Watch Robert Goulder, contributing editor at Tax Notes International, and Stephanie Soong Johnston, chief correspondent at Tax Notes Today International, discuss the pros and cons of delaying the work of the OECD inclusive framework.
Here are some highlights...
On the feasibility of meeting virtually
Stephanie Soong Johnston: We've been told that the OECD is continuing on with their timeline. They're aiming for political agreement on the solution by July, and that's when their next plenary session is supposed to start. There are about 140 countries in the framework and the OECD says that they've moved all of their meetings virtually. So they're operating through Zoom and other kinds of channels. If you look at that aspect of it, then it is feasible to conduct a meeting with about 140 people in the room online.
On calls to delay the work of the OECD inclusive framework due to the coronavirus
Robert Goulder: Two advocacy groups, the National Foreign Trade Council [NFTC] and the U.S. Council for International Business [USCIB] . . . sent in letters saying, “Hold on, let's just postpone this.” . . . [T]he letter from USCIB said, governments right now are busy . . . trying to piece together stimulus package[s] or . . . relief for individuals, large businesses, small businesses . . . in addition to public health stuff.
The letter from the NFTC was a little bit different from the USCIB [letter]. [They] tried to make the point that we're looking at a possible global recession or depression, with economic activity grinding to a halt. If you're going to adopt tax reforms, those reforms should be focused on growth-oriented policies. They make the point that, what we refer to as BEPS here, the inclusive framework, the two pillars — that's not really a pro-growth oriented tax reform.
Stephanie Soong Johnston: Some groups have criticized the OECD [for planning to move forward rather than] focusing on the coronavirus. The OECD has done a lot of work related to the coronavirus. They have a whole website dedicated to [it]. It's not really up to the OECD to decide when the project should be delayed or if it should be delayed. It's really for the G-20, which gave the group its mandate. So, as long as the G-20 is still on board, I don't see any delay in getting the solution agreed.
On the merits of objections to move forward
Stephanie Soong Johnston: I can see things from both sides. Countries will want to implement pro-growth measures. On the other hand, countries are going to look at these official companies and say, well, these companies are the ones actually succeeding in this pandemic. We are relying on Zoom . . . , Microsoft meetings, Uber Eats, DoorDash. This coronavirus crisis has just broken everything wide open. Why not try to push radical reform now? But you want civility, too. I personally do not have an opinion either way. I am just observing from my reporting that there are two different sides to this. We really don’t know how this crisis is going to play out over time.
Robert Goulder: It's often the case in these sort of political economy disputes that an objection to procedure or timing is often a thinly veiled criticism of substance. I don't think it's a coincidence, in other words, that all of the groups that are calling for a delay really are lukewarm at best about the entire BEPS initiative and the pillars from the inclusive framework, whereas the groups that are saying “No, no, let's keep going. The show must go on,” they're the ones who seem to have an interest in either bolstering their own relevance or having these tax reforms actually implemented. I think people are basically behaving in predictable manners, saying things that relate to their self-interest, which isn't really surprising.
On whether to ring-fence the digital economy
Robert Goulder: I think any attempt to ring-fence the digital economy is going to create flip effects where you're going to have companies that are going to prosper under the previous international consensus and basically sidestep whatever new consensus we have. I don't think you can have two competing international consensuses. You can't have one for the mainstream economy and one for the digital.
On whether a solution will be reached
Robert Goulder: I think they will deliver these proposals to the G-20 around the end of the year. The governments will have to decide, do they want to take up these proposals or not? We've already had a beta test of what that looks like from the first BEPS package. They issued their final reports on the 15 action items in the fall of 2015. In order for countries to adopt the minimum standards, they had to sign what was known as the multilateral instrument or the MLI. Some very large, prominent economies — namely the United States and China — didn’t sign it. So if they didn't sign the last MLI and assuming that you need sort of an MLI version 2.0 to implement the proposals coming out of the inclusive framework, I don't think they're going to sign that one either. Let’s say most of the EU countries sign the MLI. Do you really have a consensus if such big players aren’t in the game? A year from now, the subject will probably be all of the unilateral measures that are springing up all over Europe and the rest of the world.