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OECD Secretary-General

September 2016 Informal Meeting of EU Finance Ministers: Remarks on taxation

 

Informal Meeting of EU Finance Ministers (ECOFIN)

Remarks by Angel Gurría,

Secretary-General, OECD

Bratislava, 10th September 2016

(As prepared for delivery)

 

 

Ministers, colleagues,

 

Thank you for inviting me to discuss with you the tax challenges facing EU countries -- and indeed other countries as well: tax is now clearly a global issue.

 

It has for some time now been high on the agenda at the OECD, in the G20 and within the EU, as we have together pushed forward our initiative to tackle base erosion and profit shifting – “BEPS” – and to implement automatic exchange of financial account information to end the era of bank secrecy. Together we have improved the capacity of governments to tackle both tax evasion and tax avoidance so that everyone pays their fair share of tax. With the recent passage of the Anti-Tax Avoidance Directive, and the directives to give effect to the exchange of tax rulings and country-by-country reporting, you have shown leadership in swift implementation of the BEPS measures.

 

I’m just back from Hangzhou, where many G20 Leaders congratulated our efforts over recent years to tackle tax evasion and avoidance. The Inclusive Framework on BEPS is the latest move to ensure that tackling multi-national enterprises is a truly global effort. 85 countries have joined the OECD Committee on Fiscal Affairs to implement BEPS. As regards transparency, I reported to G20 Leaders that 55 billion euros in additional revenue have already been identified from tax evaders coming forward before the start of automatic tax information exchange. Major progress has been achieved and we can be proud of our achievements, with the EU making unprecedented progress passing legislation. However, tax cooperation remains a challenge, and we need to be mindful of the risk of unilateral action as highlighted by President Obama in Hangzhou.

 

What's next? First, while much has already been accomplished to strengthen tax compliance and enforcement, there is still further progress to be made. And second, we think that greater consideration needs to be given to the role that tax policy can play to foster trade, investment and growth. Now is a good time to look at the aspects of tax policy and administration that may be undermining investment, which remains too weak, not least in Europe.

 

Breaking down silos to fight tax and other financial crimes

 

In the last decade, we have seen increasingly sophisticated methods used to evade tax, hide corruption or participate in other financial crimes, including the financing of terrorism. Can we continue trying to pursue these crimes through the existing silos in our institutions and governments? Or do we need not only better cross-border collaboration, but also much better inter-agency cooperation at the domestic level?

 

Some concrete actions for you to consider are:
 

  • Break down the silos between different law-enforcement agencies so that they can harness their collective expertise and information to tackle financial crimes.
     
  • Improve the effectiveness of inter-agency and international cooperation by allowing for faster exchange and cooperation on information provided by leaks and whistle-blowers. This would require a revision of the Directive on Administrative Cooperation.
     
  • Introduce mandatory disclosure rules on intermediaries such as banks, advisors and other service providers consistent with the modular framework set out in the BEPS Action 12 report.

 

Our work to combat tax evasion and other financial crimes will remain an ongoing challenge. It is clear, however, that if we are to succeed in improving enforcement, we must work together towards common rather than divergent tax standards. 

 

Towards a more certain tax environment

 

Apart from improving tax enforcement and compliance efforts, the other imperative is to ensure that the tax system does not discourage investment. One issue that has been raised recently in the G20 context is the economic impact of tax uncertainty. At the OECD we have just launched work on this important issue. Of course there will always be some degree of policy uncertainty due to economic change - such as new business models arising from developments in the digital economy -- but governments can design tax policies to minimise tax uncertainty. Improving dispute-resolution mechanisms is one obvious way to do this, and efforts to improve the EU Arbitration Convention are a step in that direction. More globally consistent application of the international tax rules would also further this objective, as noted at the recent G20 Tax Policy Symposium hosted by China in cooperation with Germany. 

 

At the EU level, options for reducing tax uncertainty include:
 

  • Further cross-border harmonisation of tax rules;
      
  • Mandatory, effective and swift cross-border dispute-resolution mechanisms;
      
  • Binding tax rulings and advance pricing agreements;
     
  • Training of tax administration officials to enable them to deal with the new global challenges;
     
  • Encouraging the implementation of cooperative compliance programmes.
     

I cannot conclude without mentioning the Apple case and state aid cases more generally, even though I know the Commission has exclusive competence on this issue. The BEPS measures will make this type of tax planning impossible in the future. The state aid cases deal with the past. It is thus extremely important that we all stick to the agreed rules on transfer pricing. Sending this message loud and clear will avoid jeopardising the BEPS package we worked so hard to deliver.

 

The EU has been a critical partner in the OECD's efforts to improve the standards to tackle tax avoidance and evasion. I look forward to continuing to work with you and for you, and thank you once again for the invitation to join you today.