Viet Nam

APEC FMM : Base Erosion & Profit Shifting

 

Remarks by Angel Gurría

OECD, Secretary-General

Hoi An, Viet Nam, 21 October 2017

(as prepared for delivery)

 

 


Ministers,

 

I am delighted to see that tax issues, and in particular tackling Base Erosion and Profit Shifting—or BEPS— has become a fundamental component of the APEC agenda, under the Cebu Action Plan.

 

Let me recall the size of the BEPS challenge: The OECD conservatively estimates that tax avoidance costs as much as USD 240 billion in lost revenues ─ or around 10% of global corporate income tax revenues ─ every year. That is billions of dollars that could have been invested in policies, people, and institutions to ensure inclusive and sustainable growth.

 

Tackling BEPS is also about tax morale: Maintaining the integrity of our tax systems—so that citizens are confident that all individuals and businesses are making a contribution and that the tax laws are fairly applied—is essential to ensuring continued trust in and support for our institutions.

 

In an interconnected world, national tax laws have not kept pace with global corporations’ activities and fluid capital, leaving gaps that can be exploited by companies to avoid taxation in their home countries by pushing profits abroad to low- or no-tax jurisdictions.

 

Because BEPS is a global challenge, it requires a global response. As of today, this response has been game-changing: The package of measures to tackle BEPS, designed with the support of the OECD, is now being implemented across the globe, bringing together over 100 countries and jurisdictions in the BEPS Inclusive Framework. BEPS is the right solution for this challenge because it addresses the areas where governments are most vulnerable to tax avoidance: a lack of legislative measures, a lack of information, and difficulties in capacity-building.

 

As the leading international organisation on international tax, the OECD is glad to partner with APEC to support your work: in that regard, I want to congratulate Viet Nam for its leadership to ensure BEPS remains a priority. The implications, in terms of revenues as well as trust in governments, are significant.

 

Through the workshops we have been running with Viet Nam, and which we will continue under Papua New Guinea’s Host Year in 2018, we are able to identify the top BEPS priorities for APEC economies, and also to support implementation of the four minimum standards. This includes updating tax treaty networks to prevent abuses like treaty shopping, the introduction and effective use of Country-by-Country reports to improve risk assessment, as well as tackling issues such as tax-eroding interest deductibility.

 

I encourage you to stay engaged in the ongoing BEPS Project work to update the international rules, particularly on the taxation of the digital economy. The Inclusive Framework on BEPS, which is now leading this work, is the place where your voices can be heard and truly shape the outcomes, with all members participating on an equal footing.

 

I also want to re-extend our offer of support through bilateral assistance to work with APEC members in addressing their specific tax challenges.

 

Through our Tax and Development programmes and also with the OECD/UNDP Tax Inspectors Without Borders initiative, we have been delivering practically focused, hands-on capacity building for tax officials. This initiative has yielded USD280bn of additional tax revenues in developing countries, since its inception 4 years ago. We stand ready to deliver this assistance to interested APEC members.

 

In addition, we work on these tax issues in cooperation with other international organisations such as the IMF, the UN and the World Bank, through the Platform for Collaboration on Taxation. Together, we are developing guidance and practical toolkits to provide developing countries with tailored solutions to better tackle BEPS.

 

This has led, for example, to the delivery of a manual on the efficient use of tax incentives for low income countries, as well as guidance on transfer pricing rules in developing countries.

 

Let me finally mention the growing impact of tax transparency to address tax evasion. The first exchanges under the OECD’s Common Reporting Standard began in September, and within the next 12 months, over 100 jurisdictions will be exchanging tax-related information through our secure Common Transmission System.

 

This is a quantum leap forward compared to the Exchange of Information “on request” standard and has yielded concrete benefits even before its actual implementation: last week, at the G20 Finance Ministers’ meeting, Minister Sri Mulyani of Indonesia informed us that the voluntary disclosure programme put in place in her country, ahead of the implementation of AEoI, led to the declaration of USD330bn of hidden assets held offshore by Indonesian taxpayers, yielding more than 8bn additional tax revenues to the government’s coffers.

 

We stand ready to support jurisdictions interested in participating in AEOI. Twinning programmes with OECD members has proven to be a useful peer-to-peer learning tool for countries as they move through the AEOI implementation process, and could offer a useful model amongst APEC members.

 

This momentum is game-changing: Business operates internationally, so governments must act together to tackle BEPS and restore trust in domestic and international tax systems.

 

On that note, again, my congratulations for your efforts in this important area, and my encouragement as you continue to build stronger tax systems across the region.

Thank you.

 

See also

OECD work on BEPS

 

 

 

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