OECD SECRETARY-GENERAL TAX REPORT TO G20 FINANCE MINISTERS AND CENTRAL BANK GOVERNORS. This report contains two parts. Part I is a report on the activities and achievements of the OECD’s tax agenda, and is made of two subparts: looking back at significant achievements and looking ahead at the further progress needed, in particular through the OECD/G20 Inclusive Framework on BEPS. Part II is a Progress Report to the G20 by the Global Forum on Transparency and Exchange of Information for Tax Purposes. JULY 2018. (…) Since 2008, the G20 has made the fight against international tax fraud and avoidance a priority. Thanks to the support of Leaders and Finance Ministers, major progress has been achieved, which has demonstrated that international cooperation, in a multilateral framework, can support and strengthen national sovereignty. Transparency has been improved and rules have been changed to realign the location of profits with the place where value is created. The time where multinational enterprises (MNEs) could use tax planning based on a lack of transparency, a lack of substance or the exploitation of cross-border loopholes is over. More needs to be done, and is being done, in particular to address the challenges of the digitalisation of the economy. Meanwhile, you demanded that countries automatically exchange financial account information – almost 50 jurisdictions started to do so in September 2017 and another 50 more will begin this September. You urged countries to join multilateral conventions to facilitate international cooperation and to implement parts of the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project. Almost 120 jurisdictions now participate in the Mutual Administrative Assistance Convention and the BEPS multilateral instrument counts 82 signatories and has just this month entered into force. To counter harmful tax practices you insisted that countries amend or abolish harmful preferential tax regimes – 175 regimes have been reviewed by the OECD/G20Inclusive Framework on BEPS and more than 130 regimes have already been amended or abolished or are in the process of being amended or abolished. The G20 insisted that countries be transparent about the types of agreements their tax administrations strike with their taxpayers and now information on 17 000 tax rulings have already been identified and exchanged. Country-by-Country Reporting, requiring the largest multinational enterprises to provide tax administrations with a complete and coherent picture of their tax situation, has started. As a direct result of all this, taxpayers are changing their behaviour. A significant number of MNEs have already reported taking pro-active steps aimed at aligning their tax structures with their real economic activity. In addition and as a result of voluntary compliance mechanisms and other offshore investigations put in place since 2009 thanks to the improvements in international tax cooperation, particularly the onset of automatic exchange of information, taxpayers have come forward and disclosed formerly concealed assets and income. By June 2018, jurisdictions around the globe have identified EUR 93 billion in additional revenue (tax, interest, penalties) from such initiatives. There is much more work to do. Crucially, the leadership and collegiality of the G20 will be essential in solving one the most urgent issues in the international tax agenda. In my last report to you in March of 2018, I delivered the OECD’s Interim Report on the Tax Challenges Arising from Digitalisation. The OECD/G20 Inclusive Framework agreed to revisit the profit allocation and nexus rules and is now working towards a consensus-based solution. The OECD/G20 Inclusive Framework’s Task Force on the Digital Economy met on 11 July, allowing countries to refine their positions, with a view to bridging the gap between them. The Secretariat is now in a good position to identify a clear way forward and provide you with an update in June 2019. The final report would be prepared for 2020. We have received a number of requests to advance the final report to 2019. Clearly, this would only be possible if there were a higher level of convergence on the path forward and on the possible ways to achieve what is clearly a shared objective. (…)More and more jurisdictions are engaging in the work of the Global Forum on Transparency and Exchange of Information for Tax Purposes (the Global Forum) with its membership reaching 150. Members are making constant progress towards a more effective implementation of the internationally agreed standards on tax transparency and exchange of information, are being subject to rigorous assessment and monitoring processes, as well as providing their feedback and participating in the evaluation of peers. Multilateralism proves its effectiveness both at the institutional level, which continues to attract new members, and through legal instruments facilitating cross-border tax cooperation. Today, 123 jurisdictions participate in the Convention on Mutual Administrative Assistance in Tax Matters (the multilateral Convention) and 102 jurisdictions have signed the OECD’s Multilateral Competent Authority Agreement for the Common Reporting Standard which provides the basis for automatic exchange relationships. In 2017, around 50 jurisdictions started exchanging financial account information automatically. In more than 50 further jurisdictions preparatory work is entering its final stage with exchanges due to commence in September 2018. While a majority of these jurisdictions already have everything in place to deliver on their commitment, a few of them have not completed all the necessary steps and are therefore facing the increasing pressure to comply. With around 100 jurisdictions expected to be participating in automatic exchange of information (AEOI) on financial accounts of non-residents in just a couple of months, the environment in which taxpayers and tax administrations operate will change dramatically. The first evidence of increasing tax compliance is already available. Nearly 93 billion euro in additional tax revenue has been identified as a result of voluntary compliance mechanisms and offshore investigations. Members are also observing an increase in the number of foreign accounts and the income from these accounts being declared by taxpayers through tax returns. The work on delivering peer-led evaluations of the progress made by jurisdictions in the effective implementation of the transparency and exchange of information on request (EOIR) standard continues according to the schedule. In the second round of peer reviews, 24 new ratings have been assigned, of which 10 overall ratings are “Compliant”, 12 “Largely Compliant” and 2 “Partially Compliant”. Where any gaps are identified, recommendations are made on the steps necessary for addressing them. The new peer reviews demonstrate the successful progress made in the implementation of the recommendations made in the first round, as well as improved practice and frequency of exchanges. The number of requests between tax authorities continues to grow. The Global Forum also makes a valuable contribution in advancing the global agenda on beneficial ownership along with Financial Action Task Force (FATF) and other international actors. This report contains an update on the actions taken by the Global Forum in response to the 2016 G20 call to advance its work in this field. Much has been delivered already, including the inclusion of the beneficial ownership requirement in the 2016 Terms of Reference (ToR) for the second round of EOIR peer reviews which will ensure the scrutiny of the availability of, and access to, beneficial ownership information in all member jurisdictions, as well as the provision of technical assistance through numerous capacity-building trainings and support in drafting laws. Technical assistance facilitating the effective implementation of the tax standards continues to expand. In 2018 alone, more than 50 jurisdictions have received tailored support. Whilst much has been done, there is more work to come. Developing countries remain behind more advanced economies with respect to tax transparency. Many have not yet signed and/or ratified the multilateral Convention and are yet to implement the AEOI standard. Technical assistance has been offered to all developing country members to enable more effective participation in tax cooperation and the progress is now largely dependent on the domestic political leadership and willingness to benefit from such support. A spike of political interest is observed in Africa, where nearly 20 jurisdictions have already signed the Yaoundé Declaration, made at the ministerial meeting alongside the 2017 Global Forum annual plenary, which calls on all African countries to fully benefit from the most recent improvements in global tax transparency. For the remainder of 2018, the Global Forum will maintain its focus on ensuring the full and timely delivery of the AEOI commitments. It will continue its assessments of the timeliness and quality of AEOI implementation under the “Staged Approach”, whilst delivering a framework for the full peer reviews which will take a close look at the effectiveness of AEOI implementation in practice. Further progress is anticipated with respect to the participation of developing country members in this new standard. The EOIR peer reviews will continue, including with respect to the jurisdictions which obtained a provisional rating under the Fast-Track reviews in 2017. The work on beneficial ownership information will remain a priority. Capacity-building support to developing countries will continue with an increased focus on engagement with political leadership in developing countries, and further efforts will be put in the assessment of the impact of increased tax transparency.
