capita and tax structures are assessed in a correlation analysis. The new database provides invaluable insights for researchers and fiscal policy analysts and offers a high level of comparability and reliability.

OECD Working Papers on Fiscal Federalism N. 21. Decentralisation in a Globalised World –

OECD Working Papers on Fiscal Federalism N. 21. Decentralisation in a Globalised World – Consequences and Opportunities. Globalisation accompanied by the growing importance of information technology and knowledge-based production pose challenging problems for federations. We summarise the difficulties that traditional decentralised federations face in addressing problems of competitiveness, innovation and inequality brought on by globalisation. Adapting to these challenges involves rethinking the roles of various levels of government and rebalancing them appropriately. On the one hand, responding to inequality enhances the policy role of the federal government. On the other hand, state and local governments must respond to the imperative of providing education and business services to equip citizens and firms to compete in the knowledge economy. Perhaps most important, large urban governments are best placed to provide the physical and social capital to support innovation hubs. A key challenge for fiscal federalism is to facilitate the decentralisation of responsibilities to urban governments. This entails new thinking about revenue decentralisation, policy harmonisation and the structure of intergovernmental transfers so that cities can implement their policies effectively and accountably. Boadway, R. and S. Dougherty (2018).

OECD – MODEL PROTOCOL FOR THE PURPOSE OF ALLOWING THE AUTOMATIC AND SPONTANEOUS EXCHANGE OF INFORMATION UNDER A TIEA

OECD – MODEL PROTOCOL FOR THE PURPOSE OF ALLOWING THE AUTOMATIC AND SPONTANEOUS EXCHANGE OF INFORMATION UNDER A TIEA. Background. At present, both Article 6 and 7 of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (the “Multilateral Convention”), as well as Article 26 of the OECD Model Tax Convention foresee the possibility of automatically and spontaneously exchanging information between Contracting Parties. However, the current Model TIEA, which was published in April 2002, does not provide for such forms of exchange. As the Multilateral Convention is now the most comprehensive and wide-ranging legal instrument for internationally exchanging information, it is expected that jurisdictions would in most cases choose to put in place the exchange of information, including under the Standard for Automatic Exchange of Financial Account Information in Tax Matters (the “Standard”), on the basis of the Multilateral Convention. There may, however, be instances where jurisdictions wish to implement the automatic and the spontaneous exchange of information on the basis of a TIEA (e.g. the exchange of information with dependent and associated territories or where a developing jurisdiction and a developed jurisdiction wish to put in place the automatic exchange of information). As the current Model TIEA does not provide for such forms of exchange, and most of the TIEAs currently in place reflect this approach, appropriate model wording for allowing the automatic and/or spontaneous exchange of information under a TIEA in these instances is herewith made available.

OECD Taxation Working Papers N. 41- Taxation and the future of work

Recent policy discussion has highlighted the variety of ways in which the world of work is changing. One development prevalent in some countries has been an increase certain forms of non-standard work. Is this beneficial, representing increased flexibility in the workforce, or detrimental, representing a deterioration in job quality driven by automation, globalisation and the market power of large employers? These changes also raise crucial issues for tax systems. Differences  in tax treatment across employment forms may create tax arbitrage opportunities. This paper investigates the potential for such opportunities for eight countries. It models the labour income taxation, inclusive of social contributions, of standard employees and then of self-employed workers (with applicable tax rules detailed in the paper’s annex). The aim is to understand whether countries’ tax systems treat different employment forms differently, before approaching the broader question of whether differential treatment has merit when evaluated against tax design principles.

OECD – Tax and digitalisation – Policy Note

The digital transformation of the economy calls into question whether the international tax rules, which have largely been in place for most of the past 100 years, remain fit for purpose in the modern global economy. While good progress has been made in tackling base erosion and profit shifting (BEPS) through the BEPS Project, some of the more fundamental tax challenges posed by digitalisation have remained unaddressed. Through the BEPS Project and more recently, through the Inclusive Framework on BEPS, discussions on how to address the tax challenges that arise from digitalisation have been ongoing. Recent international efforts to address these issues have highlighted the divergent positions of many jurisdictions. While the introduction of unilateral measures in a number of countries has underscored the urgency of the issue and the need to re-assess some of the key international tax principles, these divergent positions have made a consensusbased solution difficult to achieve. In a significant advance, the 128 members of the Inclusive Framework have recently agreed a policy note – “Addressing the Tax Challenges Arising from Digitalisation” (OECD, 2019a) – that identifies concrete proposals in two pillars to explore and which could form the basis of a global, consensus-based solution. These pillars involve the re-allocation of taxing rights among jurisdictions and the need to address remaining BEPS issues. This policy note will be the basis for detailed analysis over the next 18 months as the Inclusive Framework works towards delivering a solution to the G20 by the end of 2020. In November 2015, two years after the G20 Leaders endorsed the ambitious Action Plan on BEPS, the BEPS package of 15 Actions to tackle tax avoidance was agreed by all OECD and G20 countries and endorsed by G20 Leaders. It was designed to stop countries and companies from competing on the basis of a lack of transparency, artificially locating profit where there is little or no economic activity, or the exploitation of loopholes or differences in countries’ tax systems. The work on tax and digitalisation has been a key aspect of the BEPS Project since its inception. Published as part of the BEPS package in October 2015, the Action 1 Report found that, as a result of the pervasive nature of digitalisation, it would be difficult, if not impossible, to ring-fence the “digital economy” from the rest of the economy for tax purposes. In other words, countries agreed that there was no such thing as a “digital economy”, but rather that the economy itself had become digitalised and that this trend was likely to continue. Following a mandate by G20 Finance Ministers in March 2017, the Inclusive Framework, working through its Task Force on the Digital Economy (TFDE) published Tax Challenges Arising from Digitalisation – Interim Report 2018: Inclusive Framework on BEPS (the Interim Report). The Interim Report provided an in-depth analysis of value creation across new and changing business models in the context of digitalisation and the tax challenges they presented. These challenges included risks remaining after BEPS for highly mobile income -producing factors which still can be shifted into low-tax environments. While members of the Inclusive Framework did not converge on the conclusions to be drawn from this analysis, they committed to continue working together towards a final report in 2020 aimed at providing a consensus-based long-term solution, with an update in 2019. Conscious of the significance and urgency of the issue, the TFDE has intensified its work since the delivery of the Interim Report. Drawing on the analysis included in the Action 1 Report as well as the Interim Report, and informed by recent discussions of the TFDE on a “without prejudice” basis, a number of concrete proposals have been outlined in “Addressing the Tax Challenges Arising from Digitalisation” (OECD, 2019a). The Inclusive Framework will continue to explore these proposals, including through a public consultation process, with the aim of developing a detailed work programme to guide the Inclusive Framework’s efforts to agree a global, long-term solution by the end of 2020.