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OECD Secretary-General

Closing of the Meeting of the Ibero-American Council for Competitiveness and Productivity

 

Remarks by Angel Gurría

OECD Secretary-General

14 June 2018 - Madrid, Spain

(As prepared for delivery) 

 

 

 

Dear Enrique Iglesias and Enrique García, Secretary-General Rebeca Grynspan, César Alierta, Ladies and Gentlemen:


I am delighted to take part in the closing of this session of the Ibero-American Council for Competitiveness and Productivity. I am sure that it was a very useful and productive meeting, given the content of the discussions but also given the presence of so many dear friends and in particular the two "Enriques from America": Iglesias and García. I congratulate them on bringing everyone together, and, in particular, on the relevance of the issues addressed.


The technological hurricane brings benefits and challenges

We are experiencing changes occurring with exceptional speed and fluidity. We live in connected societies, where the boundaries between the digital, physical and even biological worlds are blurred. The digital transformation has the potential to stimulate innovation, foster efficiency, improve services and make growth more inclusive and sustainable.

 

Aware of its multiple advantages, many Ibero-American countries are already implementing digital governance practices. Between 2003 and 2016, the UN e-Government Index in Latin America rose from 0.44 to 0.53, while the e-Participation Index rose from 0.24 to 0.52, both on a scale of 0 to 1. In addition, countries are taking steps to modernise their public services and make them more accessible to citizens, through projects such as País Digital in Argentina, and ChileAtiende.

 

But the benefits of digitisation go hand in hand with new challenges which raise important questions about jobs and skills, privacy and security. We are not witnessing times of change, but changing times.

 

The impact of digitisation on tax issues is not just a technical issue

One of the most important challenges is the impact of these new technologies on our tax systems and our tax policies. New business models require greater transparency about how and where value is created, as well as the profit to be taxed in each jurisdiction.

 

We must not forget that taxes are the backbone of the social contract, the foundation of the project of “Res publica”, of the common good. Perhaps, looking beyond technical disagreements, these technical discrepancies reflect divergences about what kind of society, and what kind of world we want to live in. Improving public services requires boosting tax collection, which on average in Latin America stands at 23% of GDP, below the level of 35% in the OECD. The absence of clear international standards creates the risk of loopholes and of conflicts between different regulatory frameworks.

 

In order to increase international tax co-ordination, the OECD and the G20 promoted the project to combat base erosion and profit shifting, otherwise known as BEPS. As part of the project, which already involves 116 jurisdictions, we presented a report to the G20 Finance Ministers last March on Tax Challenges Arising from Digitalisation. While the report shows that there are still significant disagreements between countries on tax issues, it also reflected the benefits of cooperation. BEPS is helping to tax multinational companies more effectively, with the potential to add up to USD 240 billion a year to public coffers.

 

In addition, other standards such as the Automatic Exchange of Information (AEOI) also play a key role. So far, AEOI has helped countries raise an additional EUR 85 billion. Tax collection not only makes competition cleaner, but also provides states with the resources to meet the growing demand for better services, and to create more and better opportunities for all.

 

Citizens, businesses and governments have their own expectations

These are times of enormous challenges, but also of great opportunities for improvement. In the face of change, citizens expect public sectors capable of adapting quickly to their needs; sectors with a more digital, open and participatory governance. Businesses demand that they make their work easier, that there is a level playing field for competition, and that productivity gains are encouraged.

 

The digital revolution is having a disruptive impact on the way goods and services are marketed, even in some cases blurring the boundaries between the two concepts, and this affects the way in which tax administrations operate. For example, service platforms are creating significant industries that already existed on a small scale in the past, such as renting a room or parking space, and which require special attention from the public sector.

 

Governments must meet the priorities of the present and remain constantly vigilant with regard to the changes that will mark tomorrow. Digital and innovative governments are needed to drive and guide change. The path to a digitally transformed public sector is not straightforward. The OECD Recommendation on Digital Government Strategies guides countries in moving from an e-government perspective primarily focused on digitising administrative formalities to a more ambitious goal of digital government, where technologies facilitate the transformation of public administration towards a data-centric and people-centred approach.

 

No hurricane can last one hundred years

The good news is that the shift to a fully digital state that allows for the exchange of information is happening. Through the OECD's Forum on Tax Administration, 50 administrations are working together to streamline and improve the tax compliance of platforms.

 

Direct information is already being obtained from these types of platform in countries such as Ecuador, Estonia, Finland and Mexico. In the Slovak Republic, for example, more than EUR 500 million in "dubious" value added taxes were identified over a two-year period following the introduction of electronic invoicing processes. In Rwanda, in the two years since the introduction of electronic cash registers in March 2013, VAT collected on sales increased by 20%.

 

In addition, programmes in the OECD's Tax Inspectors Without Borders initiative have increased the tax revenue of developing countries by more than USD 185 million. This project promotes the exchange of knowledge and skills about tax inspections with tax administrations.

 

In order to continue to drive positive change, the OECD Observatory of Public Sector Innovation claims that the public sector must use innovation as a systemic activity that supports the functioning of government. We are working on the Going Digital project to develop what I am convinced is urgently needed: a whole-of-government approach to policy-making in the digital age.

 

Ladies and Gentlemen,


Digitisation is generating change at an impressive rate. Change in our societies, our economies and, of course, in our governments and regulations. This should not lead to hasty decisions. On the contrary, we must look beyond the urgency and the concrete technologies, towards the horizon of a more inclusive, more supportive and better governed society.

 

The OECD will continue to help governments develop innovative and digital public sectors, with institutions adapted to the realities of our time. It is our job, our conviction and our mission to support them. With the same enthusiasm and commitment, we will continue to participate in this Council.


Thank you both Enriques! Thank you all!

 

 

See also:

OECD work on Tax

OECD work on Science and Technology

OECD work with Spain

 

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