The Future of International Tax Policy

OECD Remarks

Within the 73rd IFA Congress, the Secretary General OECD, Angel Gurria, stated that as
a hard work of OECD to modernize the global tax system, there are two “big bangs”
developments that have transformed global tax landscape in recent years. Herewith is
the explanation:

First, resolving bank secrecy for tax purposes. In this case, nowadays, all financial
centres engage in the automatic exchange information through the OECD’s Common
Reporting Standards (CRS). Under CRS, the amount of countries exchange the
information agreements were more than 4,500 with 90 jurisdictions in 2018 and those
information agreements exchanged were entry into force.

Further, the exchange of information agreements conducted by countries result three

things. They are: (1) The revenues were increase. Governments identified and collected
over EUR 95 billion in additional tax revenues from voluntary disclosures and offshore
investigation. (2) The result was delivered. Countries had reported that information on
47 million offshore accounts were exchanged for the first time in 2018. (3) The
transparency was improved. The amount of bank deposit in the international financial
centres was increased from 20% to 25% over the past decade.

Second, the delivery of the OECD-G20 BEPS package in 2015. The succeed of this
delivery was caused by the revenue loss from base erosion and profit shifting was
significantly. Thus, several BEPS Action is implemented recently, they are. (1) BEPS
Action 5 regarding harmful tax practices. In this case, the 134 members of the OECD
G20 are working to put an end to harmful regimes and are exchanging information on
previously secret tax rulings. All those tax rulings recognized as harmful would be
amended or abolished.

(2) BEPS Actions is BEPS Action 15 regarding Multilateral Instrument. Under this
BEPS, Multilateral Instruments (MLI) has been used to implement treaty related to anti-
BEPS measures. Based on OECD’s information, MLI has been signed by 89
jurisdictions. (3) BEPS Action 14 regarding Mutual Agreement Procedure (MAP). Under
this BEPS, the implementation of Mutual Agreement Procedure (MAP) is for improving
the timeliness, effectiveness and efficiency of dispute resolution procedures. As a
record, over 45 jurisdictions have been peer reviewed.

The other “big bang” development launched by OECD?

The “big bang” development that still being undertaken by OECD is addressing the tax
challenges of the digitalization of the economy. Although there is yet agreement is
achieved as it can be shown from several countries do the unilateral measure, the 129
members of the OECD G20 adopted a Programme of Work based on on two pillars.
Herewith is the explanation.

The first pillar focuses on the allocation of taxing rights regarding nexus and profit
allocation, with three different proposals. Further, the concept used is based on “user
participation”, “marketing intangibles”, and “significant economic purposes”. The second
pillar proposes a global anti-base erosion mechanism that serves as a backstop to the
first pillar. Under this pillar, the jurisdiction would be given a minimum level of tax where
income is subject to no taxation.

Conclusion

The future of international tax should be certain. In this sense, OECD is working on