Tax Project Continues Amid Coronavirus Fears: OECD Official

Pascal Saint-Amans, the Organization for Economic Cooperation and Development's top tax official, said Monday that he didn't expect a delay in a project with world tax leaders to overhaul the global tax rules due to the coronavirus outbreak.

OECD officials hope to unveil an agreement before a July meeting of the finance ministers of the Group of 20 consortium of advanced economies. A G-20 letter, which kicked off the project to address tax challenges in the digital economy three years ago, gave the OECD a deadline of Dec. 31, 2020, to finalize a report. 

World leaders are bracing for a possible pandemic of a new strain of coronavirus, which originated in China. So far, France has not issued any travel advisories, according to the U.S. Centers for Disease Control and Prevention. But World Health Organization Director-General Tedros Adhanom Ghebreyesus identified neighboring Italy as a country with an outbreak of the virus that is a concern. The CDC has issued a travel advisory for Italy, advising against any nonessential business travel, but has yet to recommend one for all of Europe or for other European countries.

"Too early to say what the impact will be, but I can tell you we will adapt and do not plan any delay," Saint-Amans, the director for tax policy and administration at the OECD, said in an email to Law360. He added that officials involved with the project were meeting with Angel Gurría, secretary-general of the OECD, to assess the situation.

The OECD, based in Paris, acts as a global standard-setter for international tax rules and norms. Delegates from its member countries regularly meet in its Paris office to negotiate changes to its standards. As part of its most recent tax initiative, the OECD leadership has met with the inclusive framework, an advisory committee comprising 137 jurisdictions. 

The OECD's yearslong project on taxes and the digital economy has had a rocky road toward a potential consensus. Initially, officials were pessimistic about the chances that world leaders could agree on a policy that would address perceived profit-shifting and tax avoidance in the technology sector and replace national digital services taxes enacted by France and other countries. But following the 2017 Tax Cuts and Jobs Act , countries seemed to warm to a bargain including aspects of the law's international tax regime and a "unified approach" to grant market countries more power to tax corporations involved with consumers or users in their jurisdictions.

But hopes for a deal by the beginning of 2020 faded when U.S. Treasury Secretary Steven Mnuchin penned a letter to the OECD expressing concerns about the proposal, asking that the unified approach only be recommended as an optional safe harbor for companies to choose as a protection against uncertainty. Other participants, especially French officials, lambasted the idea and negotiations seemed to run aground.

More recently, the OECD delegates agreed to a new outline and announced optimism that they would reach a basic agreement by July.

The stakes for the group to reach an agreement by the end of 2020 are high, because President Donald Trump and the U.S. trade representative have vowed to initiate retaliatory tariffs, potentially as high as 100%, on French products if France implements its 3% digital services tax. U.S. and French officials reached a tenuous detente that would delay collection of the tax until the end of the year, and the U.K. won't begin collection of a similar tax until 2021.

OECD officials have said they fear that without a consensus solution, the world could spiral into trade wars.

Representatives from the U.S. Treasury Department did not return requests for comments.

--Editing by Neil Cohen.

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