Remarks by Angel Gurría, OECD Secretary-General, delivered at the G-20 Finance Ministers and Central Banks Governors’ Meeting
Cairns, Australia, 21 September 2014
(As prepared for delivery)
Ministers and Governors,
From the man on the street all the way up to political leaders, over the last 5 years, fairness and transparency in the international tax system have been recognised as fundamental global concerns, with significant economic impact – starting with implications for public finances - and a bearing on citizens’ trust in institutions.
Through the OECD/G20 Base Erosion and Profit Shifting Project (BEPS), and our work to establish a single global standard for the automatic exchange of information, we are reforming an international tax system which had not kept pace with changing times, and in doing so, restoring integrity, coherence and effectiveness to it.
The 7 BEPS “deliverables”
Today I am delighted to deliver the first package of measures to address base erosion and profit shifting - that have been agreed by all OECD and G20 Countries working together on an equal footing, in the framework of the BEPS Action Plan. The fruit of this work will put an end to deficiencies which allow taxpayers to book profits in low or no tax jurisdictions, divorcing the location of profits from economic activities and value creation.
For your endorsement, the package includes 4 instruments and 3 reports:
• We have agreed a minimum standard to ensure that tax treaties are not used to allow double non-taxation;
• A “country by country” reporting template will see Multinational enterprises produce consistent information to allow tax administrations to properly assess transfer pricing risks;
• Revised rules on transfer pricing will promote outcomes that align with value creation in the key area of intangibles; and
• Measures to prevent taxpayers taking advantage of differences in the way countries treat the same transaction or entity through so called “hybrid mismatches”.
In addition to these four instruments, we have reached a consensus on three reports:
The report on Action 5 outlines the progress on agreeing principles to counter harmful tax practices; although agreement still needs to be reached on the approach to determine when a preferential regime requires a substantial activity to apply.
On Action 15, the report confirms the feasibility of developing a multilateral instrument that will support a rapid and globally coherent implementation of the BEPS measures and amend the existing network of more than 3000 bilateral tax treaties in one go.
Importantly, the report on the tax challenges of the digital economy brings some order to a so far confused debate. While recognising that it is not advisable to ring-fence the digital economy for tax purposes, the report identifies the key features of the digital economy and its business models, which are relevant from a tax perspective - so that the work in the other areas of the BEPS Project can effectively tackle them.
Further analysis will however be needed in this area.
We are now halfway through the BEPS Project, with the final outputs to be delivered in 2015: your political support and commitment will remain critical in this second phase of the project.
The full AEoI standard
At the same time as we mark the significant progress made with the BEPS Project, we are heralding the agreement on the single common global standard for the automatic exchange of information, now with all of the technical details needed to embark on the road to effective implementation. G20 countries are called on to lead the way.
Already more than 60 countries have committed to implementation of the AEOI Standard, and 45 countries have agreed to a specific and ambitious timetable for early implementation that will see the first exchanges take place from 2017.
Through our work on tax compliance, we have already made substantial and meaningful progress which is having an effect on taxpayer behaviour. Thirty-seven billion euros have so far been identified from voluntary disclosure programmes targeting offshore evasion involving just 24 countries over 5 years. More will come. You made it happen! Without the G20, this would simply not have been possible.
The tax agenda: A global concern
Let me conclude by reiterating that the work that the 44 OECD and G20 countries have achieved on tax is not solely essential for them but also for all tax jurisdictions around the globe. More than ever, the tax agenda is a global concern.
For this reason, on BEPS issues alone, over 80 developing countries have been engaged, through targeted programs and regional consultations. Going forward, we must look to institutionalise these mechanisms – expanding and deepening the dialogue with developing countries on the development of the rules, and most importantly, to ensure implementation will be effective across the globe.
Following the calls from the G20 Development Working Group, I will report on our renewed engagement approach to the Leaders in November.
In the same vein and in close consultation with developing countries, we have established a roadmap that will enable low incomes countries to benefit gradually from automatic exchange of tax information - factoring in their priorities and as well as their capacity constraints – constraints that we stand ready to address through such programs as the OECD’s Tax Inspectors Without Borders.
Remember, please, that we already successfully work with 124 countries in the Global Forum on Transparency and Exchange of Information for Tax old site, it is chaired by India and China is one of the vice-chairs.
Ministers, Governors, colleagues,
The remarkable progress which we, the OECD and the G20 have made on these issues in just a short period of time, has demonstrated the possibilities which arise when political leadership, sense of responsibility and technical excellence align in pursuit of a common objective.
The work of tackling the complex international tax issues is one of the most important success stories of our G20 partnership. The OECD looks forward to continuing to partner with you to address these important challenges.