Tax in a Borderless World: The Role of the OECD

1. Tax in a Borderless World: The Role of the OECD IRS/George Washington University 20th Annual International Tax Conference Washington December 13 & 14, 2007 By Jeffrey Owens, Director Centre for Tax Policy and Administration OECD www.oecd.org/ctp

2. Membership: 3 NAFTA, 4 Asian-Pacific countries and 23 European countries Setter of “soft” and occasionally “hard” rules A forum for discussing the economic and social challenges of interdependence and globalisation A provider of comparative data, analysis and forecasts to underpin multilateral co-operation The OECD

3. The Committee on Fiscal Affairs What are we? A forum for senior policy makers and administrators What do we cover? All international and related domestic tax issues How are we organised? • Biannual meeting • Eight subsidiary bodies • Centre for Tax Policy and Administration

4. The Committee on Fiscal Affairs * Working Parties N° 3, 4, 5, 7 were abolished

5. The Centre for Tax Policy & Administration • Forty plus professionals grouped into 5 divisions: • Treaties/Transfer Pricing; • International Co-operation; Tax Policy; • Tax Administration; Outreach What are we? • First Draft of reports for the CFA • Advise other parts of OECD on tax related issues (e.g R & D) • Assist governments in their tax reforms • Co-ordinate with other international • organisations What do we do?

6. Major outputs of the CFA • Model Tax Convention • Transfer Pricing Guidelines • Standards on Exchange of Information • Best Practices Guidelines in Tax Administration • International VAT/GST Guidelines • Comparative Analysis and Statistics on Tax Levels and Structures • Anti-Bribery Convention

7. How governmentsparticipate in the OECD’swork • Country ambassadors form Council of Ministers who set overall policy • Senior tax policy-makers and administrators are delegates to CFA • Technical experts (e.g. from Treasury and IRS) are delegates to subsidiary bodies • Joint secretariat / government experts seminars with non-Member countries

8. How do issues get onto the OECD’stax agenda? • Politicians (Secretary-General meets Ministers, annual ministerial, sector ministerials) e.g. tax and growth • CFA delegates e.g. attribution of income to permanent establishment, business restructuring • Business (BIAC, associations, individual companies) e.g. arbitration, CIV/REITS

9. Business participation in OECD’staxwork • Business and Industry Advisory Committee to the OECD (BIAC) • United States Council for International Business (USCIB) • TAGs, BAGs, etc. • Discussion drafts • Public consultations

10. Limited Membership, Global Reach • Global guidelines need global acceptance • To assist in the development of their tax systems Why involve NOEs ? • Observers • Developing partnerships • Multilateral, regional and in-country programmes • Over 600 events with NOEs including around 14,000 officials How ? • Twenty-five NOEs set out position on Model. Many NOEs basing transfer pricing legislation on 1995 Guidelines • A more coherent global tax environment • for MNEs Outcomes

11. Enlarging the OECD • Current 30 Member countries account for • 60% plus of world’s GDP • 70% plus of inward and outwardinvestment

12. The Next Wave • The five applicants: Estonia, Slovenia, Israel, Chile and Russia • A 2-5 year process • And at the same time enhancing our involvement with the BIICS (Brazil, India, Indonesia, China, South Africa) with a view to possible accession • Continued deepening of partnerships with many other NOEs

13. Candidate countries should committo the following core tax principles • Eliminating international double taxation through complying with the key substantive conditions underlying the OECD Model Tax Convention; • Eliminating double taxation through ensuring the primacy of the arm’s length principle, as set forth in the OECD’s Transfer Pricing Guidelines;

14. Candidate countries should commit to the following core tax principles (2) • Engaging in effective exchange of information; • Combating harmful tax practices; • Eliminating double taxation through the development and implementation of International VAT/GST Guidelines. Overall accession process provides opportunity to achieve greater convergence with OECD core principles

15. The OECD in 2020 • All major economies • Represented on all continents • Accounting for 80 % of world’s GDP/Foreign Direct Investment

16. How can we respond to these pressures? (i) Providing rules on what’s acceptable / unacceptable tax practices to attract activities (ii) Achieving a deeper understanding by governments of new business models and by business of the concerns of governments (iii) Intensifying co-operation between governments to improve international tax compliance and enhancing the relationship between taxpayers and revenue bodies

17. How canwerespond to these pressures (2)? (iv) Achieving greater consistency in implementation of guidelines, models, etc. (v) Identifying best practices in tax administration (vi) Developing an OECD set of guidelines on VAT (vii) Providing more comparative analytical material to inform the political debate on tax reform