Pascal Saint-Amans said bigger countries will benefit more from the proposed tax reforms than smaller countries like Ireland
But he said he could not divulge what the impact would be on Ireland or any other individual countries.
“Ireland, I think it is no surprise to say so, is not a winner of this reform,” the Director of the Centre for Tax Policy and Administration at the OECD said.
Mr Saint-Amans said it would not be unfair to conclude that bigger countries will benefit more from the proposed reforms than smaller ones like Ireland.
But he added that the outcome must be seen in the context of the likelihood of what would happen if there is no multi-lateral solution.
“The ones which will pay the higher price will be the smaller countries,” he said.
“A trade war or tax war will make Ireland suffer relatively more than all the others.”
“So at first sight, you may say, oh, a solution again is the big countries trying to get together. But in reality, if they don’t get together, if they don’t reach an agreement the small countries will suffer.”
As a result, he added, whether it is driven by large countries or not, it is in the interests of all states to get a solution.
He said the Irish Government has well understood that the solution to the challenges of international digital tax reform is a multilateral one.
Mr Saint-Amans told the audience that the OECD’s blueprints on the reform of digital tax will be sent for consideration by an 8-9 October meeting of the OECD’s Inclusive Framework, a group of 137 countries that are seeking a unified approach to resolving the issues.
He said the documents will be presented publicly on 12 October before being forwarded to the G20 finance ministers meeting on 14 October.
There will be two blueprints – one for each of the two digital tax reform pillars being negotiated under the OECD’s process.
Pillar one is focused on the nexus of where digital companies should pay their tax and the allocation of profits to different jurisdictions, while pillar two is looking at a possible agreed minimum corporation tax rate.
The OECD official said the blueprints would be technical pieces of work that explore questions such as determining the residual profits of a company, sourcing of income, defining the tax base, defining what automated digital services and what consumer-facing business would be, and other matters.
“So we’ve developed all that and technically we’ve tried to advance as much as we could, including all the scope, which we understand has since the beginning been the tricky part with the US saying no ring-fencing and other countries saying let’s do ring-fencing,” he said.
He said the OECD now has something which is nearly ready for use, except that some of the key parameters need to be solved.
The US has indicated that, due to the proximity of its Presidential election, it will not be keen to reach agreement on 14 October, he added.
But the US has not pulled out of the negotiations, he claimed, contrary to what has been reported by some media.
“So there is clearly a level of uncertainty there, so that is why today I would struggle to tell you what kind of agreement we will reach on the 14th of October because ministers are not talking to each other,” he said.
He said pillar two was easier because there was no unified approach. But he said it had proved a challenge and was very complex.
Ireland has indicated that it “can cope with” pillar one, he said, but doesn’t like pillar two.
The blueprints will subsequently be put out for public consultation in October.
The process will also wait for the outcome of the US election because, depending on which administration has control of the White House and the make-up of Congress, it will impact the next stage of the negotiations, he indicated.
“Although I understand that everyone in the US understands that this is now an important topic,” he said.
The EU has also indicated that it will press ahead with digital tax plans at the end of the year if the OECD fails, he pointed out, referring to Ursula Von Der Leyen’s reference to the matter in her recent State of the Union address.
“So you can see there is a dynamic in Europe, there is a dynamic in the US,” he said.
“We think that we now have a very solid basis for finalising the negotiation when we have leadership.”
He said the proceeds of reformed digital tax would not pay for the cost of the Covid crisis.
“The amounts at stake are not that big,” he claimed.
But the overall regulation of finance and tax avoidance has several hundred billions at stake, he stated.