International organisations play a central role in global tax policy and regulation. With the growing interconnectedness of global economies, and the increase in the scale and scope of cross-border activity, the need for cooperation in international tax matters to ensure the fairness and effectiveness of the international tax system—both as a reliable source of financing and an instrument of growth—is greater than ever. International organisations serve as platforms for collaboration to inform and facilitate cooperation. With a focus on the experience of the Organisation for Economic Cooperation and Development (OECD), this article provides an overview of the ways in which international organisations can support effective cooperation on global tax policy reform.
Why Collaborate Via International Organisations?
Discussions about the effectiveness and fairness of the international tax system, and about the role of international organisations, have been dominating policy conversations and the tax press for some time now. Understanding the role of an international organisation such as the OECD in shaping international tax policy begins with the drivers of cooperation in tax matters. As previously observed,[1] the right to tax is fundamental to sovereignty and is jealously guarded by national governments. Countries agree to collaborate on international tax rules and standards when collective action is necessary to secure or facilitate domestic policy objectives, or when the absence of coordination frustrates domestic objectives. The importance of collaboration amongst countries on international tax becomes greater as cross-border activities accelerate. The growing footprint of multinational enterprises and the expanding mobility of labour, capital, and markets, pose several risks for tax policy makers. These include information gaps that interfere with tax revenue collection, double taxation resulting from disparate domestic tax systems, and the risk of base erosion resulting from the exploitation of differences in those systems.
While each of these risks might be mitigated to a certain extent through unilateral actions or bilateral negotiations, multilateral collaboration on international rules and standards has proven necessary to fully and fairly mitigate these risks. The OECD, as a platform for collaboration, has served to foster such multilateral coordination over several decades through its convening power, its broadening inclusivity, extensive technical resources, deep bench of experts, data analytic capabilities (that support and help inform country delegate deliberations and domestic policy choices), its consensus-based decision making, and its expansive technical assistance initiatives.
The OECD is a member-driven international organisation that offers a platform for collaboration on a broad range of economic policy matters of mutual interest. With respect to international taxation, that collaboration amongst members takes place in the context of the Committee on Fiscal Affairs (CFA) and the Inclusive Framework on BEPS established in 2016 and consisting of 147 member jurisdictions (the OECD Inclusive Framework).
There are many working parties and task forces under these bodies that carry out the technical work, and there are also other important fora such as the Forum on Tax Administration (and within that the FTA MAP Forum), the Global Forum on Transparency and Exchange of Information for Tax Purposes (consisting of 171 member jurisdictions), the Global Forum on VAT, the LAC Fiscal Forum, a Network on Fiscal Relations, and several other bodies.
Each of these committees and fora consist of delegates from either the Finance Ministries or tax administrations of participating jurisdictions. Decisions to pursue a policy initiative are made by consensus in the committees, and outputs are also agreed by consensus. The OECD’s Centre for Tax Policy and Administration (CTPA), serves as a neutral, non-partisan secretariat that provides technical expertise to support the members of the OECD Inclusive Framework, the Global Forum, the CFA, and other fora and their working bodies. The secretariat is composed of economists, lawyers, policy experts, and academics from over 50 countries.
The collective interest of jurisdictions to exchange views, share experience, and explore opportunities to coordinate policies, has informed the range of work covered by the OECD as a platform for collaboration. This includes work on standard setting (such as the model treaty, transfer pricing guidelines, and of course, the BEPS reforms). It also includes work on tax administration, tax certainty, tax transparency, and tax and crime, to address illicit financial flows. There is also critical collaboration on other important areas of taxation outside the corporate income tax, including indirect tax, tax and environment, VAT, a range of other tax policy considerations (including behavioural tax), statistics, and importantly, technical assistance and capacity building. These efforts have generated concrete results.
Tax Transparency
Tax transparency has been a stalwart of multilateral efforts to coordinate on tax. Collaboration on the establishment and implementation of standards for the exchange of financial account information has led to the end of bank secrecy and enabled the identification of approximately EUR 130 billion in additional tax revenues (including EUR 45 billion for developing countries).
BEPS Initiative
The Base Erosion and Profit Shifting (BEPS) initiative was launched in 2013 to coordinate efforts to reform international tax rules and standards to tackle multinational tax avoidance and modernise the tax system to adapt to new business models. In 2016, the OECD Inclusive Framework was established to implement the four minimum standards of the BEPS Action Plan. The Inclusive Framework, initially comprising 82 countries, has grown to include 147 countries and jurisdictions, each participating with the same rights.[2]
Prior to the BEPS initiative, virtually no information on tax rulings was being exchanged. Today, over 54,000 exchanges of information on tax rulings have taken place among 130 jurisdictions. In addition, almost 120 jurisdictions have introduced legislation to require the filing of a country-by-country report by multinational enterprises significantly increasing transparency among tax administrations; and the BEPS multilateral instrument, which curbs treaty abuse, now covers 104 jurisdictions and over 1,950 tax treaties.
Two-Pillar Solution
In October 2021, members of the Inclusive Framework reached an historic agreement on the Two-Pillar Solution to address the tax challenges arising from the digitalisation of the economy and improve the fairness of the international system. This agreement has delivered unprecedented beneficial outcomes, raising the floor on the taxation of multinationals and mobilising significant domestic resources.
Pillar One, which remains the subject of ongoing negotiations, seeks to reframe the coordinated allocation of taxing rights, increasing the agreed allocation to market jurisdictions with respect to a defined portion of the residual profits of the largest and most profitable MNEs (so called Amount A). The collective goal is to reinforce the value proposition for international coordination and to prevent fragmented unilateral measures. While negotiations are ongoing, a text of a Multilateral Convention (MLC) to implement Amount A was published in October 2023.[3]
Pillar One also includes a framework for enhanced tax certainty and rule simplification relating to baseline marketing and distribution activities (so-called Amount B), with a particular focus on the needs of low-capacity jurisdictions.[4]. The first phase of this work has led to the adoption of an elective approach that has been incorporated into the OECD Transfer Pricing Guidelines.[5] From January 2025 this simplified and streamlined regime is available to all jurisdictions, whether they are Inclusive Framework members or not.
Under Pillar Two, the global minimum tax (GMT) raises the floor on the taxation of large multinational groups, ensuring a 15 per cent minimum level of effective tax on their income. Importantly, this initiative supports domestic resource mobilisation and removes the pressure felt by many jurisdictions to offer uneconomic incentives to attract and preserve investment. Already, 46 jurisdictions have introduced or enacted legislation to implement the GMT and a further 17 are taking concrete steps to implement. The rapid implementation of the GMT means that 90 per cent of large MNEs will be in scope of the GMT by 2025.
A Subject-to-Tax Rule (STTR), specifically designed to protect developing countries, also raises the floor on taxation by ensuring a minimum level of tax on certain cross-border payments covered by income tax treaties. More than 70 developing country members of the Inclusive Framework can now request inclusion of the STTR in their treaties with Inclusive Framework members that apply corporate income tax rates below nine per cent to covered payments. A first signing ceremony for an optional multilateral instrument (MLI) developed to facilitate and expedite implementation was held in Paris on 19 September 2024, although the rule can also be applied bilaterally. Importantly, whether or not countries choose to use the MLI or to implement bilaterally, Inclusive Framework members have committed to applying the rule when requested to do so by a developing country.
Technical Assistance And Capacity Building
International organisations also play a critical role in providing technical assistance and enabling capacity to support developing countries in mobilising domestic resources and securing domestic policy objectives. As documented in our recent Retrospective on Tax and Development,[6] the OECD has mainstreamed its support for developing economies across all its tax work, reaching over 30,000 officials in over 100 countries annually. Over the years, the OECD has developed critical programmes, such as ‘Tax Inspectors Without Borders’ in partnership with the UNDP, an initiative which has helped tax administrations in developing countries generate an additional USD 2.3 billion in tax revenues and USD 6.05 billion in tax assessments across 63 developing country jurisdictions.
The Road Ahead
The current conversations about the role of international organisations in global tax reform highlight the importance of multilateral cooperation in international tax matters. Future priorities for collaboration must build on the successes of the past while learning its lessons. Inclusivity and consensus will remain top priorities in OECD-hosted efforts. Underpinning all our efforts, technical assistance and capacity building will continue to be critical and will be carried out in partnership with other international and regional bodies, to ensure developing countries can mobilise domestic resources and reap the benefits of international cooperation.
Recognising the diverse experiences and competencies of the different international organisations engaged in global tax policy, it is critical that we all collaborate constructively across platforms in support of common goals. Indeed, there is already a high degree of cooperation across these organisations: for example, the Platform for Collaboration on Tax, comprised of the IMF, the OECD, the UN and the World Bank, collaborates on a wide range of work, including capacity building, tax policy and administrative toolkits.
Given the enormous needs and considerable challenges ahead, international organisations will continue to play a central role in supporting global tax policy. To ensure that our collective goals are reached, and that developing countries can fully benefit from international collaboration, our contributions must be viewed as complementary rather than competitive. It will be critical for all to remain focused on constructive engagement to ensure the efficient and effective delivery of concrete outcomes. The OECD remains committed to building on its strong foundation of delivering results, and its experience in effective partnering with other international and regional organisations, to address challenges and embrace future opportunities in international tax cooperation.
[1] https://www.ifcreview.com/articles/2024/january/the-international-tax-reform-journey-past-present-future/
[2] This is echoed by an expanding participation journey across the OECD’s tax work, for instance:
[3] Multilateral Convention to Implement Amount A of Pillar One | OECD
[4] https://www.oecd.org/en/publications/pillar-one-amount-b_21ea168b-en.html
[5] See OECD (2024), Pillar One - Amount B: Inclusive Framework on BEPS, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris, https://doi.org/10.1787/21ea168b-en, Also the definition of qualifying jurisdiction: https://www.oecd.org/content/dam/oecd/en/publications/support-materials/2024/02/pillar-one-amountb_41a41e1e/statement-qualifying-jurisdiction-definitions-section-5-2-section-5-3-simplified-streamlined-approach.pdf and the definition of covered jurisdiction: https://www.oecd.org/content/dam/oecd/en/publications/support-materials/2024/02/pillar-one-amountb_41a41e1e/statement-covered-jurisdiction-definition-inclusive-framework-commitment-amount-b.pdf
[6] A retrospective report released in May details the last 15 years of tax and development work at the OECD: https://www.oecd.org/en/publications/tax-and-development-at-the-oecd_9db734bc-en.html
Manal Corwin
Manal Corwin is the Director of the Centre for Tax Policy and Administration at the OECD. She took up her duties as on 3 April 2023. Prior to her role at the OECD, Manal was principal-in-charge of KPMG’s Washington National Tax Practice and America’s Regional Tax Policy Leader; a member of the KPMG Board of Directors and Lead Director. . Earlier roles at KPMG included national service line leader for International Tax and leader of KPMG's Global BEPS Network.