OECD SECRETARY-GENERAL TAX REPORT TO G20 LEADERS. Osaka, Japan June 2019. Since I last reported to you in December 2018, substantial progress took place on all the deliverables in the G20 International Taxation agenda; namely, tax transparency, Base Erosion and Profit Shifting (BEPS) implementation, addressing the tax challenges arising from the digitalisation of the economy, tax certainty and tax and development. Since its inception in 2008, the G20 has developed a very ambitious tax agenda to improve tax cooperation and transparency and ensure that companies pay their taxes where they carry on their activities. 10 years ago, bank secrecy and opaque structures were used and abused by too many taxpayers across the world to hide their assets and income from tax administrations. Thanks to the efforts of the G20, bank secrecy for tax purposes no longer exists and all financial centres are now engaged in the automatic exchange of financial information (through the OECD’s Common Reporting Standard – CRS). In 2008, only 40 exchange of information agreements between secretive jurisdictions and other countries had been put in place. Today, more than 4500 exchange of information agreements are in force with 90 jurisdictions implementing the CRS in 2018). As a result 47 million offshore accounts – with a total value of around 4.9 Trillion euros – have been exchanged for the first time. This level of transparency in tax matters is unprecedented and ensures that those assets will never escape detection. A small number of jurisdictions have yet to fulfil their commitments to exchange automatically by 2018 at the latest and they are urged to do so without further delay. Beyond these impressive numbers, our action has had a very concrete impact. First, you and other countries in the world have recovered taxes which had been defrauded for too long. For a few years now, I have reported to you the amounts collected from taxpayers coming forward and having disclosed formerly concealed assets and income through voluntary compliance mechanisms and other offshore investigations. The latest update brings the amount to over EUR 95 billion in additional revenue (tax, interest, penalties) from such initiatives, which is an addition EUR 2 billion since November 2018. That said, now that the CRS is fully implemented this amount will stabilise and countries will annually collect taxes on the income generated by the disclosed assets. I am also now in a position to report that there is economic evidence that your efforts have had an impact on offshore bank deposits. Drawing on previous economic surveys, the OECD’s analysis shows that bank deposits in international financial centres (IFCs) have fallen by approximately 34% over the past ten years for a decline of USD 551 billion. A large part of that decline is due to the onset of the automatic exchange of information, which accounts for about two thirds of that decrease. Specifically, automatic exchange of information (AEOI) has led to a decline of 20% to 25% in the bank deposits in IFCs over the past decade. Tax evasion is also often linked to other financial crimes, which are becoming increasingly sophisticated, including corruption, money laundering and terrorist financing. The OECD promotes a “whole of government” approach to fighting these types of economic crimes through its Oslo Dialogue, emphasising the great synergies that investigators can achieve through interagency cooperation and information sharing. I am delighted to report on the establishment of the OECD Asia Academy for Tax and Financial Crime Investigation, hosted by Japan, in the margins of the G20 Finance Ministers and Central Bank Governors meeting and of the Ministerial Symposium on International Taxation held on 8 June 2019. The launch of this Academy, follows the success of the Academies established in Italy, in Kenya and in Argentina from 2014 to 2018. This is about institution building and delivering on our commitment to support capacity building. Regarding our fight against Base Erosion and Profit Shifting (BEPS), I am glad to report that the implementation of the standards to combat tax avoidance has been broad, consistent and is continuing through the G20/OECD BEPS Inclusive Framework. Changes are massive and the proper implementation of the minimum standards is being peer reviewed. Some figures just show the magnitude of the legal and practical changes • 21 000 previously secret tax rulings have now been exchanged, which is an increase of 4 000 additional rulings since I last reported in July 2018. What does that mean? Companies can no longer negotiate secret, sweetheart deals which would deprive other countries of their revenues. • 80 jurisdictions (up from 62 jurisdictions last year) have engaged in the exchange of Country-by-Country reports (CBCR) on the activities, income and assets of multinational enterprises, which began in June 2018. CBCR provides tax administrations with access to extensive and consistent information on the largest foreign MNEs, which pose the greatest potential BEPS risk to their jurisdictions, given their size and potential revenues at stake. • Preferential tax regimes allowed multinationals to avoid tax on their international activities, contributing to base erosion. Since 2015 over 250 regimes have been reviewed and virtually all of the regimes that were identified as harmful have been amended or abolished. Around the world, harmful regimes can no longer be used by countries to attract the tax base from other countries by targeting non-residents and foreign income only. • With the Multilateral Instrument to implement BEPS covering 88 jurisdictions and already ratified by 25, treaty shopping, which deprives countries of billions of euros in revenue, is also coming to an end. At this stage, all treaty shopping hubs have signed the Multilateral Instrument and tax administrations are reporting that they can see meaningful behavioural changes among taxpayers. Overall, the very high profile of our work against tax fraud and tax avoidance has brought tax matters to the boardrooms and is having a massive impact. These are just some of the successes. But implementing the OECD/G20 BEPS Package can also be a legal and administrative challenge. Ensuring that all members of the Inclusive Framework have the capacity to benefit from the international standards is essential to maintaining a global level playing field. This work continues through the Inclusive Framework and the Global Forum on Transparency and Exchange of Information, as well as in collaboration with other international organisations. The OECD/UNDP Tax Inspectors Without Borders has been a major success story, helping developing countries raise USD 470 million in additional tax revenue to date. The Platform for Collaboration on Tax brings together the IMF, the OECD, the UN and the World Bank Group to ensure that capacity building efforts are coordinated and coherent. The implementation of the OECD/G20 BEPS Package is a good start, but we must now finish the job. The tax challenges of the digitalisation of the economy remain to be addressed. The public, in many countries, have yet to be convinced that changes are real and that justice has been restored in the international tax system. More needs to be done to complete our efforts, which are now recognised by all Inclusive Framework members. Working together, they have acknowledged that further efforts are necessary to stabilise the international tax system to make it more robust in the face of the increasing digitalisation of business activities. Countries are working together and have agreed on 28 May 2019 the programme of work on addressing the Tax Challenges Arising from the Digitalisation of the Economy (Programme of Work) to deliver, by the end of 2020, a solution to these challenges. This Programme of Work was endorsed by your Finance Ministers at their meeting earlier this month in Fukuoka, Japan. The aim of the Programme of Work is to overcome the obstacles that jurisdictions face in trying to tax the profits that multinational companies earn from users and consumers located in those jurisdictions, particularly where the companies are not physically present in those markets. They have also agreed to work on mechanisms so that companies would see their profits taxed at some minimum levels. In January, the 129 members of the Inclusive Framework agreed a policy note that identified the contours of a solution based on two pillars – one addressing the re-allocation of taxing rights (Pillar 1) and the other based around a minimum tax to address the remaining BEPS issues (Pillar 2). Today, the programme of work to deliver a solution by the end of 2020 is submitted to you for endorsement. These are complex and difficult questions and in particular, the gaps to find a unified approach in Pillar 1 will have to be bridged. This will require political leadership of the G20 to forge the way to a global, consensus-based, longterm solution in 2020.
OECD (2019), OECD Secretary-General Tax Report G20 Leaders – June 2019, OECD, Paris, www.oecd.org/tax/oecdsecretary-general-tax-report-g20-leaders-june-2019.pdf.