Opening Remarks by Angel Gurría, OECD Secretary-General, delivered at the ITD Global Conference
Beijing, 26 October 2009
Ladies and Gentlemen, distinguished Ministers,
It is a great pleasure for me to join Vice Premier Li Keqiang and Minister Xie Xuren in welcoming you on behalf of the International Tax Dialogue (ITD) to this high level conference. I would like to extend my warmest thanks to the Government of China for hosting the conference and for the splendid facilities they have provided for us. I also welcome Ministers, senior officials and delegates representing over 75 countries, eight international organisations and the various universities and enterprises present this morning.
This is a truly global conference, addressing an issue of global significance as we look beyond the current crisis to rebuild a sustainable and vibrant financial sector for the future. It is a timely meeting, and an appropriate topic for the International Tax Dialogue.
Globalisation requires strengthened international co-operation on taxation. And taxation is essential to finance public services, infrastructure development and poverty reduction in rich and poor countries alike.
The IMF, OECD and World Bank established the International Tax Dialogue in 2002 as a means of sharing experiences and facilitating technical discussions among tax administration and policy officials. I am delighted that this initiative has flourished in the past few years. We now have the European Commission, the Inter-American Development Bank and the UK Department for International Development as full partners in the ITD, and we look forward to the UN joining us. I am also very pleased to have the support of the Asian Development Bank for this conference. I know that President Kuroda has always had a strong interest in this policy area.
But let me start by putting this event in a broader context of global co-operation. We all know the bad news – the unprecedented financial and economic crisis of the last year or so. Despite the recent stabilisation and growing confidence in financial markets, the human and social cost of the crisis will continue to increase in the coming months. And we have only started putting in place the policies, the regulations and the control systems that we need to make sure that a crisis like this never happens again.
The good news here is that global co-operation is growing, both in intensity and in quality/ We find a growing demand for international dialogue, and stronger political will by major economies, to work together to address common challenges. The G20 is giving a new impetus to global efforts towards policy coherence and convergence. And it is doing this with a broad and significant inclusion of interests and perspectives from developing as well as developed economies.
We in the OECD and other international organisations active in the ITD network, continue to address crucial areas of the international agenda, ranging from corporate governance to competition, financial education, pensions or investment.
Taxation must clearly be a part of this intensifying global dialogue, as is already the case in the field of tax compliance. I am thinking especially of the recent expansion and strengthening of the Global Forum on Transparency and Exchange of Information and the ending of the era of banking secrecy, allowing countries to fully enforce their tax laws and protect their tax base. Since April, over 100 tax information exchange agreements have been signed and over 60 tax treaties have been negotiated or renegotiated to incorporate the now globally endorsed OECD tax transparency standards.
But the tax dialogue has to extend beyond compliance. Tax influences virtually every financial and economic decision, and has a crucial role to play in supporting a stronger, cleaner and fairer economy. That means we should be looking at tax policy and its administration alongside other structural policies to strengthen financial markets, and to ensure that taxation does not introduce distortions and does not promote excessive risk taking or leverage.
But we face a major challenge here. We all agree on the fundamental principle of minimising distortions by maintaining a broad, stable, and transparent tax base. But applying this in the area of financial sector taxation is easier said than done, and the consequences of getting it wrong are severe. Let me offer a few observations on the nature of this challenge, and how we might rise to it.
First, the contribution of the financial sector to the economy is very significant, yet the global mobility of profits from financial services means it is a fragile plank in the overall tax base. Financial services are a vital source of growth and support for productive activity in developing and developed countries alike, and taxation must be applied even-handedly and with a light touch if it is not to choke off those benefits. We have an opportunity over the next three days to consider how tax policies and cross-country co ordination of tax compliance measures might help to secure tax revenues from the financial sector on a level playing field basis.
Second, while tax may not have been a primary cause of the financial crisis, it has to be part of the solution. We in the OECD, like in the IMF and in other organisations, have been asking whether the tax treatment of financial instruments, of housing, of executive remuneration may have contributed in some way to financial instability. These are difficult issues, and the conclusions are not clear cut, but we have an opportunity in this conference to share views and experiences.
Last but not least, innovation in the financial sector creates particular challenges for tax policy makers and administrators, but also offers unique opportunities. Financial innovation has shifted traditional and longstanding boundaries in taxation, such as differences between debt and equity, income and capital or income from capital and income from labour. This is a challenge for tax policy, and for tax administrators. It is their job to control aggressive tax planning around these boundaries which can undermine revenues. But also to reassess whether the traditional tax boundaries make sense – whether financial market innovations are in fact a catalyst for changes in tax policy which would reduce distortion and be easier to administer.
As we engage in these issues over the next three days, I cannot conceive of a more appropriate place to do that today than here in China. [As Minister Xie Xuren explained], the development of China’s financial system has played, and will continue to play, a crucial part in building China’s remarkable growth and helping to spread that growth within China. So our conference comes at the right time and at the right place.
Ministers, Ladies and gentlemen,
I want once again to thank our hosts for welcoming us to Beijing. I hope that by the end of the conference we will – together – have developed a better sense of how the International Tax Dialogue can best support our shared policy goals. We hope this conference will make a great contribution to tax policy and tax education in each of your countries. Each of the organisations present in the International Tax Dialogue is proud to have you here to discuss how the global tax system can support and promote a healthy financial environment.
I wish you a successful conference.