Tax

Mobilising domestic resources through tackling base erosion and profit shifting

 

Third International Conference on Financing for Development

Side event on base erosion and profit shifting (BEPS)

Opening Remarks by Angel Gurría,

Secretary-General, OECD

Addis Ababa, Ethiopia

14 July 2015

 

 

Ministers, ladies and gentlemen,

 

I am delighted to be with you this evening to open this event on base erosion and profit shifting. Reducing BEPS, as we call it, could go a long way towards helping developing countries mobilise the resources they need to finance sustainable development.

 

Of course, we will look back on 2015 as a ‘make or break’ year for development. This Financing for Development conference will be followed by the agreement of the Sustainable Development Goals in September. To close out this exceptional year, in December we will have the COP21 Climate Change Conference in Paris and the 10th WTO Ministerial meeting in Nairobi.

 

We will also look back on 2015 as the year when our efforts to address Base Erosion and Profit Shifting by Multinationals came to fruition. In less than three months, we will deliver on the 15-point BEPS Action Plan.

 

Companies are already getting the message. Amazon, for example, has announced that they are revising their tax structure so that they book sales in countries where their customers are based, rather than where tax arrangements are more advantageous.

 

BEPS can help underpin domestic resource mobilisation to finance development

 

Governments face a broad range of fiscal challenges, all the more so in developing countries that need to invest in infrastructure, human capital and state-building. This makes it all the more important that those countries can collect a larger share of the tax they are due. Yet in practice, our tax rules have allowed companies to engage legally in tax avoidance almost to the point of double non-taxation. Addressing  BEPS is therefore a key variable to restore balance in the equation. Its impact in terms of revenue and an improved compliance culture could be transformational.

 

Developing countries rely more heavily on corporate tax revenue compared to OECD countries. In the extreme case of Burundi, one company provides 20% of the total tax take. Even more critically, it matters greatly that the biggest and most well-known companies are known to be paying a fair share of tax. This sends signals to taxpayers from all walks of life: you better pay your taxes, because there’s nowhere left to hide!

 

BEPS is becoming more and more inclusive

 

In 2014 we opened the doors to developing countries on the BEPS Project. More than 55 developing countries participate, directly or indirectly through their membership in two key regional tax organisations ATAF (African Tax Administration Forum) and CIAT (Inter-American Centre for Tax Administration) in the decision-making and technical bodies responsible for the BEPS project.

 

More than 80 developing countries and other non-OECD/non-G20 economies have been consulted through five Regional Network Meetings and five thematic global fora meetings. More than a dozen (Albania, Azerbaijan, Bangladesh, Georgia, Jamaica, Kenya, Morocco, Nigeria, Peru, Philippines, Senegal, Tunisia, and Vietnam) now participate in BEPS decision-making and technical bodies. Regional organisations, ATAF and CIAT, also joined the IMF, UN and World Bank to participate and contribute directly in the discussions. And of course, BEPS has the full and important backing of large emerging economies via the G20.

 

This means that developing countries not only stand to benefit, but they have a role in defining the rules of the game. For example, on the transfer pricing aspects of commodity transactions and limitations on interest deductibility.

 

Today, more than 60 countries participate directly in the development of BEPS solutions. Regular, regional, structured dialogues are broadening the discussion to more than 100 countries, integrating with pre-existing technical groups created by organisations like ATAF and CIAT. The next round of five consultations will begin in October 2015. (Africa, Latin America and the Caribbean, Asia, French-speaking countries, Eurasia)

 

The dynamics of the discussions are changing too; developing countries are proposing changes that OECD countries will also benefit from. We have a shared agenda and shared concerns. This is a truly global endeavour!

 

And then… for the tough part: implementation

 

Predictably, BEPS isn’t popular in some quarters. But, even in the face of ferocious lobbying, I have every confidence that we will meet our target in getting BEPS over the line in the coming months.

 

We are already thinking hard about the implementation phase. We also know that the BEPS outcomes will be complex. So, through the G20 Development Working Group, we have committed to working with the IMF, World Bank, the UN and with Regional Tax Organisations to translate the BEPS outcomes and related deliverables into user-friendly guidance and tools.

 

  • For example, the fruits or our work on wasteful tax incentives and on transfer pricing data will come on stream this year.
     
  • We are stepping up our work to deliver technical support on transfer pricing to 20 developing countries, including 10 in Africa, through our Task Force on Tax and Development.
     
  • And, our work on the Tax initiative - which I was delighted to launch with Helen Clark last night - shows what can be achieved. In Kenya alone, shared tax audit expertise is helping to generate tens of millions of additional tax dollars!
     

Ladies and gentlemen,

 

This sequence of high-level meetings on development in 2015 present us with a once-in-a-generation opportunity. With that opportunity, comes great responsibility:
 

  • To agree ambitious, comprehensive and universal Sustainable Development Goals.
     
  • To agree on the financing mix – of tax, aid and investment – to achieve them.
     
  • To agree a climate change deal that puts us on a course to zero net emissions.

 

On all fronts, the OECD is engaging – with its Members, its Partners, and with the International Organisations – to design, develop and deliver better policies for better lives. Before concluding, I want to thank the UN Department of Economic and Social Affairs, with whom we partnered in organising this evening’s event. I look forward to hearing our distinguished panellists discuss how we can make BEPS work in their countries, and for your continued engagement to advance the symbiotic tax transparency and development agendas.

 

Thank you!