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OECD Secretary-General

Setting Global Standards: The OECD, the G20 and the International Tax Agenda, Forum for New Diplomacy

 

 Keynote Speech by Angel Gurría, OECD Secretary-General, “Setting Global Standards: The OECD, the G20 and the International Tax Agenda” delivered at the Forum for New Diplomacy

 

 

6 November 2014, Paris, France
(As prepared for delivery)

 

 

Ladies and gentlemen,

 

 

It is my great pleasure to address the Forum for New Diplomacy. I wish to thank in particular, Jean-Claude Cousseran for his kind invitation, and Liz Alderman with whom we will be having a conversation shortly.

 

 

Over the years, this Forum has been instrumental in developing fruitful and lively debates on the central challenges which our economies and societies face. This evening, I have been asked to address a topic of utmost relevance for the world economy and the evolution of multilateral cooperation: the increasingly important role of effective and inclusive global standards for the world economy.

 

 

I will be using the OECD-G20 cooperation on international tax matters as a prime example of how we are making progress in this key policy area.

 

 

 

The key role of global standards: a level playing field

 

 

In an increasingly interconnected and globalised world, the need for global standards has never been stronger or more urgent. Their implementation can ensure the right environment to level the playing field, to avoid a race to the bottom, to bolster healthy and fair competition and ultimately, to build strong, resilient, and inclusive economies.

 

 

The OECD has been developing international standards for over 50 years. This is one of our central missions. On the basis of best practices, we have produced global standards for seeds, tractors, fruits and vegetables, education, public sector accounting, anticorruption, and development evaluation, to name but a few.

 

 

We have produced Guidelines for Multinational Enterprises, Testing of Chemicals or the Security of Information Systems. And we have developed international Principles in areas like Lobbying, Corporate Governance, Public Procurement, or Global Pollution.

 

 

We are also making a constant effort to adapt both the creation and implementation of these standards to a changing global economy, where emerging and developing countries play an increasingly important role. We have recognised that changing geo-economic and geo-political dynamics, as well as shifting wealth from West to East, are challenging the legitimacy of the standard-setting institutions which were established in the post-war period, under very different circumstances.

 

So we are gradually opening our processes, partnering with an increasing number of countries and international organisations. We want to make globalisation work for all, building a new more transparent and reliable global governance. Let me now turn to the specific example of international taxation, where the OECD has become the main source of international standards.

 

 

 

The OECD and the G20: International Taxation

 

 

For decades we have insisted that taxation is not only about revenues, it is about keeping and improving the social contract in our societies. It is the basis for the beliefs and the trust of our citizens in governments, in institutions and in a fair political and social system, but now also in globalisation itself. Therefore, we have been working to help countries modernise the international tax system and make our rules and frameworks fairer and more efficient.

 

 

Five years ago, in London, G20 leaders came together with a new resolve to tackle tax evasion. They declared: “The era of bank secrecy is over”. From then on, the OECD has been a partner to the G20, taking action to tackle international tax evasion and avoidance. And, at the G20 Leaders Summit in Brisbane next week, I will be tabling some of the most important results to date from that collaboration. They are a game changer.

 

 

 

For example, this May, the G20 Finance Ministers and Central Bank Governors endorsed the Common Reporting Standard for automatic exchange of tax information. More than 90 jurisdictions have now publicly committed to implementation. Over 50 of these have set out a specific timetable leading to the first automatic information exchanges in 2017.

 

 

Even before the Standard has become operational, we have already seen the benefits. In five years, some €37 billion have been recovered from voluntary disclosure programmes targeting offshore evasion involving just 24 countries. More is expected.

 

 

The OECD Base Erosion and Profit Shifting project (or BEPS) has been another game changer. In 2013, we joined forces with the G20 to take the lead on reforms that would tackle opportunities which allow multinationals to legally pay little or no tax on their overall global profits.

 

 

The first results of the BEPS Project were published in September, and represent a big step forward in agreed approaches to tackling some of the key strategies used by multinational business to lower tax. This is certainly the most important reform of the international tax architecture in a century.

 

 

Setting new standards in the area of international taxation has been the success story of the G20. I welcome this achievement not only because the OECD was the linchpin behind this breakthrough: it also shows that the international community can build consensus to change key global rules – where and when required. 

 

 

Our collaboration with the G20 in international tax matters was not only fruitful, it was also very pedagogic. We learnt a lot on how to improve global governance. Let me share a few lessons.

 

 

 

Lessons to improve international standards setting

 

 

First: Processes aimed at changing international standards need to be inclusive and transparent

 

 

To enhance tax transparency and address tax evasion for instance, the OECD reached out to economies far beyond its membership. Working towards this goal, in 2009 we overhauled the Global Forum on Tax Transparency and Exchange of Information for Tax Purpose.

 

 

We turned it into a fully-fledged global body, whose membership now encompasses more than 110 countries – including all G20 countries and a vast number of developing countries. Thereby, the Global Forum became a very effective platform for the peer-review of national legislation on exchange of tax information on request.

 

 

The genesis of the BEPS project was equally encompassing. All OECD and G20 countries were on board: 44 countries, representing about 90% of the world’s economy, committed to tackle these issues using a consensus-based approach which sees them working together on an equal footing in our Committee on Fiscal Affairs.

 

 

And beyond those 44 countries leading the Project, an in-depth consultative process drew in a broader range of stakeholders – business, academics, civil society.

 

 

Targeted engagement has seen more than 80 developing countries get involved in BEPS. Next week, in the lead-up to the G20 Summit in Brisbane, I will be announcing our new strategy which will bring developing countries directly into the next stage of the Project.

 

 



Second: Implementation is of the essence and must be carefully thought through

 

 

In this respect, it is essential to marshal coalitions, create quasi-consensus and isolate hold-outs. Think of international exchange of tax information; we started with a limited and reasonable objective – mainstreaming exchange of tax information on request – and we achieved a lot: around 2500 tax agreements have been signed since 2008 against less than 50 between 2000 and 2008.

 

Timing is also critical. When the environment was ripe and windows of opportunity opened up, we received the mandate from the G20 to craft the new international standard for automatic exchange of information.

 

 

The approach was very similar with BEPS: Public indignation with multinational enterprises taking advantage of tax rules was strong; as was the eagerness of cash-strapped governments to uphold their tax base. In this context, we received a request from the G20 to analyse the BEPS issue and propose realistic but ambitious policy options.

 

 

We did so under the Russian G20 Presidency and based on this diagnosis, we patiently built consensus among all G20 and OECD countries – and beyond – under the Australian Presidency. The result is the first seven policy proposals to tackle BEPS which will be endorsed by Leaders in Brisbane.

 

 

 

Last but not least, the G20 tax story reflects another important requirement: the need for Leadership

 

 

Without high-level political commitment, the drive to rapid and effective implementation can be lost. Therefore, to be most effective, policymakers must recognise opportunities to capture political will and move quickly to develop or renew important international standards. The G20’s leadership has been integral and central to the current wave of international tax reform.

 

 

Ladies and gentlemen,

 

It is impossible to over-emphasise the change which these new approaches represent. And the results to date are ground-breaking. Thanks to them, taxation is finally catching up with globalisation, making it more redistributive, and harnessing its potential for social progress and justice.

 

 

But there are broader lessons to be drawn from this success: The new approaches being applied successfully in our tax work are providing a method for future standard-setting work in other fora. We are shaping new processes and pillars in the architecture of global governance.

 

Thank you.

 

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