The OECD's inclusive framework on BEPS unveiled on Friday 31 May its work programme setting out the way forward towards a global agreement to tax multinational companies, adopted at the end of its meeting on 28 May (see EUROPE 12266/27).
“Important progress has been made through the adoption of this new Programme of Work, but there is still a tremendous amount of work to do as we seek to reach, by the end of 2020, a unified long-term solution to the tax challenges posed by digitalisation of the economy”, said Angel Gurría, OECD Secretary-General. For his part, the French Finance Minister, Bruno Le Maire, welcomed the adoption of the programme, calling it an “important step”.
The programme recognises that political agreement on a comprehensive and coordinated solution should be reached as soon as possible, ideally before the end of 2019, in order to allow work to be completed in 2020.
To this end, it identifies all the technical issues to be resolved on the two main pillars of work: the modalities for taxing the digital economy at the international level and the modalities for establishing an effective global minimum corporate tax rate.
On the revision of the rules on profit distribution, in response to the challenges raised by the digitisation of the economy, three approaches are currently under discussion at the OECD: the “significant economic presence” approach, the user participation approach and the “intangible marketing assets” approach (see EUROPE 12262/14). While the major challenge will be to unify these approaches, the OECD believes that their commonalities already make it possible to identify some characteristics of a consensus-based solution.
The programme also identifies three main areas to be examined: - the different approaches to determining the amount of profits subject to the new tax law and the distribution of such profits between jurisdictions; - the design of a new linking rule, which would reflect a new concept of commercial presence in a jurisdiction reflecting the transformation of the economy, and not limited by a physical presence requirement; - different instruments to ensure the effective application and administration of the new tax law, including the effective abolition of double taxation and the settlement of tax disputes.
As for the second pillar, which deals with under-taxation through minimum tax rules, the work programme provides for the examination of several rules, including an inclusion, conversion or instalment payment rule. OECD members also agreed to examine issues related to rule coordination, simplification, thresholds and compatibility with international obligations.
The work programme also emphasises that, while some parts of the work can progress in parallel, the two strands are closely interconnected. The Inclusive Framework also agreed that technical work should be complemented by an assessment of the impact of proposals on government revenue, growth and investment.
It is a “dynamic” work programme, the OECD states in its statement, acknowledging that new technical issues may emerge as work progresses.
The program will be presented to G20 Finance Ministers for approval at their meeting on 8-9 June in Fukuoka, Japan. See the document: https://bit.ly/2JSmHWk (Original version in French by Marion Fontana)