Despite the US request to put the negotiations on hold (see EUROPE 12509/17), the G20 Finance Ministers reaffirmed, on Saturday 18 July, in the final communiqué published at the end of their meeting, their willingness to overcome their differences in order to reach a global solution on the two pillars of international tax reform in 2020.
“There is an agreement among the G20 and even the members of the OECD and otherwise that the consequences of not reaching an agreement are not pleasant and therefore there is actually a lot of encouragement for the members of the G20 to reach an agreement”, Saudi Arabia's Finance Minister Mohammed Al-Jadaan, whose country currently holds the presidency of the G20, said at a press conference.
At the beginning of June, the United States tightened its stance by announcing new US surveys on digital service taxes in about ten countries and even the one envisaged by the EU (see EUROPE 12498/27).
“Contrary to what has been reported publicly, all members are committed to the current negotiation even though some are of the view that a pause at the political level is needed”, says OECD Secretary-General Ángel Gurría's report on the latest developments on the international tax agenda, presented to G20 Finance Ministers on the same day.
Mr. Gurría encouraged all ministers “to remain fully engaged and advance the work so that, when the Covid-19 crisis is over and some of the electoral deadlines have passed, a political agreement can be reached”.
No decision was expected at this meeting, which was intended solely to take stock of the progress of the work. The next crucial deadline has been pushed back to the October meeting of the G20/OECD Inclusive Framework on BEPS (see EUROPE 12479/21), where a blueprint on the design of the two pillars will be submitted and “key policy decisions” are expected.
The OECD report goes into more detail about the progress made. On Pillar One, digital taxation, it said that the eleven elements of the “unified approach” adopted in January (see EUROPE 12416/20) have all been refined and discussed. In addition, progress has been made on: - the refinement of the scope of the new right of taxation by defining automated digital services and businesses in contact with consumers; - the new nexus rules for determining when a company can be considered as having a significant and lasting commitment in a market; - the rules for allocating and measuring market revenues.
With regard to Pillar Two, minimum taxation, work is at an even more advanced stage. In particular, progress has been made on the definition of the tax base while further reflections are underway on exclusions and the minimum tax rate.
Differences remain, however, on the decoupling of the first and second pillars and on the adoption of a gradual approach starting with Pillar One, the report says. “These divergent positions will have to be bridged in the coming months”, it says.
See the final communiqué of the 'G20 Finance': https://bit.ly/3fXpJoN and the OECD report: https://bit.ly/3fNNP5g (Original version in French by Marion Fontana)