Remarks by Angel Gurría,
Ankara, 5 September 2015
(As prepared for delivery)
Deputy Prime Minister Yilmaz, dear Ministers and Central Bank Governors:
In four weeks when we meet again in Lima, I will deliver the full package of 15 measures to address Base Erosion and Profit Shifting - BEPS. OECD and G20 members have worked together on an equal footing to address the mismatches in the international tax system which have allowed the location of economic activity and value creation to be separated from the location of taxation. The project is a vivid example of how you - the G20 - in partnership with the OECD, have been able to balance the necessity of tax sovereignty with the realities of a globalised economy and rapidly changing business models in the digital world.
You are now equipped with the instruments to collectively re-establish your tax sovereignty - which has been eroded by tax avoidance over recent decades - and avoid a race to the bottom, to meet your broader policy objectives of raising tax revenues, re-instilling fairness and trust of your citizen in your tax systems, and to promote sustainable and balanced growth. The package is almost finalised and I count on you to make sure we reach consensus in the coming weeks for the few remaining issues.
It is a comprehensive package which will be submitted to you and then to your leaders: The actions agreed under the BEPS Project will curtail tax treaty abuse, address potentially harmful tax practices, enhance transparency on tax rulings with cross-border impacts, provide access to key data regarding the structure of large multi-nationals and also improve the dispute resolution mechanism between governments. Its endorsement by the G20 will significantly change the behaviours of large multinationals. Tax planning and international tax practices will be impacted, which is why some of you may hear complaints from those companies who are “members of the club of the rent seeking society”.
But let’s be crystal clear: What is at stake is to restore the confidence of your people in the fairness of our tax systems. People cannot understand why we would leave open massive gaps in our international tax rules at a time where tax contributions from those who cannot plan their tax affairs have never been so high.
This work has been driven by the G20 with the highest political support. It will have an impact for all countries as it puts an end to double non taxation. It is not about how to share the rights to tax but making sure that the pie to share stops shrinking!
Developing countries will benefit massively from this work as they rely more heavily on corporate income tax revenues, even though they also face many other challenges to mobilise domestic resources which need to be addressed. Already more than 100 countries have contributed to the development of the BEPS package, with over a dozen developing countries participating directly in the technical working groups, regional fora and also in the decision-making body.
The delivery of this BEPS package is an historical breakthrough. But let’s not fool ourselves: this is only the beginning. It is time to already think of what is next, to make sure that this unprecedented work produce all its effects, and that agreed actions be implemented. In this respect, we need to remain united – G20 members and international organisations, continue to work collectively and closely together, and avoid “friendly fire” that would give specious arguments to the adversaries of this major endeavour. The “post-BEPS” environment is to be designed quickly and will have to be about implementation and inclusiveness.
Implementation is key to ensure the success of the project, notably making sure countries implement their commitment and that tax administrations use the new instruments properly to secure revenues, while avoiding risks of double taxation.
But implementation must be global and inclusive: tax loopholes should not shift from some countries to others and it is key to level the playing field. Equally important is the need for developing countries, beyond the OECD and the G20, to have their say and be fully involved on an equal footing. Developing countries must also be “equipped” to make the most of this new tax environment – and we are developing toolkits, jointly with our colleagues from other IOs, to that aim.
This is why we need to move with the same energy which with have elaborated the rules to develop an inclusive framework – a kind of “Global Forum on International Tax Practices” - as is already the case with the Group working on a multilateral instrument to change tax treaties, where 87 countries work on an equal footing.
While we are on the verge of delivery of the BEPS Project, we must not lose sight of the ongoing need to be vigilant in the fight against tax evasion. The deadlines for the first exchanges under the Automatic Exchange of Information Standard are rapidly approaching. This means that countries must be acting quickly to implement the necessary domestic measures - legislative and regulatory changes, as well as new IT and administrative procedures, to meet their commitments. My report also outlines for your consideration the range of possible tougher incentives for those jurisdictions which fail to meet their commitment to the Exchange of Information on Request standard. In November I will be able to report to leaders with the latest evidence of the concrete effect your crackdown on tax evasion has had, in terms of voluntary compliance and revenue increases.
The completion of the BEPS project will be a historic moment. We should be motivated by this satisfaction; it should not be cause for complacency. So let’s start discussing and addressing the challenges of implementation right now - the OECD stands ready to support the group in moving to this new phase!