Remarks by Angel Gurría
Tallinn, Estonia, 16 September 2017
(As prepared for delivery)
Thank you for the invitation to join you today for this important discussion on international taxation, and in particular, to focus on the remaining tax challenges arising from the digitalisation of our economy.
Progress to fight tax evasion and tax avoidance has been unprecedented over the past 10 years. The European Union has played its role and I would like to commend the Commission and the member countries for their active participation in the OECD work as well as for having translated global standards into EU law. With the end of bank secrecy and the adoption of the BEPS package, tax administrations are better equipped to deal with global taxpayers. As you know, more than 85 billion euros have been collected worldwide through voluntary disclosure and other initiatives, with more than 500 000 taxpayers disclosing offshore accounts. This is due to the upcoming automatic exchange, which starts in less than two weeks time!
As regards BEPS, we are at the implementation stage and we can already see significant changes. The MLI has now been signed by more than 70 countries and will stop treaty shopping. Companies are changing their tax structures to be more compliant with the new rules and this will translate into more revenue collected but also increased fairness between taxpayers. More permanent establishments are going to be declared, transfer pricing will be less aggressively used and hybrid mismatches are coming to an end. The ATAD directives have obviously contributed to these important changes. It is important to recognise these changes to restore confidence in public action!
That said, further challenges remain and the digitalisation of the economy is clearly one of them.
As you will recall, Action 1 of the BEPS Action Plan provided a number of significant recommendations. First, we need to recognise that all companies tomorrow will be, one way or another, digital. As a result, ring fenced solutions may not work that well. Second, BEPS is clearly exacerbated by the digitalisation of the economy and the BEPS measures should address the most aggressive features of tax planning. We now need to make sure that the BEPS measures are implemented. For instance, with the new rules, most companies will have permanent establishments where they operate and recent court decisions, in France for instance, would have been different, had they been taken under the BEPS measures and guidance. Third, major progress has been achieved in the field of VAT. Through Action 1, agreement has been reached that VAT should be collected in the countries of destination of e-sales and e-services. There are billions at stake and the new OECD Guidelines on the VAT treatment of cross border services are being implemented by more than 100 countries. These guidelines are fully aligned with the EU rules. As the earliest adopter of these principles, the EU has identified the total VAT revenue declared via its simplified compliance regime or Mini One Stop Shop (MOSS) as being in excess of EUR 3 billion in 2015 - its first year of operation. Approximately 70% of the total cross-border B2C supplies of services and intangibles that are within the scope of this regime are captured by this simplified compliance regime.
These measures, which are currently being implemented, are expected to have substantial impact on addressing BEPS in the context of the digitalisation of the economy. However, some countries remain concerned about how to better tax companies without a physical presence in a country where they derive large revenues and profits; no agreement was reached during the negotiation of the BEPS package on how to address this issue.
I do understand that the current lack of a realistic prospect for agreement on a global solution, is frustrating and threatens to trigger unilateral measures or initiatives. Some of you, invited by Bruno Lemaire, have expressed the view that action is required now. Your discussions today and the initiatives proposed are raising awareness around the world of the importance of reaching a global solution sooner rather than later.
It is critical that we continue a globally inclusive dialogue on this issue. The Inclusive Framework’s Task Force on the Digital Economy offers such a forum, where technical experts representing more than 100 jurisdictions can share their knowledge to develop a world-class solution.
As you know, the OECD has been mandated by the G20 (let me thank Wolfgang Schauble for his support and trust), to deliver an interim report by April 2018. A public consultation will take place in San Francisco in November. It is key that the work of the Task Force on the Digital Economy be fed by your proposals.
At the same time, political support for a multilateral solution must be reinforced. Today’s ECOFIN meeting, as well as the upcoming G20 Finance Ministers meeting in Washington DC, will be watched closely by your officials and by external stakeholders for meaningful indicators in that regard.
My team at the OECD stand ready to support the design of effective technical solutions to these challenges and to build a global consensus, ensuring that all businesses are fairly taxed, regardless of their business models, without harming the innovation-driven digitalisation of our economy.