Tax in a Borderless World The Role of

Tax in a Borderless World: The Role of the OECD IRS/George Washington University 20 th Annual International Tax Conference Washington December 13 & 14, 2007 By Jeffrey Owens, Director Centre for Tax Policy and Administration OECD www. oecd. org/ctp

The OECD December 13 -14, 2007 • Membership: 3 NAFTA, 4 Asian-Pacific countries and 23 European countries • Setter of “soft” and occasionally “hard” rules • A forum for discussing the economic and social challenges of interdependence and globalisation • A provider of comparative data, analysis and forecasts to underpin multilateral co-operation 2

The Committee on Fiscal Affairs December 13 -14, 2007 What are we? A forum for senior policy makers and administrators What do we cover? All international and related domestic tax issues How are we organised? • Biannual meeting • Eight subsidiary bodies • Centre for Tax Policy and Administration 3

The Committee on Fiscal Affairs December 13 -14, 2007 Subsidiary Body* Area of responsibility Working Party N° 1 Tax Conventions and Related Questions Working Party N° 2 Tax Policy Analysis and Tax Statistics Working Party N° 6 Taxation of Multinational Enterprises Working Party N° 8 Tax Avoidance and Evasion Working Party N° 9 Consumption Taxes Forum on Harmful Tax Practices Addresses anti-competitive tax practices and is working with tax havens to improve transparency and to establish effective exchange of information Forum on Tax Administration Focuses on taxpayer service and compliance Board for Co-operation with Non-OECD Economies Has the responsibility of supervising the alignment between the co-operation programmes with NOEs and the core interests and expertise of the CFA * Working Parties N° 3, 4, 5, 7 were abolished 4

December 13 -14, 2007 What are we? What do we do? The Centre for Tax Policy & Administration • • Forty plus professionals grouped into 5 divisions: Treaties/Transfer Pricing; International Co-operation; Tax Policy; Tax Administration; Outreach • First Draft of reports for the CFA • Advise other parts of OECD on tax related issues (e. g R & D) • Assist governments in their tax reforms • Co-ordinate with other international organisations 5

Major outputs of the CFA December 13 -14, 2007 • • • Model Tax Convention Transfer Pricing Guidelines Standards on Exchange of Information Best Practices Guidelines in Tax Administration International VAT/GST Guidelines Comparative Analysis and Statistics on Tax Levels and Structures • Anti-Bribery Convention 6

How governments participate in the OECD’s work December 13 -14, 2007 • Country ambassadors form Council of Ministers who set overall policy • Senior tax policy-makers and administrators are delegates to CFA • Technical experts (e. g. from Treasury and IRS) are delegates to subsidiary bodies • Joint secretariat / government experts seminars with non-Member countries 7

How do issues get onto the OECD’s tax agenda? December 13 -14, 2007 • Politicians (Secretary-General meets Ministers, annual ministerial, sector ministerials) e. g. tax and growth • CFA delegates e. g. attribution of income to permanent establishment, business restructuring • Business (BIAC, associations, individual companies) e. g. arbitration, CIV/REITS 8

Business participation in OECD’s tax work December 13 -14, 2007 • Business and Industry Advisory Committee to the OECD (BIAC) § United States Council for International Business (USCIB) • TAGs, BAGs, etc. • Discussion drafts • Public consultations 9

Limited Membership, Global Reach December 13 -14, 2007 Why involve NOEs ? • Global guidelines need global acceptance • To assist in the development of their tax systems How ? • Observers • Developing partnerships • Multilateral, regional and in-country programmes • Over 600 events with NOEs including around 14, 000 officials Outcomes • Twenty-five NOEs set out position on Model. Many NOEs basing transfer pricing legislation on 1995 Guidelines • A more coherent global tax environment for MNEs 10

Enlarging the OECD December 13 -14, 2007 Current 30 Member countries account for § 60% plus of world’s GDP § 70% plus of inward and outward investment 11

The Next Wave December 13 -14, 2007 • The five applicants: Estonia, Slovenia, Israel, Chile and Russia § A 2 -5 year process • And at the same time enhancing our involvement with the BIICS (Brazil, India, Indonesia, China, South Africa) with a view to possible accession • Continued deepening of partnerships with many other NOEs 12

Candidate countries should commit to the following core tax principles December 13 -14, 2007 • Eliminating international double taxation through complying with the key substantive conditions underlying the OECD Model Tax Convention; • Eliminating double taxation through ensuring the primacy of the arm’s length principle, as set forth in the OECD’s Transfer Pricing Guidelines; 13

Candidate countries should commit to the following core tax principles (2) December 13 -14, 2007 § Engaging in effective exchange of information; § Combating harmful tax practices; § Eliminating double taxation through the development and implementation of International VAT/GST Guidelines. Overall accession process provides opportunity to achieve greater convergence with OECD core principles 14

The OECD in 2020 December 13 -14, 2007 • All major economies • Represented on all continents • Accounting for 80 % of world’s GDP/Foreign Direct Investment 15

How can we respond to these pressures? December 13 -14, 2007 (i) Providing rules on what’s acceptable / unacceptable tax practices to attract activities (ii) Achieving a deeper understanding by governments of new business models and by business of the concerns of governments (iii) Intensifying co-operation between governments to improve international tax compliance and enhancing the relationship between taxpayers and revenue bodies 16

How can we respond to these pressures (2)? December 13 -14, 2007 (iv) Achieving greater consistency in implementation of guidelines, models, etc. (v) Identifying best practices in tax administration (vi) Developing an OECD set of guidelines on VAT (vii) Providing more comparative analytical material to inform the political debate on tax reform 17