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Japan

Session III: International Taxation

 

Remarks by Ángel Gurría

OECD Secretary-General

8 June 2019 - Fukuoka

(As prepared for delivery)

 



Dear Ministers and Governors,


With the commitment of your countries, we have over the past years brought tax transparency to levels never seen in the history of taxation and decisively stepped up the fight against tax avoidance.


Ten years ago, bank secrecy and opaque structures were used and abused by too many taxpayers around the world to hide their assets and income. Thanks to the efforts of the G20, bank secrecy for tax purposes is being wiped out and 90 jurisdictions now automatically exchange financial information.


You have all recovered taxes already which had been defrauded for too long. I am pleased to announce staggering figures: information on 47 million offshore accounts – with a total value of around 4.9 trillion Euros – has been exchanged for the first time in 2018. Your efforts have had considerable impact on offshore bank deposits. The OECD’s analysis shows that automatic exchange of information has resulted in a decline of 20% to 25% of bank deposits in international financial centres. Through voluntary compliance mechanisms and other offshore investigations EUR 95 billion in additional revenue (tax, interest, penalties) has been generated. Now that the Common Reporting Standard is fully implemented, this amount should stabilise and countries will annually collect taxes on the income generated by the disclosed assets.


As for our fight against Base Erosion and Profit Shifting – BEPS - the implementation of the standards to combat tax avoidance is broad-based and comprehensive, thanks to the work of the G20/OECD Inclusive Framework, which is benefiting countries at all levels of development! More than 70% of the members of the OECD/G20 Inclusive Framework on BEPS are non-OECD and non-G20 countries and jurisdictions from all geographic regions. The proper implementation of the minimum standards is being rigorously peer reviewed and here too, massive changes are reported.


Information on 21,000 previously secret tax rulings has now been exchanged. This means companies can no longer negotiate secret, sweetheart deals which would deprive other countries of their revenues. 80 jurisdictions have engaged in the exchange of Country-by-Country reports on the activities, income and assets of multinational enterprises. Since 2015 over 250 preferential tax regimes have been reviewed and virtually all of the regimes that were identified as harmful have been amended or abolished.


On tax treaty abuse, countries are now in the process of strengthening their tax treaty network. This will be done primarily through the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (the BEPS Multilateral Instrument). It entered into force on 1 July 2018 and now covers 88 jurisdictions and, once all signatories have ratified, will modify more than 1 500 already existing tax agreements.


I am also delighted to report on the establishment by the Japanese National Tax Agency and the OECD of the Asia Academy for Tax and Financial Crime Investigation. The OECD academies are about institution-building and delivering on our commitment to support capacity building, and I am very pleased that Japan has agreed to be our newest host, following Italy, Kenya, and Argentina.


Going forward, the G20 must continue to be ambitious. There is unfinished business. Despite great success, the biggest challenge is still ahead of us: the need to fundamentally reform the international tax framework. The OECD has launched this debate in the context of addressing the tax challenges arising from digitalisation but, as suggested by the recent IMF corporate income tax study, this goes beyond digitalisation and calls for revamping the rules to deal with the tax challenges of the 21st century.


After years of discussion, a consensus-based solution is now in sight. The OECD/G20 Inclusive Framework on BEPS has just adopted a Programme of Work based on two pillars: one addressing the re-allocation of taxing rights – Pillar 1 – and the other based around a minimum tax to address the remaining BEPS issues – Pillar 2.


Today, I am presenting for your endorsement this Programme of Work to address the tax challenges resulting from the digitalisation of the economy. Adopted last week by the OECD/G20 Inclusive Framework on BEPS, it is a roadmap to achieve a consensus-based, long-term solution by 2020. It will allow countries to tax the profits of multinationals where users and consumers are located, and it will ensure that companies’ profits are taxed at some minimum levels.


These are complex and difficult questions and in particular, the gaps to find a unified approach in Pillar 1 are quite challenging and will have to be bridged. We now need your personal engagement to conclude a deal in the coming months. All stakeholders and organisations need to be involved. We stand ready to start the technical work on both pillars but reaching a global agreement in 2020 depends on your leadership in the coming months to reach a political compromise.


We know that countries worry about the impact on their own revenues. We are working on an impact economic assessment to help your decision, but there is a broader, more fundamental objective we need to achieve: restoring stability to the international tax system while at the same time enhancing its fairness.


Your political leadership and commitment are crucial. They will set in motion the technical work that is needed to advance the discussions and define the contours of the political bargain that remains to be struck, the definitive approach to one of the most challenging public policy issues of our time. Thank you.

 

 

See also:

OECD work on G20

 

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