 Hi, good morning. As you saw from the program, my name is Amelia Santos Paulino, I am from UNCTAD, the United Nations Conference on Trade and Development and for me it's very symbolic to be here. I was a fellow at UNEY there for six years before joining UNCTAD and since then we have managed to keep a good partnership and thanks to Kunal support who has been basically backing up and giving us the space and also supporting our policy and academic work. Today we have a different panel from all the academic panels you have. I will be presenting the main results of the World Investment Report, the Think Chapter which is the International Taxation and Development. Then we will have the best possible policy and academic mix panel. First we will have the Discussant, Professor Yucca Pirtala from UNEY there and also from the University of Helsinki. Also I am very pleased to have today and thank you so much for supporting us. Luis Ignacio Lozano from the Central Bank, the Bank of the Republic is the Director of Research and finally we have Kunal Sen wrapping up with the Development Discussions. Yesterday somebody asked me, we were having coffee and asked me, what are you from, what are you doing here and when I said I am from UNCTAD the person asked, what is your link with inequality then and then I thought to myself, well if by now we don't know that trade and investment have direct links within and between countries in equality we are in trouble. So without further ado, I would like to say that my presentation today will not cover all the report, the World Investment Report is the flagship publication of the United Nations Systems on Investment and Development. It has the usual trends chapter that looks at investment trends, different types of cross border investment trends, also policy trends and since 2019 the United Nations General Assembly through a resolution designed on to also analyze the impact of international investment both upstream and downstream on sustainable development. And then every year we have a theme, a theme related to investment and development and this year we work on the theme of the impact of the international tax reform that is the OECD G20 Pillar II BEPS II which calls for the introduction of a minimum tax on multinational enterprises of 25%. So the core of my discussion and then the panelists will focus on this aspect of the report. Before we go into the topic, if you give me three minutes, I would like to present to some important trends on foreign direct investment because I think that will help to contextualize why this reform matters and what are the possible developmental implications. I have a declaration, a disclaimer to make the report and the reason why ONTAC goes into this topic is because of the implications that we have on developing countries and on investment policies. We do not do distributional assessment, we do not do distributional impact. We look at the impact of foreign direct investment and what might be the implications for developing countries' investment policies. So just quickly here, this is our standard opening figure of the World Investment Report. We saw that the pandemic hit foreign direct investment flows as other important economic variables. In 2020, 2021 was a year of recovery, FDI recovered 64% from the pre-pandemic level, sorry from the post-pandemic level in 2020. This recovery happens across the world, both development and developing countries, but the growth was higher in developing countries due to the loose financial conditions that multinational benefit from the support during the period of pandemic and also through high reported retained benefits. And what happens, these high report benefits were not invested in productive sectors. There was an increase in intra-firm, financial transaction, mostly mergers and acquisitions. So yes, positive developments, but not necessarily it implied more productive investment for developing countries. Before the global environment changed with the war in Ukraine, that also was reflected in investor sentiments. We do analysis of expected profits of multinational and all revised expected profits downward, except for those operating in the oil and gas sector, again with important implications on top of the food and fuel crisis. Because the world, we saw that developing countries had a positive recovery from the impact of the pandemic. Here we see that developing countries benefit, especially because of strong performance in Asia, a partial recovery in Latin America and a rebound in Africa. So this is, again, welcoming. Just quickly, and I will not go into this because we will need another conference for this. As I said, we are mandated to analyze the impact of foreign direct investment or all cross investment on sustainable development. This is just an analysis we do, looking at cross border, what is called Greenfield investment, the intentions of investors and project finance, which is a very important mechanism because basically it is investment into big projects that developing countries cannot afford to undertake alone. So basically there was a decline on investment across all SDG sectors. These are not the 17 SDGs, these are investment-related sectors of the sustainable development goals. The only increase that we observed was in renewable energy. This is a boom that we also saw within regions, especially Latin America, but also in Europe and developed countries. And in education there was a rebound, but not necessarily in the all aspects of education of the goal. It was basically big infrastructure projects in some countries. So yes, FDI increased mostly financial transactions between enterprise, high return earnings and then the discussion on why taxation matters becomes relevant. So now we move to the core, the theme chapter of the report and the discussions that we are going to have today. So what is the impact of the BEPS, this new reform to international taxation on global FDI? Some of you that are expert, I am not an expert in taxation, I am part, I am the chief of investment research and I am part of the core team of the World Investment Report. We had a team of experts working with us. We had Michael King, ex-IMF and also from the Institute of Fiscal Studies in London. We had some experts from the Vienna Taxi Institute. So it was a team of scholars working with us doing this analysis and again our entry point is the impact of FDI and what will be the impact on policy. So just quickly, what do we need to worry? Why I am here at the development conference talking about the global minimum tax? There are three many aspects that we cover in the report and yesterday we had a fantastic policy panel that touched on some issues related to the development input. One the reform is transformational. It will reshape the international investment landscape because it affects the larger multinationals which invest in developing countries through their foreign affiliates. And it is pervasive, it involves more FDI than countries that it seems. And finally it is concrete, already signed. Implementation is expected for the end of 2023-2024, Switzerland the country where I am posted already called for a referendum, but other countries that signed are a bit concerned about what it will imply for their fiscal promotion, for the tools for fiscal and for investment attraction. So what we did while we were preparing the report, we did a survey of investment promotion agencies which are our focal point in tandem with the ministries of trade to see what was the level of awareness among developing countries. 141 countries signed already, mostly of the G20 plus developing countries. So surprisingly ministries of trade or ministries of finance knew because processes through the OECD but the level of awareness in the institutions that facilitate investment, promote investment was very low. So that is an issue when we think about technical assistance and technical cooperation and the level of preparedness of developing countries to implement this reform. And then the big question to the panel, especially to Kunal, what are the development implications and we will come back to that. So as I said, I mean we live in a global economy that is characterized by, you know, by EECON 101, by mobile capital, mobile trade and in this war we have to be realistic. Corporate tax policies can affect multiple aspects of the global investment. It affects the location, it affects the distribution and it and also affects how countries design their tax system. So these are the aspects that we look into the report. So the core of this reform affects what is called large multinational defined not by the number of employment but by the capital, the annual revenue. So the cut of point was 750 million. This leaves small multinational out of the scope of the reform. I invite you to look at the first chapter of the report where we started to look at internationalization of SMEs via FDI, not only export and investment by small enterprises is still small and is in decline. So this is mostly large M&E's investing in developing countries. The scope is 15%, there is potential downward pressure on new investment by multinationals after this coming into place. And then the issue for many countries is the special economic zones regime, again it was discussed last night, what it will imply four countries that depend on these special areas of production that relied on corporate tax incentives. So these are the issues that we look into the report. So in terms of the, I will not go into the technicality because it will take a long time but the unit of analysis what we analyze is the effective tax rate paid by foreign affiliates of large M&E's. And what we see that on average effective tax rate is 19%, six points below the average statutory tax rate. So M&E's pay effectively less tax than what the country's statutory tax rate implies, which comes into the discussion the issue of profit shifting. I mean what happens is that this foreign affiliate, they don't reinvest their needs, they shift the profits of short financial center back to the home country or other mechanisms that might be in place. So we cannot be naive, I mean we have to look beyond the statutory tax rate. We know that countries offer other fiscal incentives, especially those related to their corporate tax bill. Some of the things that we look at were the tax holidays, the deductions and credits. We sometimes are used and abused by multinationals to sort of an effect, this effective rate, that's why this effective rate is lower. So what we did was we used country by country reporting, it's very, as we know those that work with micro data, it's very difficult to find firm level data, so we use country by country reporting data. And then we computed at the country level what is this effective tax rate and then we did some grouping average for the sake of looking at developing country impact. Our analysis covers 208 countries of which 53 are developed countries and 155 developing and also we look at what we call offshore financial centers because they are the one that stand to lose when the reforms come in. I mean this is what this reform is about, to avoid profit shifting and to redistribute this income into the host country. It's easier saying that Donna's, Yuka will be telling us later. So also something important that came out from our analysis is that differences, differences in statutory rates remain one of the most important factors in explaining the variation in this effective tax rate. So we have to be very careful when we generalize but we try to have a sort of clean analysis and try to normalize as much as possible for these variations. But in general key message is that this statutory rate is way below, sorry the effective rate is way below the statutory rates. Then before we went into the analytical framework we also tried to understand what is the corporate investment and the fiscal tools used and as we can see here most of the instruments are based on corporate income tax. This is many of the countries rely on corporate income tax over the last decade and that represents over 49% of all incentives granted to multinational. So the bulk of the reform is this corporate income tax. There are other instruments that will have to become part of the financial incentive package once this reform comes into place especially those related to royalties, innovation and other non-financial incentives. There are two issues also important here that we consider during the analysis. One is the analysis based on expenditure or capital investment base and the other what they call the investment allowance, depreciation, another type of very boring financial analysis but again that there is where multinational can mask some of these profit shifting numbers. But all in all the bulk of the reform falls into this CIT, this corporate income tax base. It doesn't matter if we look at capital, losses, profit, at the end of the day the impact will be significant at the time. Then I mean this is sort of complement to what I said earlier as I show the effective rates are lower than the statutory rates and less, I mean our main concern is developing countries and here we can see that less than a third of developing economies report an average effective tax rate below 15%. So this is the rate that we are very, I mean we are trying to see what will be the shifting mechanism of pillar two. So pillar two is here, so we have that around 37% of countries, the chair of developing countries with higher effective staff rate that we have to adjust to that reduced taxes is I mean we have between 37% and 20%. And again this is an issue that we have to be put on the table when the inclusive framework committee comes to the table and discuss how this is going to be implemented. So in this case what we did also, I mean this figure what we tried to do was not to look just ratios of taxes paid but also how they compare to the FDIS stock in developing countries because at the end of the day this is the outcome that we are concerned about. So here there are two aspects, one is what is going to be the impact on FDI and then what is the how it will impact the profit shifting which is the main channel of concern. So again we saw that there is a difference between developing and developed countries in terms of the effective tax rate and we incorporate this profit shifting dynamic because basically this is what overstates the actual taxes paid. So in general we see that the chair of developing countries as we saw before with rates below 15% if we look at what is the profit shifting increases. So basically this is the part that we are concerned about. What is the, I mean how is this profit shifting is going to be curved and is going to return to the countries. In general we see as I said before this is what are worried, I mean this is the countries that fall below or above the reform and what will be the adjustment level and when we look at the incentives granted what we call this curve out this is mostly the area of concern especially countries that rely on special economic zones and so on. So when we consider this profit shifting then this is the best distribution that we can have. So again this is the core of the pillar too, these countries that pay these taxes and M&E's with this revenues. So what is the implication of all this? This is sort of summarized what we saw in the figures. So we see that M&E's pay more, average increase in the corporate income tax on FDI globally lies between 15% and 20%, Latin America the range is between 12% and 22% and most of the increase in this will be due to the profit shifting mechanism. So this is what we want to tackle, 65% globally and in Latin America the profit shifting mechanism is 90% and again it's because of the nature of most of the productive system. According to our analysis the conservative range of the impact of FDI will be FDI during the period of adjustment will increase between 2% and 3%. This is on top of any structural variables or chalk that might be experimented. Then this will affect the locations decisions of M&E's. Now the competition will not be based on taxes, there will be other criteria especially when it comes to investing in developing countries. There will be diversion from low to high tax countries and we see that the tax rate differential will decrease between 15% and 30%. This differential between these two types of countries. And we expect that in terms of fiscal revenues developing countries are expected to gain between 1%, 1.5% and 3% of FDI and Latin America this lies between 1% and 2%. So there will be an adjustment, negative adjustment through FDI but possibly a positive through government revenues. We expect that government revenues are expected to increase. The analysis that according to our data we see that the increase will be around 20% of corporate income tax but developed economies will gain more around 30% than developing countries. And of course the idea is that of short financial centers will lose. I don't have the number from the top of my head, I'm still jet lag but the OECD calculated what is called the fiscal sacrifice, the loss of all countries because this profit shifting mechanism and it was in the billion. So this is a welcome news, this can be tackable. Again the question that remains through my presentation is that how this will be redistributed to developing countries. So as I said before, I mean this transformation, this reform is pervasive because it involves more FDI and country that it seems. We know that it affects large multinational center, foreign affiliates leaving SMEs before but it's not here we cannot think about frames, the FDI by large SMEs and I will show you later how important it is in the range of over 60% of green field investment. Apparently it affects only the 141 jurisdiction but we have to remember that we live in a GBC war where MNEs have foreign affiliates in countries that have signed and countries that have not signed the reform. So it will affect all the countries. I mean some countries will not be able to avoid it. And as we saw it will not affect only the low tax country, it will affect also the countries above the threshold because they will have to adjust to lower the tax rates and so basically this is a global, a general equilibrium and a global impact. So I earlier mentioned that we focus on analysis on effective tax rate measure through different weights and the most important is FDI stock. So basically these are the three channels that we look. The volume of FDI what will be the input of the volume, the distribution and the route whether it's profit shifting or not. So here I mean this is basically summarized more or less what we say and these three are the three core outcomes that we look at the analysis. So basically the aim is to host countries will, I mean we look at the host country effective tax rate and the aim is to reduce profit shifting. I mean this is the core of the analysis. And then there are concerns also what will imply to the cost and also the volume of productive investment in the medium term. Then we look at the other aspects of the differentials of what I already explained. I mean the chapter has all the technicality in boxes and there are references to the work of others like King that were used as background for this study. So in terms of the input I already mentioned that the profit shifting is the main concern, is the critical driver of the reform. This is why the G20 came to the OECD. Some of us might remember that BEPS 1, the original BEPS, the aim was to tackle the digital M&E's because they have a completely different footprint that normal multinational, their development in Paris zero sometimes negative. So BEPS 2 went beyond the digital M&E's to look at all the enterprises. So here these trends confirm what I already said and for this exposition what we did was the composition was made assumption of full reversal of profit shifting. I mean there was the main assumption full reversal of the profits in the upper bound. All profits shifted, pre-pillar 2 are then simply reassigned to the host country where they are generated. So hopefully these profits will come to the developing countries. The mechanism is not clear yet. Again we try to see how this is going to be applied and again we look at the importance of this mechanism. If you see in Africa, in all developing countries, 91% Latin American, 96% so this profit shifting mechanism is really an important issue for policy makers. Again in terms of another level of impact that we looked at, it was that we look at how the corporate income tax rate on FDI will be affected and the increase will be more or less by 2% on average. So BEPS pillar 2 will increase the corporate income tax face by M&E's on the foreign profits as we already have said many times. The estimated increase in defective tax rates by M&E's is conservatively estimated because as I said there are many variations in statutory rates and other intrinsic characteristics of the countries and then this will imply an increase by the tax paid by M&E's in developing countries by 15% and those will be directly affected by the reform. So this is the growth that we expect on the rates, the adjustment after pillar 2 is implemented. I mean our baseline scenario places the potential downward as I said on minus 2%, the downward pressure on FDI but this refers to productive investment only. This does not account what is equity or the financial transactions between multi-nationals and this is another story. And I mean this is important because as we saw there is a long history of a very important financial component of FDI but in our case we are concerned about productive investment. The flip side of this as we said is that the potential downward pressure on investment, the negative impact of FDI but there will also be a reduction in the tax differences between countries reducing tax competition. However, all the benefits will not be automatic and this is where the big question to scholars and policy makers lie. I mean in a war where we have a smaller tax base and smaller tax improvements in other investments determined is important. Here we are going to compete about fundamentals, country fundamentals including those related to the infrastructure, the governance, the institutional environment of the countries. I mean this complements what we said before. Again, this is what we call the curve out effect. The foreign affiliates of the multi-nationals affected because this is, I mean this is what developing country grants. I mean it's a tax break within this range. So the diversity of tax incentives in the system implies that the impact of the report will fall unevenly across developing countries and firms. And again, here this is a sort of ideal, ideal world and we try to see how other incentives could be affected but the impact is minimal. I mean we said because basically all the exemptions, reduced rate, deductions are less important than the actual tax break and any holidays. So any realistic distribution curve that implies some variance of effective tax rate will lead to greater impact than the assumption of a uniform country level affected tax rate. So this is how it might look. And I would say 100 times again, this is the concern we see with the finance ministers and policy makers how to make up for this with other incentives. Just quickly wrapping up, so again this relates to the, I mean here the orange is what you say the highly affected and the green not much affected. So basically this is the part that will be more affected in the reform. Many developing countries don't use that much just that incentive. So when the reforms are discussed, these are the issues that they will have to consider. So in terms of the impact on national investment policy and then how that might overlap to development, investment promotion agencies will have to rethink the standard policy tool kills alongside the trade ministries, labor ministries and so on. So again, the main constituency of concern for many developing countries, especially in Africa and Latin America is the presence of special economic zones. That relied on this type of investment package. In the report we tried to do a sort of guide of what policy makers could do to plan for a fiscal reform in this setting. Something that I mentioned earlier is that this analysis and the bulk, I mean the core of the reform is foreign investment, productive investment. So what we did, we tried to look at what share of Greenfield investment will be affected by this reform and Greenfield undertaken by these large M&E's and in developing countries will be set with the percent of productive investment. Africa 73%, 72 Latin America, 68 in Asia Pacific. And this is an issue for discussion in terms of what it will imply for the financing of developing productive capacities and sustainable development goals in developing countries. Then when we think about the fiscal reform adjusting the toolkit, what are the key insights that we can give to developing countries? I mean this is, we try to see what is the core of this inclusive framework? What is outside, what is inside? So we need to look at the investment that needs to be thinking in countries not endorsing pillar two because they will be affected indirectly. So we know that countries affected that signed agreement have to reform the fiscal regimes. Those that did not side do not have that pressure but through the issue of foreign affiliates and intra firms relationship they will be affected. So the most obviously will be those that are part of the inclusive framework agreement and they find that many host countries will be subject to this adjustment even if they don't sign the agreement. So countries that have not endorsed agreement they think that the reform will not buy them because they are outside of the reform but as I said, due to the relationships between intra firms that will be affected partially. Also the effects of such countries are indirect. We cannot measure them directly because they don't fall into the reform and we cannot look how that would affect the profit shifting. So that is also another complication of the analysis that it will have to be solved in addition to the policies. So tax competition is blunted but not ended because some countries did not sign and they will likely take new forms. The tax competition will take new forms and new shape. So these are the main concerns how to adjust this fiscal investment policy. I mean this is an issue that we try to do some work on regional tax cooperation and also the complication that international investment agreement bring to these landscapes. Countries have already signed bilateral and international investment treaties that contradicted some of the experts of the reform so that is an issue that is not clearly articulated and some countries will have to look at what to do what to do with that. So what are the key recommendations that we can make to the international community as a knowledge base but as a policy institution is that we need to scale up technical assistance to developing countries and not only from the UN side but also from the BEPS G20 inclusive framework side. We need to adopt a multilateral solution because as I said, this investment dispute settlement mechanism is complicated in a world where you have on top of free trade agreements you have investment bilateral investment treaty that might complicate the application of the reform. And finally what we call a stopgap measure we need to establish a mechanism that will return those revenues raised by developed countries, the home countries of M&E's to go back to the host country of the M&E's and especially countries that were not able to raise those taxes because of technical capacity. So this is a stopgap measure is also one of the issues that is under discussion in terms of the inclusive framework with the G20 and the OECD. So general message before we open the panel discussion. Both develop and develop in economies are expected to benefit. Substantially for increased revenue collection. For developing countries it will be more complicated. Of short financial centers are stand to lose especially part, substantial part of the corporate income tax collected. And for smaller developing countries we generally have lower statutory and effective tax rates. The application of these top tax could make a major difference in revenue collection but again we go back to the first point of the technical capacity to do this. So all in all FDI the impact will not be, the conservative will be 2% decrease in FDI. The adjustment will be of income will be between 15, 30%. Developing countries stand to benefit but developed countries as we stand today the status quo is that they will benefit more and then the impact of development this is the question that I post to the panel now. With this I stop I come back with the discussion and thank you very much for your attention.