Session by David Bradbury, Head, Tax Policy Statistics Division, OECD Centre for Tax Policy and Administration, Meeting of the OECD Parliamentary Group on Tax, 19 Oct 2015

1. STRATEGIC TAX POLICY DESIGN
IN THE FACE OF THE CHANGING BUSINESS
ENVIRONMENT & ENHANCED INFORMATION
SHARING & TAX COOPERATION
OECD Parliamentary Group on Tax
19 October 2015
David Bradbury
Head of the Tax Policy and Statistics Division
OECD’s Centre for Tax Policy and Administration

2. 2
Business environment is changing
Increased globalisation
Growth of intangibles
& services
Importance of
finance
Infrastructure needs
Ageing
populations
Fiscal
consolidation

3. • Corporate income tax (CIT) rates - least growth friendly
• CIT rates have fallen
• While average OECD CIT rate has declined, differences in CIT
rates have increased, especially on more mobile income
• Countries have been competing with other incentives –
e.g., R&D tax incentives and patent boxes
Countries are competing against each other
to attract jobs, investment and revenue
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Increasing competition among nations

4. 4
Differences in tax rates
0
5
10
15
0
5
10
15
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Corporate income tax rate variation within OECD countries Corporate income tax rate on patent income variation within OECD countries
While average statutory CIT rates have been declining in the OECD, tax
rate differentials between countries have been increasing

5. 5
Impact of the BEPS Project
Towards a greater alignment
What are the implications for tax policy?

6. OECD-G20 BEPS Project will contribute to the changing business environment
Achieving a greater alignment between the location that taxable income is
reported and the economic activity generating that income will reduce the
mobility of taxable income
This is likely to make investment decisions – having real economic impacts -
more sensitive to tax rates
• Potentially leading to downward pressure on CIT rates
• Introduction of other incentives to attract investment
Likely to lead to increased government competition for real investment
Overall investment climate will continue to be important
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A world with less BEPS

7. What tax policy challenges does this create?
• European Commission study showed that patent boxes, without “substantial
activity” requirements encouraged the shifting of taxable income without any
meaningful shifting of real economic activity
• Under “nexus approach” (Action 5), lower rates on patent income can only be
provided where there is real R&D economic activity occurring in the country
• Still an open question whether patent boxes are an effective tax policy tool
• Need to consider innovation policies in their totality
Take the example of patent income
• Striking the right balance between revenue collection to fund services and
infrastructure and attracting economic investment
• Distortions from the large differences in the CIT rate and the top PIT rate
Potential reductions in CIT rates
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A world with less BEPS (2)

8. 8
Difference between the CIT & top PIT rate
The difference between CIT rate & top PIT rate is increasing in many OECD countries

9. BEPS country-by-country reporting will assist in reducing tax avoidance through
greater transparency
Automatic exchange of information will be a significant factor in reducing
individual tax evasion
• AEOI will make it more difficult for individuals to keep their wealth hidden from the
view of tax administrations, who will now have greater capacity to enforce their
personal income tax laws
• While there have been growing concerns about the impact of tax systems on
inequality, in helping strengthen the PIT system, these measures will be likely to
help tackle inequality, as the PIT systems are generally progressive
• Will give rise to questions about whether capital income should be taxed at lower
rates
States will continue to be sovereign on tax matters, but the focus should be on
cooperation, boosting transparency and eliminating harmful tax practices
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Information sharing and tax cooperation

10. BEPS Action 11 focused on measuring and monitoring BEPS
• Much evidence of the existence of BEPS, but the currently available data has
significant limitations
• Country-by country reporting will be a rich source of new data
Action 11 has made a number of recommendations
• A new Corporate Tax Statistics publication
• Refined and updated BEPS indicators
• Improved cooperation between governments, academics and researchers
Governments should consider best practices
• Better collection of data on MNEs
• Providing access to tax return data under strict confidentiality rules
• Collaboration with researchers
• Making available tabulations of aggregate country-by country reports
• Make available estimates of the revenue impacts of BEPS countermeasures
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Importance of improved data

11. Business environment has been changing and will continue to change
• These changes present both challenges and opportunities from a tax policy
perspective
• Important business tax issues require more tax policy analysis
The BEPS Project & AEOI are underpinned by global cooperation
• As MNEs and the owners of capital conduct their affairs across national borders,
global cooperation is essential
• Both projects are global but will have an impact on domestic tax policy
Increased transparency and better data will improve tax policy analysis, enabling
more strategic tax policy design
• OECD needs continued cooperation from governments to assist with the
quantitative monitoring of the effects of implemented policies, such as the
BEPS measures.
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Conclusion

12. Contact details
David Bradbury
Head of the Tax Policy and Statistics Division
Centre for Tax Policy and Administration
2, rue André Pascal - 75775 Paris Cedex 16
Tel: +33 1 45 24 15 97 – Fax: +33 1 44 30 63 51
David.Bradbury@oecd.org || www.oecd.org/tax
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