More than 10 years ago, the UN said it was seeking to tax the Internet. The organization had in mind an undeniable tax, preferably a small fee on all the knowledge sent over the Internet.
The concept that the tax would impose minimum prices on individual users, but would generate billions of dollars worldwide. This revenue would finance the progression of the Internet in the poorest regions.
But the concept came to an end when the United States threatened to withdraw a U.N. budget and accused the organization of invading its fiscal sovereignty. To make this clear, U.S. lawmakers enacted a law that prevented the government from investing any UN initiative that striated to tax any facet of the Internet or any UN effort to impose taxes on U.S. citizens.
Although lawmakers in particular opposed the concept of the United Nations imposing taxes on American citizens, the legislative language to oppose a broader activity than that. Lawmakers didn’t need American cash to worry about tax speech on the Internet.
A decade later, we would possibly be on the cusp of a foreign primary tax reform through the OECD that, in particular, aims to impose a higher tax burden on digitized companies, no matter where they operate, and a global minimum corporate tax.
Despite all the unrest the OECD is having to announce its new technique – disagreements over the scope, a US proposal to put a port regime into force rather than a new tax law and a pandemic – the proposal is still alive.
The timeline is aggressive. The OECD hopes to reach consensus until the end of the year, and much is at stake. But the OECD’s role reflects the strong fiscal influence of the organization and raises the question of when, how and why the OECD has the de facto leader in foreign fiscal policy.
The events over the years tell the story of an OECD that had the merit of pioneering many facets of foreign fiscal policy, starting in the 1960s, when it developed its model of a high-influence fiscal treaty. The closest political competitor to the OECD would be the UN, but its policy has sometimes been reactionary to OECD activity.
“In what other sector is the OECD as vital as an organization? I don’t think in the field of advertising, not for peacekeeping,” Caplin and Drysdale Chtd. Member Elizabeth Stevens told Tax Notes. “I don’t think the OECD is the key player among foreign organizations in anything other than taxation.”
The first world style of tax treaties that was born in the shadow of a world war and a primary pandemic.
In 1920, the world was just beginning to emerge from the devastation caused by World War I and the 1918 influenza pandemic, which combined the lives of millions of people.
After so much destabilization, Western leaders sought to create an organization that would promote global peace and spread potential long-term wars. Your solution to the League of Nations.
But the league temporarily learned that it could cope with political cooperation and stability without tackling the specter of double taxation, which threatened to undermine diplomatic cooperation and stability.
In response, the league created a double taxation committee and eventually generated several models of tax treaties that encouraged the drafting of global tax treaties long after their dissolution.
But the life of the League of Nations is short; did not live up to his pacifist promises and remained temporarily irrelevant when World War II broke out. In some respects, the end of World War II reflected the end of World War I, when countries emerged from devastation with a strong preference for multilateralism and collaboration.
When the war came to an end, dozens of world leaders converged in San Francisco, where in April 1945 they agreed to create the United Nations.Three years later, European countries regrouped and rebuilt their war-torn countries through the European Organization for Economic Cooperation. (OEEC).
At that time, the United Nations was already doing everything imaginable on double taxation and tax reform protocols. It didn’t start from scratch; the League of Nations left behind two styles of influential tax treaties known colloquially as Mexican style and London style, and in particular chose the United Nations to continue his paintings when it was dissolved in 1946.
The Mexican style was more strongly aligned with the interests of emerging countries and gave greater tax work to countries of origin. London’s style more strongly followed the interests of evolved countries and gave greater tax work to countries of residence.
It took the OEEC a few years to catch up with the UN and convene a tax committee and an executive tax organization. But when she did it in 1956, the OEEC found itself unexpectedly alone.
The United Nations Budget Committee had collapsed two years earlier, leaving a force vacuum that allowed the OEEC and its successor, the OECD, to have the merit of being the first time in multipast dueral tax policy until the United Nations returned to the game after 1960.
The OEEC management teams have addressed a number of issues, adding direct patent royalty taxes and similar payments, dividend taxes and double taxation strategies. He has written 4 treaty articles dealing with double taxation on the source of income and wealth. By the early 1960s, it had helped negotiate 54 bilateral agreements.
These paintings were expanded when the OEEC added the United States and Canada to the list and, in 1961, they officially became the OECD.
Almost immediately, the OECD began to expand its own style of tax treaty, which was largely based on the London style of the League of Nations. The organization published a draft in 1963 and an official edition of the style in 1977. In the following years, the OECD expanded and renamed its Finance Committee to the Committee on Tax Affairs and established 15 steering groups.
The United Nations re-entered the treaty game in the past 1960s, when its Economic and Social Council established the Panel of Experts on Tax Conventions between Developed and Developing Countries. The first time table is a manual to help emerging countries negotiate treaties with their evolved counterparts (Manual for negotiating two-step tax treaties between developed and future countries). The current schedule is a 1980 tax treaty style (the style of the United Nations Convention that opposes double taxation between evolved and future countries), which aligns more strongly with the treaty style of the League of Nations in Mexico.
When the OECD met to talk about double taxation after World War II, it might not have explicitly sought out the standard-bearer of global fiscal policy now known. The organization was more involved in facilitating economic relations between its Member States and in the economic momentum of those States.
For example, the OECD addressed taxes and progression from the outset, but in a component in the context of how OECD countries can benefit from tax incentives in emerging countries (tax incentives for personal investment in emerging countries).
The fact that OECD members represented the world’s most economically tough countries at the time means that the popular organization has the de facto global popular. United Nations paintings in this area underlined this reality, but also reflected the Very Duty of the United Nations to more countries.
In 2000, the then UN. Secretary-General Kofi Annan wanted to know whether the United Nations deserves to create a forum or organization for foreign tax cooperation. He commissioned an examination and drafted an organization of stars of former world leaders, and added former Mexican President Ernesto Zedillo, about whether the task can simply be completed and how it can be incorporated into the UN’s financial strategy of progression.
At that time, the United Nations took the decision to take global progression funding more seriously and introduced its first foreign convention on the financing of progression in Monterrey, Mexico, in 2002. Taxes have taken into account the plans of the United Nations; committed to foreign fiscal cooperation and to coordinating multilateral fiscal work.
The paintings are gradually accelerating. First, the ad hoc tax committee received an update to an official 25-member UN tax committee reporting to the Economic and Social Council and began meeting twice a year.
Then, starting in 2005, verbal exchange began to extend beyond treaty paintings to other issues, such as the fight against foreign tax evasion, a movement price manual for emerging countries, and the creation of fiscal capacity for emerging countries.
Finally, stakeholders began recommending that the UN should provide an intergovernmental fiscal framework to expand a global fiscal policy, with representation from all UN member states. In 2009, the committee began implementing a movement price manual for emerging countries.
Arguably, the OECD experienced some of its most powerful fiscal policies in the years leading up to the Fiscal Reorganization of the United Nations.
In the 1990s, the OECD issued a series of influential reports and rules on moving prices, destructive tax practices, e-commerce, and VAT, which laid the foundation for the even more ambitious task of eroding the organization’s tax base and moving profits.
In 1995, the OECD modernized its moving price rules, which had not been revised since 1979, when it published a report on moving price issues. These 1995 rules consolidated the full festival’s precept as the OECD’s motion price selection approach and established the game’s regulations on how it deserves to be applied.
Three years later, at the request of the G-7, the OECD published a much-cited report on destructive tax practices advising how OECD countries deserve to identify and eliminate fiscal policies that can simply create tax havens or otherwise advertise unfair taxes. Competition.
These paintings, which complemented the paintings through the EU Code of Conduct (Company Tax) group, resulted in several other projects, adding the OECD Forum on Harmful Tax Practices and their framework paintings for the exchange of tax data between the authorities.
Around the same time, the OECD presented a major task of e-commerce tax reform addressing cross-border tax issues, which marked a turning point in the organization’s leadership, to Arthur Cockfield, a professor of taxation at Queen’s University School of Law in Kingston. Ontario.
“This was the first time in history that OECD member states, along with contributions from non-member states, created what were called the conditions of the Ottawa fiscal framework, which were guiding principles that OECD countries would consult on the progression of one of the forthcoming e-commerce tax regulations. So it was a big step forward. This has led to a much more global influence on behalf of the OECD,” cockfield said.
Then I got here BEPS. In 2013, the OECD will face BEPS through a comprehensive set of 15 action plans to combat the virtual economy, change prices, etc.
At first, BEPS was a collaboration between the OECD and the G-20, but then the task was opened to any country that agreed to adhere to the BEPS criteria: this new coalition has become the OECD/G20 inclusive framework on BEPS.
Was BEPS a success? In a way, yes.
“There were countries that participated in the OECD debate through what is now the inclusive framework that had been legislators, they were never responsible for the resolution, but now they had a say in the rule-making process. And this new inclusion makes a big difference,” Stevens said.
“While not all BEPS reports are clear, persuasive and easy to read, I think a lot of the organization’s paintings have been superlative, given that it has been able to reach consensus on those documents from such a giant organization of countries,” Stevens said. .
He also highlighted bePS minimum standard scores, practices and recommendations as a sign of the organization’s ability and effectiveness.
But others found much to be desired, since the OECD and G-20 developed the BEPS project and approved all 15 action plans before they decided to invite other countries via the inclusive framework.
It has been widely reported that the BEPS negotiation procedure has not expanded into inclusive solutions in fact, and some have complained about the speed with which the OECD has produced the 15 BEPS action reports in a short period of time.
Some felt that bePS regulations overlapped with an already complex formula and failed to create more clarity because the underlying formula remained the same.
“The main outdoor inventions of BEPS have been administrative agreements such as [the multilateral bePS instrument] and [country-by-country reporting] and these are vital administrative arrangements, but they do not replace a country’s substantive tax laws.” Cockfield said. “It was much less difficult to reach consensus on this, because there is no wonderful risk to fiscal sovereignty or to a country’s ability to determine its own fiscal destiny.
It is not that the calls of a United Nations intergovernmental tax company intensified after the OECD published its final BEPS reports.
For civil society organizations and emerging countries, their reports under the BEPS procedure underlined the desire to shift the progression of fiscal policy to the United Nations, to which they would provide an impartial political approach.
Since the vast majority of UN Member States are not members of the OECD or the Group of 20, the UN Committee of Experts on International Tax Cooperation has a key role to play in coordinating with these and other applicable agencies. countries, i.e. the least evolved countries, in the applicable activities,” the UN said at the time.
In 2015, UN members put the factor to a vote in Addis Ababa at the Third International Conference on Financing for Development. This failed, as did a next discussion at the 14th consultation of the United Nations Conference on Trade and Development in Nairobi in 2016.
The following year, Ecuador doubled its action on the factor after appointing the G-77 organization of the emerging countries and integrating an intergovernmental fiscal framework into its platform. This time, China also supported the movement, but made progress.
The result is that the continued rejection of an intergovernmental fiscal framework necessarily maintains the place of strength with the OECD.
In 2019, IMF leader Christine Lagarde applauded the OECD’s inclusive framework to attract more than a hundred countries to its fold, but said the organization could do even more to account for the interests of emerging countries.
He said emerging countries needed a more important role in the foreign fiscal policy debate because they were wasting about $200 billion a year due to the movement of profits, according to IMF estimates.
At the time, he placed the IMF as a challenge solver that would fully satisfy the interests of emerging countries and publicize its own research on foreign tax reform.
Meanwhile, the OECD does more collaborative work, mainly through the Fiscal Collaboration Platform, a rapprochement between the OECD, the United Nations, the IMF and the World Bank on foreign fiscal policy reform and training.
It was created in 2016 and focuses on how taxes are adapted to the UN 2030 Sustainable Development Goals and how they can expand concrete teams to help low- and middle-income countries raise income.
This time, the OECD learned from the bePS example and began its paintings on the virtual economy in an inclusive framework.
Even so, there are fears that the end product will lose the interests of emerging countries. In several OECD consultations, emerging countries indicated that they felt ignored in the proceedings because they are not mainly market countries and would possibly not gain great advantages from the proposed new rules.
“They have other characteristics; many of them have herbal resources. In particular, there are things about how moving pricing regulations work, or possibly say they don’t work, with respect to extractive industries. ArrayArrayArray This is a challenge that emerging countries,” Tove Maria Ryding, the tax coordinator of the European Debt and Development Network, told Tax Notes Tove Maria Ryding. “The fact that[ these] challenges are not addressed in the OECD means that there is a very transparent area for a un negotiating to take a look at everything that is looked at in the OECD.”
There are disagreements over the types of business that will be submitted to the OECD proposals. The OECD warned that the extractive and commodity industries industry would be abolished because taxes on the proceeds of extraction are considered a component of the acquisition value paid through the extractive company to the owner of the resource.
It remains to be explored how possible exclusions for extractive industries and commodities and beyond can be played or adversely affected by tax tariffs.
Martin Hearson of the International Centre for Taxation and Development noted that possible exclusions from extraction and commodities can serve as a double-edged weapon for emerging countries, as exclusions can paint in their favor in cases where they have giant customer markets. Array but also blunts any new tax laws.
As the OECD moves forward on its most recent reforms, there are considerations that the organization will produce responses that do not correspond to the kind of genuine basic replacement that governments expect.
“A lot of the things we see in the existing negotiations, we also saw them in the first BEPS negotiations,” Ryding said. “Especially the way it starts with a compelling narrative and a very clever investigation of problems, and also very ambitious language about what the procedure deserves to achieve. But then, step by step, the proposals are diluted to the point where they begin to look like the formula with which we started. That is why it becomes this retouching around the tax formula rather than the basic reform we need ».
This can be a cooperative service within a giant organization, or it is possibly a service because the organization is running with a limited plan.
“With BEPS, we explain actions: here’s the problem, here’s what we’re going to do about it. Now we have something that not everyone, not even in the problem. I think the OECD Tax Policy and Administration Centre would gain advantages from more explained and specific projects that are based on their technical expertise,” Stevens said. “Historically there has been a policy in the G20 or among other countries, and the OECD is receiving a mandate for technical implementation. This time, they are guilty of reaching a policy and intermediation agreement on this issue, as well as defining the technical details. It’s a pretty difficult job.”
Beyond that, it is questionable whether there is a genuine appetite for the kind of multilateralism to drive the OECD reform process.
“I take a look at all these external political advances: we have a global industrial war between China and the United States, all sorts of political trends in which countries stay in their own way, such as Brexit, rising nationalism, and anti-immigrant sentiment.” Cockfield told me. “I do not blame the OECD for any of these broader global trends, but it is those trends that I think are thwarting the OECD processes because the OECD is based on non-binding laws, the interest of governments in cooperating. Because of these persistent policy factors, I am concerned that the OECD’s external tax force is not as it used to be”.
I contribute to the writing of Tax Notes International, where I write weekly analyses on foreign tax issues, adding European, digital tax developments
I make a contribution to Tax Notes International, where I write weekly analyses on foreign tax issues, adding European tax developments, the virtual economy, tax base erosion and profit transfer, and tax transparency. I also write for the Tax Analysts blog. I’m passionate about the intersection of taxes, law and journalism, and I’m looking for the available and attractive angle of taxes. Prior to joining Tax Analysts, I was editor-in-chief of Thomson Reuters in New York and senior tax reporter for Law360. I have a BA from the University of Pittsburgh and a JD from Columbia Law School.