Despite its previous determination to achieve the objective of reaching an agreement on digital taxation (Pillar I of international tax reform) in 2020, the OECD has now explicitly admitted that, since the United States requested a resumption of negotiations after the US elections in November, this can no longer be achieved (see EUROPE 12509/17).
“The question facing countries is: should we wait another year? We've been waiting for a number of years, but there is an election after all, and it's true that waiting for the election result is not an outrageous idea”, said Pascal Saint-Amans, Director of the OECD's Centre for Tax Policy and Administration, when he appeared before the Belgian Parliament on Tuesday 30 June.
He stated that instead countries “intend to wait for the American elections and then give the process a last chance at the OECD”.
According to Saint-Amans, even a deadline of 2021 to reach an agreement would be extremely difficult in that context, but there is no other alternative, other than a proliferation of unilateral measures. “Europe tried to adopt a directive, which failed because there was no consensus or unanimity”, he said.
At an online conference organised the same day by French MEP Bénédicte Peyrol, Benjamin Angel, the Director for Direct Taxation in the European Commission's Directorate-General for Taxation and Customs Union (DG TAXUD), confirmed that the Commission was awaiting the outcome of the work being undertaken by the OECD.
If the negotiations at the OECD fail, however, the Commission will put a proposal back on the table “that will not simply be a copy of what we proposed previously, but will be something different”, he added.
An agreement on Pillar II in 2020?
At the same online conference, Eric Robert, a tax policy advisor at the OECD, said that on Pillar II of the reform, i.e. minimum effective business taxation, the technical work was much more advanced and that an agreement was theoretically possible in 2020.
Saint-Amans was more cautious during his appearance before the Belgian Parliament. He confirmed that the OECD would technically be in a position to adopt a solution on Pillar II in October, but observed that several countries, including the United Kingdom, were keen to keep the two pillars together in one package.
Angel felt that it would be very “disruptive to the internal market” if unilateral measures were introduced with respect to Pillar II within the EU. “If the OECD fails, then there should be an agreement at EU level”, he said.
He stressed that this is also a high priority for Germany, which takes over the rotating Presidency of the Council of the EU on 1 July, and mentioned that EU finance ministers were due adopt the conclusions on this matter, scheduled for December.
“Finding room for manoeuvre within the European framework will not be straightforward”, Angel acknowledged, because, he believes, taxation, with its rule requiring a unanimous vote, is “the EU’s dinosaur”.
He said that the G20 is playing a leading role in the OECD negotiations on taxation. “Ironically, in the G20, the EU countries are much more closely aligned than in a room at the Council of the EU where tax issues are being negotiated”, he said. (Original version in French by Marion Fontana)