Behind closed doors at the OECD Tax Forum

Intro:
Welcome to CPA Australia's With Interest podcast, bringing you this week's need to know information for businesses and accounting professionals.

Jane Rennie:
Hello and welcome to CPA Australia's With Interest podcast. I'm Dr. Jane Rennie, general manager, media and content at CPA Australia. It's Monday the 10th of October. Late last month saw a gathering of global tax regulators, administrators and business representatives at the OECD forum on tax administration, which was held in Sydney over three days. It was an invitation only event, at which CPA Australia was represented by senior manager, tax policy, Elinor Kasapidis, who is here today to tell us what went on behind closed doors at the OECD tax forum. Welcome to With Interest, Elinor.

Elinor Kasapidis:
Thanks for having me.

Jane Rennie:
Elinor, to start with, can you give us a bit of colour? Who attended this shindig and what was it like being there?

Elinor Kasapidis:
Thanks, Jane. The OECD Forum of Tax Administrators is an event that's held every year or so, although it has been disrupted by COVID, and it's invitation only in the sense that tax commissioners from relevant countries are invited to join their colleagues in Australia. So this year there were over 50 nations and jurisdictions represented, as well as about 15 business representatives.

Jane Rennie:
And are they all coming together to try and make rules for global tax administration?

Elinor Kasapidis:
So the OECD's got work on board where policy makers and ministers get together on a regular basis. This one was really focused on tax administration. So when the rubber hits the road, how are the various commissioners and regulators going to get their heads around what needs to be done and to make sure that the rules are implemented properly in their own countries and jurisdictions?

Jane Rennie:
But Elinor, I admit, I thought tax rules were national, especially when it comes to individual taxpayers. So to what extent are tax rules, in fact, global?

Elinor Kasapidis:
It's a really good question. So absolutely, jurisdictions still have sovereignty. But what the OECD has been doing through its work on multinational tax avoidance and some of the other challenges with digitalization, is bring countries together to make decisions about the design of the rules they'll implement and then they take those away and decide how they're going to make it work for their own country.

Jane Rennie:
And how are those decisions made? Is it a consensus decision making body or a majority vote? And are the rules binding on attendees?

Elinor Kasapidis:
Well, tax can get quite complicated, especially when you're getting to international tax and there are all these things called multilateral instruments and all sorts of conventions, a little bit like UN conventions that you sign up to like the charter on human rights for example. The same sort of things happen in the tax world. It really is though around the design of the rules and the OECD actually has a consultation paper out at the moment. So it very much is a consensus approach, deciding how the rules should be designed and giving each jurisdiction a model that they can then take to their governments, their people, to make decisions about how to move forward.

Jane Rennie:
And what was CPA Australia's role in attending?

Elinor Kasapidis:
It was fantastic to have business representatives there and CPA Australia was one of them. Because we have over 170,000 members in more than a hundred jurisdictions around the world, it was great for us to be able to come to a global event here, commissioners from around the world, from our representative jurisdictions, and to think about what impact it has on the members and also to represent the accounting profession.

Jane Rennie:
And just in terms of impact, as you've just mentioned, does this have any real application at the end of the day to Australian businesses and business professionals and accountants?

Elinor Kasapidis:
Yes. When you look at some of the initiatives like myTax for example, even myGov ID in Australia, or you'll look at apps and interfaces in other jurisdictions, that movement towards digital or you might hear about multinational tax and how there's a minimum effective tax rate, a lot of people have been following that in the media and all of that is coming out of the thinking and the blueprints that are created at this OECD forum of tax administration level.

Jane Rennie:
So who decided the agenda then?

Elinor Kasapidis:
For this particular event, the ATO hosted in Sydney. So really it's about them working with the secretariat. But really what it pulls out are some of the key themes and issues that are at the forefront of tax commissioners' minds and taxpayers' minds at the moment.

Jane Rennie:
And I understand over the course of the three days, there were a very large number of different sessions and side sessions, but what were the big ticket items for this gathering?

Elinor Kasapidis:
The two big ones were the global minimum effective tax rate as well as Tax Administration 3.0, which is the move to digitalizing tax administration.

Jane Rennie:
All right. Well let's start with the Global minimum tax discussion. Is this about big bad corporations not paying tax and how are we going to net them?

Elinor Kasapidis:
It definitely started that way in the sense that several years ago there was a lot of media about, for example, Google or Amazon or Apple using particular tax structures internationally to reduce the amount of tax they paid. And when that was seen, and you also had other things like Panama Papers and the whole conversation turned to, are people paying the right amount of tax given the amount of money they're making and the amount of profits they're earning? So that's where this work on pillar one and two came from, and this idea of a global minimum effective tax rate. So at the end of the day, no matter how you structure yourself across the world, there's a basic amount of tax that a big corporation should be paying. And I should emphasise, these are the largest corporations in the world. The other thing I'd know is that it started around digital companies. So companies like I said, Apple, Google and Amazon. But as the conversation has evolved, some of those restrictions have fallen away. So they're really now looking at all big global corporations with only a few exceptions to this rule.

Jane Rennie:
And what was the focus of the discussion at this forum? What were they trying to decide?

Elinor Kasapidis:
Because it's the tax administrations and the commissioners, they're really about how they're going to make it work. So whether it becomes law, how it becomes law, that's set by governments and parliaments around the world. But what the commissioners have to do is really sit down and say, how do we collect the data? How do we help taxpayers calculate this effective tax rate and how do we make sure that it's correct? The other thing is that there's been a whole lot of other kind of work that's been coming in. So one of the real challenges that they were highlighting or thinking through, and I think this is the same for business, is with all this new regulation, with all of these changes, how do you actually cope with it and how do you actually minimise the cost to both the tax paying public who funds what the tax administration does, as well as the businesses who really are trying to get it right?

Jane Rennie:
Okay. So that's very focused on the administration, but just educate me for a moment. Does that mean an actual minimum tax has been agreed to in this forum already?

Elinor Kasapidis:
Because it's tax administrations, they're getting ready for it. So like I said, it's still uncertain and it's very interesting because different nations and jurisdictions will have different approaches to what they think. So in terms of it sounds really simple, 15% effective tax rate, a company makes a hundred dollars of profit, they have to pay $15. The question is who do they pay that $15 to? Is every nation getting its own cut of that profit and should there be any more? So in that sense, it's really around what does it mean for us as a nation. So each of the jurisdictions will be thinking about that and also what is it that we're trying to achieve? So it might be that we want our part of that $15 minimum effective tax, or it might actually be how do we stay competitive if tax or low tax rates are no longer the key advantage?

Jane Rennie:
And I guess for an organisation like CPA Australia, this is actually a very interesting discussion because we operate in so many different markets and I imagine the discussion in different countries is very different. How does an organisation like CPA Australia land on this issue?

Elinor Kasapidis:
With a lot of consultation, talking to our members, participating in fora like this one. I think the more you understand the different challenges and actually agree that we're all facing the same difficulty in the sense that even the largest corporations in the world recognise the need for them to contribute. And then also a lot of countries have got different strengths, and so international tax competition is for some countries a really important part of their economy. So what we try and do is really represent the different views and try to come to something that is practical, that's workable, and where it does still achieve the economic outcomes that people want to see in their jurisdictions, but also recognises that some of the practical challenges, and that's where our membership comes into it, because they're the ones that are doing the work. And also just recognising people want to see larger corporations pay their contribution to the national purse. And I think that that's fair enough to say.

Jane Rennie:
Well, where to next for this issue?

Elinor Kasapidis:
Like I said, there's consultation out at the OECD level and here in Australia there's actually a Treasury paper as well. So really what we're seeing is the movement forward and certainly in Australia we've seen Minister Andrew Leigh out there and he's very much focused. It is an election commitment from our government and therefore we would expect to see this move through next year or 2024, we'll start to see the legislation come through.

Jane Rennie:
Right. Let's take a moment to consider the second big ticket issue that you mentioned, which is Tax Administration 3.0. It sounds kind of cool, but what is it really?

Elinor Kasapidis:
Fundamentally it's about digitalization. So it's that transition from your old school paper based, rules based, very prescriptive approach to tax, and trying to look at how digitalization data and natural systems can help make tax and tax compliance easier and cheaper for everybody.

Jane Rennie:
But isn't this just a matter for individual countries, I mean, for them to invest in digitalizing their systems? Why is this a global issue?

Elinor Kasapidis:
Because digitalization is global. I think that information sharing between administrations, we talk a lot about silos or you look for example at multinationals where information or knowledge has started say in Silicon Valley and then gets exported to the world. Forums like this one are the same sort of mechanism by which some of the administrations which have invested earlier and more heavily, for example, like Australia, in certain parts of their data or digital journey, they can share those experiences with others. And for example, in developing countries or countries which may be under-resourced, it's a really quick way for them to leverage the knowledge of more experienced jurisdictions to make their citizens' lives better.

Jane Rennie:
Okay. So rather than setting global standards, this issue is about thought leadership, I guess. And just thinking of thought leadership, were there any really innovative approaches suggested at the forum?

Elinor Kasapidis:
So I think what was really, really good was the diversity of thinking, and the observation that I made was that it's really influenced by the environment in which the administrations operate and the budgets that they have. So for example, one jurisdiction had developed an e-passport for entrepreneurs, which included blockchain basics, and it helped them engage with the tax system in a really effective digital way. There was no paperwork. Everything was online. So that was one example. Another one used their burgeoning software industry to start to build a tool that would identify black economy activity or grey market activity amongst their population. And that's now been commercialised and exported around the world. So it was really interesting to see how administrations were working with the private sector and also thinking about business, how to make business cheaper and easier and fully digital. So they were some great examples.

Jane Rennie:
And what does this thinking mean for Australia, Elinor?

Elinor Kasapidis:
It's quite big. So the ATO commissioner a few weeks ago came out in a speech at Xerocon and was talking about this high volume, low margin, where you're doing some of those processes that are becoming automated. He was signalling that this digital transformation 3.0 means that a lot of that work will start to be replaced by higher value work, such as advisory or understanding the more complex areas of tax law. I think we see this through, it's not tax, but e-invoicing for example. You see some of the software applications really starting to build in natural systems that are designed for automatic reporting. You start to hear talk about perhaps the banks using bank data to do activity statements. So these are the things that a lot of businesses will start to see. And for our members who are tax agents in particular, it's about knowing where the value add is, because the tax law is never that simple. It will probably never be able to be fully automated. So it's about where can you add the best bang for the business buck and also how do you make that book working and data entry easy so that you can give them good advice.

Jane Rennie:
Elinor, I know you attended such a wide range of sessions over the three days, and unfortunately we don't have time to go into them now, but was there a key reflection from the forum, something that stood out to you?

Elinor Kasapidis:
I think, as always, it's a statement of the obvious, but change is constant. And what we grapple with in business or as individuals, tax administrations, bureaucracies, governments are also grappling with the same thing. I really did get that sense of these are big problems, we're all in it together. How do we actually create solutions and help each other as well, so we're not wasting effort or going through lots of ideas that others have tried and it hasn't worked for them? So the world is a smaller place. I know sometimes it doesn't always feel that way, but tax administrations are talking with each other, associations are talking with each other, and I think at a global level that's really helpful because we set the pace, we keep in touch with how things are moving and you end up with a more consistent and coherent policy, which makes it great for international business exporters and getting those productivity payoffs as well.

Jane Rennie:
That's all we've got time for today. Thanks very much to our guest expert, Elinor Kasapidis. With Interest is a weekly podcast. If you like what you've heard today, why not subscribe on your favourite podcast app, and by subscribing, you'll receive notifications whenever a new episode becomes available. From all of us here at CPA Australia, thanks for listening.

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