Pascal Saint-Amans, director of the Organisation for Economic Co-operation and Development (OECD) Centre for Tax Policy and Administration, delivered the 20th annual David R. Tillinghast Lecture on International Taxation on October 13, only a week after issuing the OECD’s much-anticipated final guidelines on base erosion and profit shifting (BEPS). Saint-Amans provided professors, law students, and practitioners with useful insight into the historical background and architecture of a landmark plan for international tax cooperation and information exchange.
According to Saint-Amans, the BEPS project, which aims to limit multinational corporations’ profit-shifting strategies on sovereign tax bases, stemmed from the tense political climate following the 2008 global financial crisis. Politicians, nervous about the consequences of taxpayer-funded bailouts, targeted bank secrecy laws to neutralize political blowback. The public’s deep sense of mistrust in large banks, combined with the US’s Foreign Account Tax Compliance Act implemented in 2010 to detect domestic taxpayers’ undisclosed foreign financial accounts, prompted the G20 member nations to adopt a standard for tax information exchange to curb harmful tax practices. Saint-Amans recalled humorously that, in a 2012 G20 meeting with finance ministers about base erosion and profit shifting, he “wrote BEPS down and turned to a native English-speaking colleague” to confirm that it was a “safe four-letter word” for the international tax cooperation project.
He also highlighted the BEPS architecture, noting that the project’s three core pillars—bridging the information gap among sovereigns, rewriting international tax agreements, and enhancing transparency for tax administrators through country-by-country reporting—are essential to the successful implementation of the BEPS package. He stressed that outdated tax laws and treaties that currently govern international tax transactions have not kept pace with the increasingly globalized and digitalized economy, thus creating information dislocations between nations and enabling aggressive tax-planning schemes by multinational corporations.
Saint-Amans expressed concern about the inherent challenges for proper implementation of the BEPS rules because of the “first-mover dilemma,” but offered that developing and industrialized countries have been motivated “by the annual cost for treasuries of between $100 and $240 billion a year globally” in lost tax revenues because of harmful corporate profit shifting to low-tax jurisdictions. Although hesitant to predict exactly the global tax landscape five years from now, Saint-Amans expressed confidence that the BEPS plan will promote inclusiveness among sovereign nations, creating “a broader community agreeing on a common set of rules.”
Watch the full video of the lecture (1 hr, 17 min):
Posted October 19, 2015