Some Treaty Negotiations Could Stay Virtual, Tax Officials Say

Tax treaty negotiators from developing countries should consider having some of their bilateral discussions virtually even after the coronavirus pandemic ends, government officials said Wednesday, saying this logistical approach may be more advantageous than previously thought.  

Several tax officials suggested that virtual treaty talks should get additional discussion in a "tool kit" designed by international organizations to aid developing countries with seeking and negotiating bilateral agreements on income taxation. Although in-person meetings are the most efficient way to negotiate treaties, certain countries may have faced budget and agenda restrictions even before the pandemic, according to Claudia Consuelo Vargas Cifuentes, an adviser in international affairs at Colombia's Directorate of National Taxes and Customs.

Such restrictions "may pose an important obstacle to start negotiations or to continue with negotiations," she said, noting Colombia had its first virtual negotiation last year, before the pandemic. Vargas Cifuentes was among the tax officials who spoke during a webinar hosted by the Platform for Collaboration on Tax, a joint initiative of the International Monetary Fund, Organization for Economic Cooperation and Development, the United Nations and the World Bank.

The tool kit should address the option of virtual negotiations more and "let negotiators know that this is possible," she said.

A draft of the tool kit was released in June as part of the Platform for Collaboration on Tax. The joint effort by the four organizations started in 2016 at the request of the Group of 20 advanced economies to better frame technical advice to developing countries as they seek more capacity support and greater influence in designing international rules, according to the OECD.

The 22-page tool kit draft outlined options for how to model tax treaties and work with a negotiating partner, but also advised countries to consider alternatives to bilateral tax agreements as a way to encourage investment. The draft was largely welcomed by tax officials and specialists on Wednesday as a resource to help developing countries, though they also pointed out areas that could get another look, including a section on the logistics of negotiations.  

As the tool kit put it, "conducting negotiations through face-to-face meetings has proven the most efficient way of doing things."

"It would seem difficult to use videoconferencing or other telecommunication mechanisms when having a first discussion of the differences in the draft treaties submitted by each state or when addressing complex substantive issues," according to the document.

The draft added that as long as face-to-face meetings remain a prospect in the near future, negotiators should "restrict the use of telecommunication to narrow specific issues, procedural details or a preliminary background explanation of the states' respective positions."

Meanwhile, efforts to slow the spread of the coronavirus, which causes the respiratory disease COVID-19, have required a widespread suspension of in-person meetings — including negotiations for an international tax overhaul at the OECD. As for treaty discussions, the pandemic has shown the possibility of virtual negotiations, according to Mari Khurtsidze, head of the international taxation division in the Ministry of Finance of Georgia.

"Negotiations should not be suspended until COVID-19 passes," she said, speaking during the Wednesday webinar. "Quite the opposite."

"Virtual negotiations can be used not only during the pandemic period," Khurtsidze said, adding that while countries should start to contemplate how to use this approach in the future, virtual talks shouldn't replace face-to-face discussions.

Khurtsidze's remarks were met with agreement by Liselott Kana, head of international taxation at Chile's Servicio de Impuestos, or internal revenue service.

Speaking during the Wednesday webinar, she noted that Chile hasn't yet participated in virtual negotiations, but "I think it's going to be the future."

--Additional reporting by Alex M. Parker. Editing by Joyce Laskowski. 

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