OECD Secretary-General Tax Report to G20 Finance Ministers and Central Bank Governors. Riyadh, Saudi Arabia. February 2020. Overview Over the past 10 years, the G20 has supported multilateral co-operation for a globally fair, sustainable and modern international tax system, which translated in to successful deliverables. Thanks to this momentum, significant progress has taken place to combat tax evasion, Base Erosion and Profit Shifting (BEPS), and ensure that all economies benefit from these developments. As per your mandate, the urgent priority is now to reach a consensus-based solution to address the tax challenges arising from the digitalisation of the economy by the end of 2020. During the second half of 2019, political tensions around unilateral measures mounted and provided a glimpse of the difficulties that would arise should progress on finding a global solution by the end of 2020 hit a standstill. These tensions highlight again the urgency to advance the multilateral negotiations. The year 2020 got off to an encouraging start. On 29-30 January 2020 at their plenary meeting, the 137 countries and jurisdictions of the G20/OECD Inclusive Framework on BEPS (hereafter G20/OECD IF) reaffirmed their commitment to reach a consensus -based solution and endorsed the “Outline of the Architecture of a Unified Approach on Pillar One.” For almost two years, the G20/OECD IF had been considering three competing proposals under Pillar One. Such proposals related to new rules on where MNEs should pay tax (“nexus” rules) and on what portion of profits they should be taxed (“profit allocation” rules). In order to unlock the conversation, the OECD Secretariat released its proposed “Unified Approach” in October 2019 1, which drew on certain elements from the previous proposals and includes new nexus and profit allocation rules. This work continues not without difficulties, and some of the 137 members have divergent views on how best to address the tax challenges arising from digitalisation. There are still certain gaps that need to be bridged, one of which is a proposal from the United States as articulated in a letter to me by the U.S. Secretary of the Treasury dated 3 December 2019 to make Pillar One be implemented on a “safe-harbour” basis. In recognition of this, the G20/OECD IF noted in its statement that resolution of this issue is crucial to reaching consensus. In particular, many G20/OECD IF members expressed concerns that implementing Pillar One on a ‘safe harbour’ basis could raise major difficulties, increase uncertainty and fail to meet all of the policy objectives of the overall process. However, they noted that a final decision on the matter will be taken only after the other elements of the consensus -based solution have been agreed upon. Concurrent with the work on Pillar One, much progress on Pillar Two has been made since the last time I reported to you, notably a public consultation and working groups meetings. This work focusses on the remaining BEPS issues and seeks to develop rules that would provide jurisdictions with a right to “tax back” where other jurisdictions have not exercised their primary taxing rights or the payment is otherwise subject to low levels of effective taxation. At its plenary meeting in January 2020, the G20/OECD IF agreed a Progress Note on Pillar Two, under which various design options remain under consideration and further work on these options will continue in the months ahead. In the coming months, more data on the economic analysis and impact assessment will be available for the G20/OECD IF to take informed decisions. This timeline is ambitious but failure to reach agreement would greatly increase the risk that countries will act unilaterally, with negative consequences on an already fragile global economy. Critical meetings will take place in the months ahead where difficult decisions will need to be taken on the technical design of both pillars. Although it will be challenging, with your continued political support, I remain optimistic that agreement on key policy issues that would form the basis of a political agreement can be found at the G20/OECD IF’s next plenary meeting scheduled for 1-2 July 2020 in Berlin, Germany.