Remarks by Angel Gurría
Washington D.C., 13 October 2017
(As prepared for delivery)
Digitalisation is having a profound impact on our societies. It offers many opportunities as a driver of innovation in the private and public sectors. We are already seeing, for example, how our tax administrations are benefiting from these new technologies to enhance services to taxpayers, improve tax compliance and tackle tax evasion and avoidance.
One of digitalisation’s challenges though, is how it intersects with our national and international tax systems. We identified this as one of the important issues when you agreed the BEPS Action Plan in 2013.
The package of measures to tackle BEPS which you agreed in 2015 is now being implemented across the globe. Businesses are changing their tax planning arrangements, and the destination principle for VAT on cross-border e-services is a game-changer involving billions of dollars of tax revenues.
More needs to be done however. In 2015, we did not reach a consensus on the more fundamental consideration of the broader direct tax challenges brought by digitalisation.
There is now a very high public pressure on governments to act and calls to move quickly to ensure that there is fair taxation of digitalised businesses. Thus, the risk of unilateral measures is increasing, and with it, the potential for negative spill-over impacts. Unilateral measures would undermine the collective efforts undertaken, as well as the results achieved so far, collectively, in the G20.
To make progress, we must continue to work together, to move collectively.
You have already created a forum in which to find a common solution – the Task Force on the Digital Economy in the G20/OECD Inclusive Framework on BEPS. I urge you to use it. There are now more than 100 jurisdictions around the table.
To do so, we must address the core issue: what does it mean to create value in a world where a business may have a significant commercial presence and a large digital footprint, but minimal or no physical presence in a jurisdiction?
To answer this, we must closely consider the new business models and value-chains which digitalisation creates. We must identify the principles, applying to both traditional and digital businesses, which we would use to design the new international tax framework if we were starting from scratch. Many of the concepts we rely on today, such as the “permanent establishment”, are still tied to a world, long-past, of purely “bricks & mortar” businesses.
We must put forward a long-term, sustainable solution that does not discriminate against or seek to ring-fence the digital economy. Digitalisation is indeed quickly creeping into almost all business models. Thus, we are not talking about how to tax digital companies, but rather to tax a digitalized economy.
However, recognising the short-term pressures on governments to act, we could also explore options for those who feel they need to take temporary, short-term measures. By working together on their design, we will minimise negative spill-overs.
The BEPS Project has been a success because we worked together. We need to maintain this momentum for international tax cooperation, and call on you to affirm your support for this roadmap towards a consensus-based approach to the taxation of a digitalised economy. We will deliver in April 2018, a report which will contain concrete proposals on how to go about it. Actually, on November 1st, there will be a meeting on this issue in San Francisco, with all stakeholders, to prepare the draft of the report.
Getting this right is critical for developed, emerging and developing countries alike.
Ministers, before I conclude, I must also congratulate you. Two weeks ago, the first automatic exchanges under the OECD’s Common Reporting Standard began, using the Common Transmission System which OECD and G20 countries have jointly funded. 49 jurisdictions have already started automatic exchanges of tax information on financial accounts, and an additional 53 will begin next year. We have entered a new era of international tax cooperation
Let’s keep the momentum!