23/01/23

INTERNATIONAL TAX: OECD chief 'optimistic' on upward swing in global growth.

As published on asia.nikkei.com, Monday 23 January, 2023.

With China lifting its zero-COVID policy, the secretary-general of the Organization for Economic Cooperation and Development (OECD) is now optimistic about global economic growth.

Mathias Cormann told Nikkei Asia in an interview on Monday that "China is a very significant player in the global economy," though "economic recovery in China also will mean increased global demand for energy."

Given that "Russia's war of aggression against Ukraine is still having implications on the global demand structures for energy ... we need to diversify energy supplies, and we need to increase energy production." Still, as supply chain bottlenecks in China ease, Cormann said that he is "a little bit more optimistic about the global economy than I was in October, November."

In its latest Economic Outlook issued November, the OECD forecast the world economy to grow 2.2% in 2023, down from 3.1% in 2022.

On the digital taxation front, Cormann said, "Our objective is for it to come into effect by 2024. And that is what we're working toward."

In October, the G-20 directed the OECD to finalize a multilateral treaty on digital taxation by early 2023. For the treaty to go into effect, U.S. ratification is required. But there is little prospect of bipartisan support in Congress.

"I believe that it's in the best interest of United States' companies ... to be able to deal with one uniform system globally, rather than to continue to have to deal with the proliferation of different tax arrangements in unilateral tax measures and individual jurisdictions," he said.

According to Cormann, "There is a clear benefit from the certainty and the consistency and the simplicity that comes with having one system as opposed to a whole series of differences."

Cormann concluded: "When it's all said and done ... I believe that the United States democratic system will decide consistent with U.S. interests. And I believe it's in their interest to have that convention ratified."