OECD – 2019 Progress Report on Tax Certainty. IMF/OECD Report for the G20 Finance Ministers andCentral BankGovernors. Tax certainty for taxpayers is an important component of investment decisions and can have significant impacts on economic growth. In 2016, the G20 Leaders called on the International Monetary Fund (the IMF) and the Organisation for Economic Co-operation and Development (OECD) to work on this issue. Following an initial report in 2017 (the 2017 Report1) and an update in 2018 (the 2018 Update2), the G20 Leaders re-iterated the importance of this issue, noting their continued support for enhanced tax certainty. The Buenos Aires Action Plan called for “the OECD and the IMF to report to Finance Ministers and Central Bank Governors in 2019 on progress made on tax certainty”. This report provides an update on the work on tax certainty issues and shows clearly that this remains a priority issue for taxpayers and tax administrations alike. Moreover, the work on tax certainty covers a wide variety of issues in both tax policy and tax administration, notably:
- A shifting focus from dispute resolution to dispute prevention: ensuring that disagreements between tax administrations can be resolved quickly to avoid double taxation will always be a core element of tax certainty, but with the advances in tax transparency, cooperative compliance and the implementation of the OECD/G20 BEPS Project, the opportunity for early certainty is far greater. The availability of Country-by-Country reports allows for more targeted audits and the practice of joint audits is becoming more common, allowing for the highest levels of integration and coordination. The International Compliance Assurance Program (ICAP), which has now launched its second pilot, provides for a multilateral approach to early certainty for eligible multinational enterprises. • The demand and need for improvements to the integrity, efficiency and accountability of tax administrations, particularly in developing countries. The IMF has produced new results from its Tax Administration Diagnostic Assessment Tool (TADAT) and the OECD has begun work on the link between tax morale, namely the confidence that taxpayers have in a country’s tax system, and tax certainty. Capacity building work by both the IMF and OECD (and others) continued to support tax certainty on many fronts, including new initiatives in relation to combatting corruption in tax administrations given corruption is closely linked to tax certainty. • Work on ensuring that the tax rules are as clear and administrable as they can remains a key component of tax certainty. There is considerable work on-going to make the transfer pricing rules simpler and easier to administer. The OECD continues to work on strengthening the OECD Transfer Pricing Guidelines (TPG) and on the implementation of BEPS Actions 8-10 work streams, including work on hard-to-value intangibles (HTVI), low value-added intra-group services (LVAS) implementation, and in respect of financial transactions and the application of the transactional profit split method (TPSM). • Several lessons (not all new) have emerged from the capacity building work of both the IMF and OECD to inform the design and delivery of future assistance to enhance tax certainty in developing countries. A key lesson is that success in improving tax systems should be assessed not only by revenue levels achieved, but also by the improvements in the quality of the tax system to minimize economic distortions while ensuring predictability, fairness and simplicity. The current debates around the international tax agenda, and in particular how to address the tax challenges arising from digitalisation, necessarily have a tax certainty angle, and indeed, tax certainty is increasingly part of the policy agenda for both G20 and OECD countries as well as developing countries. There is good, concrete work going on in a number of areas and the IMF and the OECD will continue to take forward the work on these fronts.
