A favour A ourable ble tax sys tax system tem for or fair - PowerPoint PPT Presentation

A favour A ourable ble tax sys tax system tem for or fair competition air competition and g and growth wth European Economic and Social Committee 24 May 2017, Brussels David Bradbury Head of the Tax Policy and Statistics Division OECD’s Centre for Tax Policy and Administration

Base Erosion and Profit Shifting Project Base Erosion and Profit Inclusive Tax policy for Transparency Shifting Framework inclusive agenda (BEPS) on BEPS growth Project 2

Background to the BEPS Project September 2013: G20 Leaders endorsed ambitious and comprehensive BEPS Action Plan with 15 Actions October 2015: 13 reports delivered just 2 years later New or reinforced international standards and concrete measures to help countries tackle BEPS Unparalleled effort - OECD/G20 countries working together on an equal footing with many developing countries 3

Objectives of the BEPS Project Towards a greater alignment Restore confidence in the system Build a global consensus 4

The final BEPS package Detailed report on measuring and monitoring BEPS Four minimum standards Reinforced international standards on tax treaties and transfer pricing Common approaches and best practices for domestic law measures Analytical reports with recommendations • Digital economy and the multilateral instrument 5

15 Actions around 3 main pillars Digital Economy (1) Substance Coherence Transparency & Certainty Preventing Tax Treaty Hybrid Mismatch Abuse (6) Arrangements (2) Measuring and Monitoring BEPS (11) Avoidance of PE Status (7) CFC Rules (3) Disclosure Rules (12) Transfer Pricing Aspects of Intangibles (8) Interest Transfer Pricing Deductions (4) Transfer Pricing Documentation (13) Risk and Capital (9) Harmful Tax Transfer Pricing Dispute Practices (5) High Risk Transactions Resolution (14) (10) Multilateral Instrument (15) 6

What do we know about the scale and impact of BEPS? More than 100 empirical studies report evidence of BEPS New OECD research finds that global net annual revenue loss of 4-10% of CIT - USD 100-240 billion - at 2014 levels • As a percentage of tax revenues, this is expected to be higher in developing countries given their greater reliance on corporate tax revenues BEPS creates many economic distortions • Effective Tax Rates of large MNEs are lower than similar domestic firms • Higher profit rate affiliates located in countries with lower statutory tax rates • Favours intangible investments, companies locating debt in high-tax countries and distorts the location of FDI • Creates negative tax spillovers across countries Anti-avoidance rules are effective in preventing BEPS in individual countries, but coordinated measures could be more effective 7

ETRs - large MNEs v large non-MNEs Effective Tax Rate Differentials 4 - 8½ pp differential Non-MNE similar domestic firm MNEs Large MNE entity Large non-MNE (domestic) entity Large MNE entity Large non-MNE (domestic) entity 8

The Inclusive Framework on BEPS (1) Call for establishment of a more inclusive framework • G20 Leaders in Antalya in November 2015 when receiving the final BEPS package Established in Kyoto in June/July 2016 Now has almost 100 members • Membership now includes 96 countries and jurisdictions, accounting for about 93% of global GDP Strong support for the Inclusive Framework at the highest levels • Widespread support, including from the EU, G20, APEC and BRICS leaders 9

The Inclusive Framework on BEPS (2) Monitoring the implementation of the BEPS measures • Peer review of the minimum standards and monitoring of the implementation of the overall package of measures Standard setting for remaining BEPS issues Ongoing monitoring and data gathering aspects of implementation • Measurement and monitoring of BEPS and BEPS countermeasures (Action 11) Implementation support, guidance and toolkits • Feeds into the toolkit work and could potentially impact the remaining BEPS standard setting work 10

Strong commitment from the EU EU has shown strong leadership in driving the coordinated implementation of BEPS measures • EU early adopter of key VAT measures (Action 1) – amended Directive 2006/112/EC • Hybrid mismatches (Action 2) - ATAD (2016/1164/EU) • CFCs (Action 3) - ATAD (2016/1164/EU) • Interest limitation rules (Action 4) - ATAD (2016/1164/EU) • Compulsory spontaneous exchange of rulings (Action 5) - amended Directive 2011/16/EU • Country-by country reporting (Action 13) - Council Directive 2016/881/EU • Dispute resolution (Action 14) – EU exploring new options for enhancing the effective resolution of international tax disputes, with the arbitration provision aligning with the OECD Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI) • Signing ceremony for the MLI on 7 June 2017; 16 EU members have already indicated their intention to opt-in and this number is expected to increase 11

Global Forum and transparency Global Forum on Transparency and Exchange of Information for Tax Purposes • April 2009: G20 announces “the era of bank secrecy is over” and the Global Forum was restructured - now 140 members • Exchange of Information on Request (EOIR). By 2016, over 250 peer reviews conducted and 116 jurisdictions rated • New rounds of EOIR have commenced against strengthened terms of reference, including availability of beneficial ownership (2016-2020) Automatic Exchange of Information (AEOI) • In 2014, Global Forum endorsed the Common Reporting Standard, allowing the AEOI • 100 countries have committed to make first exchanges by 2017/18 • Supported by the Common Transmission System (CTS) G20 request to prepare a list of non-cooperative jurisdictions • Expected in July 2017 12

Tax Design for Inclusive Growth New OECD Taxation Paper released Tax Design for Inclusive Economic Growth Bert Brys, Sarah Perret, Alastair Thomas & Pierce O’Reilly Paper No.26 OECD Taxation Working Paper series http://www.oecd-ilibrary.org/taxation/ 13

Approach of the paper Tax policy principles Tax-by-tax Systems for assessment approach inclusive growth 14

A systems approach to tax design for inclusive growth Design of individual taxes Tax system factors • Tax administration and tax enforcement • Tax remittance Efficiency • Behavioural responses to tax changes and equity • Tax planning and income shifting • implications Tax incidence • of taxes International tax rules Non-tax system factors • Economic structure and challenges • Interactions with benefit systems • (Non-tax) drivers & characteristics of informality • Social preferences for redistribution • Existence of compensation mechanisms • Time horizons 15

Some tax policy design principles for inclusive growth 1 2 3 4 Taking into Affecting pre- Enhancing tax Broadening tax account overall tax behaviours administration bases tax system and and policy progressivity opportunities Strengthen tax Keep bases broad Equitable taxation Provide incentives administration and rates low of capital income for formalisation Tackle tax evasion Horizontal equity Remove Promote the and avoidance to enhance vertical regressive tax optimal use of equity Intergenerational expenditures human capital and gender equity Strengthen link Broaden social Align private & between lifetime Improve tax security financing social costs and taxes & benefits indicators/analysis returns Compensate losers of reforms 16

Contact details David Bradbury Head of the Tax Policy and Statistics Division Centre for Tax Policy and Administration 2, rue André Pascal - 75775 Paris Cedex 16 Tel: +33 1 45 24 15 97 – Fax: +33 1 44 30 63 51 David.Bradbury@oecd.org || www.oecd.org/tax 17