Global minimum tax will work if implemented, says OECD’s Saint-Amans – MNE Tax

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By Doug Connolly, MNE Tax

OECD tax policy director Pascal Saint-Amans in a Nov. 4 interview said the political agreement on a global minimum effective tax rate of 15% is a big deal, that it is very pleased with the outcome and is not concerned that companies will try to exploit loopholes to evade tax due to the way it is structured.

Responding to a question about what could go wrong, Saint-Amans noted that there is currently only political agreement. Legal instruments, including a multilateral instrument, are needed to implement the agreement, he explained in the interview, which took place at the tech industry event Web Summit in Lisbon. .

While implementation remains a stumbling block, political achievement has been significant. Regarding his level of satisfaction with the deal on a scale of 1 to 10, he said it was close to 10. He explained that when they started working on it he five years ago they were maybe talking about a minimum rate of 12.5%, and 15% was seen as perhaps the highest possible. He further described the deal as a “page turner”, adding that “the last time you had international tax rules was the League of Nations in 1928. We changed that”.

There is little worry about shortcomings because the system is “a bit diabolical”, he argued. “If you have one country, or the other, at the end of the chain where a company operates, you will get the minimum tax. Whatever the company does, it will fall into this mechanism.

That is – if implemented. “We need countries to ratify the multilateral convention. We need the US Congress – which is always reluctant to ratify multilateral measures, especially in tax matters – to ratify.

Still, he expressed confidence, noting “whether it takes six months to implement or a few years, it will happen.”

Saint-Amans and the OECD are now focusing on developing the necessary legal instruments and treaties. “We have to implement the agreement. We have six months to propose a multilateral convention, which will have to be signed by 140 countries.

It will take some political effort. As he explained of what was needed to reach the October 8 agreement between 136 countries, “You have to drag them. You have to keep the cats. He added that the negotiation process required many political calls between finance ministers. Two arguments have been particularly persuasive in this respect. First, there would be chaos without an agreement. Second, the US administration is prioritizing this now – and the US is providing the “firepower”.

What about countries that are still outside the agreement? “We don’t care, actually,” Saint-Amans said. “We don’t need them.” He explained that what the deal needed to succeed were the big countries, and they got the deal from the “critical mass” of those countries. He is not afraid that the recalcitrant will create new tax havens that would escape the system.

“Tell your CFOs, your CEOs, the game has changed and the tax function should be boring. It is no longer a profit center. So just tell your tax colleagues it’s going to be boring. They will have to comply to pay the tax. And it’s done. They will stop messing with very sophisticated engineering.

After implementation, if successful, what will future multilateral tax efforts focus on?

“The next big thing for the next 10 years will be carbon taxation. I mean climate change is the thing that we need to tackle collectively. It’s a global problem, which needs a global solution. For this task , he added, “we are just getting started”.

However, noted Saint-Amans, “in an age where multilateralism is not great…taxation, interestingly, is a bridge.”

Doug Connolly is editor of MNE Tax. He has over 10 years of experience in tax legal developments, previously working with both a Big Four firm and a leading legal publisher. He holds a law degree from the American University Washington College of Law.

Doug Connolly
Doug Connolly
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