by Julie Martin
G20 finance ministers and central bank governors, during their July 21–22 Buenos Aires, Argentina, meeting reaffirmed their commitment to reach multilateral agreement on the taxation of the digital economy. The ministers also agreed that crypto-assets could be used for tax evasion, endorsed a paper that makes tax policy recommendations to address the impact of future technologies on work, and asked the OECD to further strengthen international tax transparency standards.
About 50 ministers, central bank governors, and international organization representatives participated in a discussion on how to update the international tax system to more fairly tax digital businesses. As revealed in a March OECD report, countries are divided on whether and how to address this issue.
Though they failed to come to definitive conclusions on digital firm taxation, the ministers reaffirmed their pledge to meet a previously agreed-to timetable for reaching agreement.
“We remain committed to work together to seek a consensus-based solution to address the impacts of the digitalisation of the economy on the international tax system by 2020, with an update in 2019,” the ministers said in a communique signed after their meeting.
OECD Secretary-General Angel Gurría told the ministers he would provide regular updates on progress made toward reaching a long-term solution on the taxation of the digital economy. He said that countries are refining their positions, which should help them achieve a common solution.
“Clearly, the faster we converge on the what, the how, the when and the how much about digital taxation, the faster we can define a common roadmap towards implementation of a policy whose main tenet we all support: all companies pay their fair share of taxes,” Gurría told the ministers.
Crypto-assets
The ministers also agreed that while crypto-assets can benefit the financial system and the broader economy, they have the potential to be used for tax evasion.
The ministers said they welcomed updates provided by the Financial Stability Board (FSB), an international body that monitors and makes recommendations about the global financial system, and other standard-setting bodies, regarding the potential risks of crypto-assets and the need for any multilateral response.
OECD tax agenda
The OECD Secretary-General presented a report at the meeting discussing the activities and achievements of the OECD’s tax agenda.
Gurría noted that, because of the OECD/G20 base erosion profit shifting (BEPS) initiative, 175 harmful preferential tax regimes have been reviewed by the Inclusive Framework on BEPS, and changes to more than 130 regimes are underway or already completed. Moreover, he said that information on 17,000 tax rulings has been exchanged and that the exchange of country-by-country reports on large multinationals has commenced.
“Most importantly, taxpayers are changing their behaviour. A significant number of MNEs have already reported taking steps to align their tax structures with their real economic activity,” Gurría said.
A progress report discussing the activities of the Inclusive Framework on BEPS was released July 22, coinciding with the G20 finance ministers meeting.
Tax transparency
The ministers asked the OECD to disclose by the 2018 G20 leaders’ summit the number of jurisdictions that are at risk of being considered as not having satisfactorily implemented internationally agreed tax transparency standards. They asked the OECD to disclose by the 2019 leaders’ summit the names of jurisdictions that fail to satisfactorily implement the standards.
The G20 ministers also said they agreed with the OECD’s call for more stringent tax transparency standards.
“We support the OECD’s strengthened criteria to identify jurisdictions that have not satisfactorily implemented the internationally agreed tax transparency standards. Defensive measures will be considered against listed jurisdictions,” the communique said.
Future of work & tax policy
The finance ministers also endorsed the Menu of Policy Options for the Future of Work, a priority of the Argentine G20 presidency. The document discusses how transformative technologies are expected to bring both economic opportunities and challenges and provides a menu of policy options to address this change, including tax policies.
The paper states that countries should adapt their tax policies to support inclusive growth and ensure sufficient tax resources. To achieve this, countries should appropriately tax the digital economy, the paper states.
The paper also concludes that, to create more secure and sustainable tax systems, countries could opt to place greater reliance on “less distortive” taxes and on taxes that have less mobile tax bases. Consideration could also be given to base broadening, reducing differences in effective tax rates across different forms of investment, and ensuring the tax neutrality of different types of work, the paper states.
Tax certainty
Julie Martin
Julie Martin is the founder of MNE Tax. She edits the publication and regularly contributes articles on new developments in cross-border business taxation.
Julie has worked as a tax journalist and editor for more than 13 years. Prior to that, she worked as an in-house tax attorney in New York. She also holds an LLM in taxation from New York University School of Law.
Julie can be reached at [email protected].
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