 Even though I'm sitting in my office and I'm extremely frustrated not to be with you this morning Not to be able to see you. So I'm just watching a camera, which doesn't look as good as you are all look, so Sorry about that. Sorry not to be with you today. I did a three-hour trip yesterday, but just to go a Few mines away from the office stuck in in traffic Listen, I'm glad to to address you this morning to talk about the global tax challenges And I understand I've been allocated three hours to talk about tax challenges But I will try to cut it in 10 to 15 minutes and not to bother you too much We are at a juncture as you all know and I think it's good to Stop step down a bit and try to understand why we are at this juncture to start with International tax or let's put it otherwise tax has never been that high on the International political agenda I think it's never been very high on the international political agenda and it is now We are all accustomed to tax being high on the national agenda because of the fiscal constraints of the monetary Constraints the tax instrument has been more used than than ever But that has not been the case for international Tax for a simple reason, which was that this was left to technicians. This was marginal This was just about limiting the frictions between tax sovereignty and no more than that not not really political what has happened which has made this issue of International cooperation that high on the political agenda and of course the answer is is known by everybody That's the financial crisis but how come can we make this connection between the financial crisis and These tax agenda which has been taken over by the G20 which has been taken over by the OECD And now you can see that the the the crowd is Is enlarging? I mean the IMF is moving on this territory The UN has always been there, but but is increasing its work Not to mention the work that Heinz Zurek who is then high Heinz Is doing in the EU and I wish him good luck because I think there is for once a great Opportunity for the EU also to get very much involved and and develop instruments in this area So how come is it just about grabbing revenue and and I don't think so for sure It has been one of the dimensions, but I think this has been marginal I think what is at stake and that's the point I want to make I think the the global tax challenge the big challenge of Tax in the globalization is about regulation. I think the financial crisis in 2008 2009 has revealed a deep need for regulation Financial regulation and you can see the work which has been performed by the FSB But also tax regulation and I think that's why the G20 in two steps asked us or Responded to our proposal positively to engage work in tax matters matters the first part of it has been About bank secrecy lifting bank secrecy bank secrecy could have been considered as as a black hole in these International environment where people high net worth individuals could hide their assets from the tax man And at the time where politicians Governments had to put trillions of dollars on the table to save the financial institutions It was hard for the governments to accept that the financial institutions They were saving were part of a system where bank secrecy allowed taxpayers not to pay their taxes Taxes which were needed to save the international Financial system so you can see that it was easy to square the circle there and just say well We put an end to bank secrecy we leverage on the work that the OECD had been doing for more than a decade and We come to a point where we ask countries to make commitments But beyond commitments we put in place something a bit intrusive and that was the first time I think that we were able to Develop a peer review mechanism which would result in Rating countries in doing lists in telling countries where you're not good enough You're not up to the standard that you have committed to and I think the global forum by bringing all the countries and Jurisdictions on an equal footing. We now have more than one. I mean we have exactly 123 members of the global forum the most recent members being Peru and Niger So it's very interesting to see that we are extending the membership to developing countries after having covered all G20 all OECD and all financial centers and We have a new dimension there, which is about tax regulation By having this peer review mechanism That was the first step which has also translated into developing new instruments We had a multilateral convention on mutual assistance This was developed in the 80s. This was poorly used poorly signed In 2009 in three months time and you can see the speeding of the process there in three months time We did a protocol which brought this convention up to the standard Which opened this convention to all the countries and all jurisdictions across the world as before it was limited to OECD and Council of Europe countries and as a result we now have more than 85 I think territories covered and many countries queuing to sign this multilateral convention Which is used as the legal basis to move towards the new standard Which is automatic exchange of information in five years time we've moved from complete bank secrecy in many jurisdictions To an environment where not only do we have all the countries Committed to exchange of information on request, but almost all the countries committed to implementing automatic exchange of information by 2017 and 2018 with only four jurisdictions not committed being Panama, Cook Island, Vanuatu and Bahrain, quite anecdotal except for Panama, which is a big source of concern all that to say that From 2007 where bank secrecy was ruled to today we've moved at a very quick pace and to a level of cooperation which is unprecedented and Beyond the cooperation We have a mechanism to ensure that countries will implement and that they will be monitored by the international tax community The Global Forum, the OECD, the G20 But this is not limited to this Easy issue of bank secrecy I say easy because when I remember my trips to Luxembourg or Switzerland or Singapore or Hong Kong can tell you and you know it that it was not as easy as it seems today but we've moved to another Critical parts of the international tax structure which are about the rules to eliminate double taxation and As importantly the lack of rules to organize or to breach the gaps between sovereignty We all know that tax is at the core of sovereignty and at the core of democracy when there is a democracy Because it's about the consent to tax But as a result of that countries have poorly cooperated even on bank secrecy They were not able to assist each other Now we've reached the point and that was the second step in the G20 mechanism which which appeared in June 2012 in Los Cabos with a reference to the work that we had started It was just an initial reflection from the Bureau of the Committee on fiscal affairs And I would like to say hello to Manel Corrine who I think is in the room So hi Manel. You will remember this Bureau meeting where we started talking about base erosion profit-shifting the concerns of The member countries and the fact that we had to work on that growing on this discussion We had we had the new Bureau membership. We had the new director I just started as director at Center for Tax Policy and Administration during on that We proposed to the G20 or we floated the idea to the G20 in June 12 It was the Los Cabos meeting that we could work on base erosion and profit-shifting and the G20 quickly afterwards Said well, we are very much interested in that and we want you to work there because we have an issue We have businesses which are global and countries which are local Which are based on their own sovereignty and they don't cooperate much with each other And as a result it looks like we are losing a lot of money and more importantly than the money That's the same cases as I did earlier for Bank secrecy more than than losing money or being able to grab more money We want to ensure a tax system which is more fair and and I'm quite reluctant to use that word because it's it's a bit confusing It's not about Multinationals not being fair because they would not contribute But it's about the fairness of the overall tax system where some who are not exempted by law are actually Reducing that tax burden quite dramatically because of loopholes in international tax Framework which is developed by obscure technocrats in Paris That's not fair. That's not the right thing to do That's not the purpose of the international tax system The parliament's could vote reduce corporate income tax from the nationals if you if you think that because they are mobile They they should benefit a more favorable treatment But that has not been the case the outcome was due to the lack of Corporation between countries to the lack of relevance of the rules which had not been updated in other words The rules were there to limit the frictions between sovereignty marginally why Businesses had grown global and as a result they could use all the gaps between the sorentes and that's why I think the best action plan The base erosion profit-shifting action plan that we developed at the request of the G20 Became so successful because countries realized that it was time for them to develop more Regulations so the best action plan I would see it as an increased Regulation to make sure that we don't fall into the Opposition or or or the contradiction to globalization which would be protectionism The very easy way to protect your tax base is precisely to establish Protectionism to move away from the rules that you think are no more relevant So the best action plan actually is about providing more regulation But in a way which is more inclusive with all countries agreeing these Including the big emerging countries because one of the big changes and one of the big challenges of the new global environment is that we've shifted from a G7 OECD traditional environment to a G20 new environment G20 global forum G20 OECD G20 BEPS project where all the G20 countries are on an equal footing and as you will have seen We are trying to bring more developing countries on an equal footing so that the global rules Be globally relevant or if they cannot be global then we should identify what is specific for developing countries to address their own specific concerns You know the logic of the best action plan three main pillars The first one is about bridging the gaps between the sovereignty's Establishing best practices for CFC control foreign companies Developing rules for interest deductibility neutralizing hybrid mismatches as well as Making some more progress on so-called harmful tax practices even though this is quite marginal compared to what we did in the 90s Where this was the headline the second pillar is about restoring the international instruments the tax treaties Which were bilateral by nature, but actually were shopped quite aggressively losing their relevance and the transfer pricing rules Was the armsman's principle developed in the in the 1920s to result with all the profit located in a cash box in Bermuda? The answer is no that is not why this principle was developed and if we don't Recognize acknowledge these we're gonna lose this principle and we think that we should not lose this principle because there is no Alternative something that from reapportionment is an alternative We don't believe so because there are even more problems with from reapportionment But we need to fix the armsman principle. So fixing tax treaties fixing the armsman principle That's the second pillar. The third pillar is about transparency transparency by multinationals improving the Reporting and that section 13 country by country reporting but also disclosing the aggressive tax schemes and Also in terms of transparency better understanding what's going on because we don't know we're lack. I mean we're lacking data And as a result, we don't have a good intelligence of globalization of the way multinationals operate and that's why we have action 11 we have also some across the board action one of the digital economy and you will have seen the report we issued on this one and Finally speeding up the the implementation of all these through action 15 and the development of a multilateral instrument and last and certainly not least if we eliminate double non taxation we should be good at eliminating double taxation and I think we have a critical challenge ahead of us which is to Seriously definitely improve the mutual agreement procedures We're halfway. We've developed seven out of the 15 measures You know about them. I mean revising the transfer pricing rules, even though this will be finalized on in 2015 Putting a principle and a minimum standard of Anti-treaty shopping that's action six neutralizing hybrid mismatches You've seen the report on the digital economy which says that a ring fence solution is not the right solution But that's best is exacerbated in this area and companies in this area have been probably over aggressive compared to the others And and therefore the solutions that we will bring through intangible treatment, I mean the tax Transurpricing treatment of intangible property might might facilitate The solution there so digital economy being a separate report and finally the country by country reporting where we have reached I think it's a good illustration of what this project can do because then you have Brazil India, South Africa, China all the other G20 countries all the OECD G20 and non OECD countries agreeing on the template We could have had many fat guys or equivalents of unilateral Extraterrestrial Legislations asking for a country by country reporting public by the way by many countries instead of that we have had an agreement on only six elements of Information to be included on a in a template Six columns as many lines as you have countries where the multinational operate with the principle of this information to be shared only With tax administrations through secured mechanism tax treaties And all the countries agreeing to implement this and only these I can give you an example I was in Delhi last week last Monday I was in your daily for a tax seminar organized by the G20 team with a revenue authorities Some business representatives were there and interestingly Akilesh Ranjan who's the Indian delegate who's really good and really smart said In response to a question from the business community We are going to implement all the action plan But just the action plan and and he recognized that there were fears that India would move away He said no we take it very seriously. I wish all the OECD member countries would take it as seriously as he does in terms of Corporating in terms of committing to things and implementing them Which makes me think and I will conclude with that that one of the big challenges ahead of us It's not only to conclude the best action plan by the end of 15 I can tell you that it's it's real hard work. It's extremely complicated, but Let's say it's easy The real challenge will come post 15 where countries will have to implement their commitments And where I think we will collectively have to monitor the implementation of the commitments And when you step back and look at what was happening prior to the financial crisis The OECD was good at developing rules Recommendations and we didn't care whether the recommendations were implemented or not We pretend that the Amsterdam principle is properly implemented where actually we don't know why tomorrow We'll move to an environment where we will monitor the implementation of the commitments taken by countries So we are to real censure. It's extremely exciting extremely challenging I'm not in Ireland, but I speak in Ireland to an Irish audience I should say and I should have said that Ireland has been part of this process has been part of the discussion has been extremely Constructive even though what is at stake in Ireland is pretty big because you are a small open economy Which is extremely attractive from a tax perspective You've taken some steps And I know that these steps were criticized by some from the OECD perspective I can tell you that these steps are perceived as extremely smart That's the right move that's sending the right message that's Aggressive tax planning as it was practiced and he recently has come to an end We need to move to an environment where tax competition will be a reality Will be very important But will be based on other tools than providing Loopholes in different tax systems lack of cooperation It will be much fairer to the extent that it will be based on broadening the base Reducing the rate playing it straight And I think Ireland will be best placed in in that form of competition Again, sorry not to be with you not to be able to interact to respond to your question to sense the audience Pretty frustrating to talk to this camera, which has not smiled which has not loved which has not even complained No, I brought but I hope you have and I look forward to interacting with you Further at another circumstance. Thank you very much