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Digital Taxes Won't Cover COVID-19 Crisis, Saint-Amans Says

By Matt Thompson · September 22, 2020, 1:23 PM EDT

Revenue that can be raised by introducing taxes on large digital companies won't pay for the economic damage caused by the novel coronavirus crisis, Pascal Saint-Amans, the Organization for Economic Cooperation and Development's top tax official, said Tuesday.

The amount that can be gained in new tax revenue globally will amount to only a few billion dollars, Saint-Amans said at an online event held by the Dublin-based Institute of International and European Affairs. Meanwhile, endemic tax avoidance costs hundreds of billions, and countries should focus on reaching an agreement that will put an end to that, he said.

International negotiations that were meant to conclude by the end of 2020 are being held up by the ongoing pandemic, as well as by the impending presidential election in the U.S., Saint-Amans said. Nevertheless, politicians on both sides of the aisle are aware of the need to complete the overhaul of the international tax system.

The OECD is leading negotiations among 137 jurisdictions on fundamental reform of the international tax rules to address changes in the economy that have come about as a result of the rise of digital business models.

The OECD's work is proceeding in two parts, referred to as pillars. The first pillar would reallocate taxing rights to jurisdictions where companies have customers but lack the physical presence that can be taxed under traditional rules. The second involves developing a global minimum tax.

A meeting of several parties to the negotiation is scheduled to take place Oct. 14. But Saint-Amans, saying it is unlikely that the work will be concluded within the original time frame, declined to predict what the agreement would look like by the conclusion of that summit.

"I would struggle to tell you what kind of agreement we will reach on Oct. 14," Saint-Amans said. "What happens next depends on the political dynamic."

The talks nearly ground to a halt earlier this year due to insistence by the U.S. that reforms be made optional. Saint-Amans told the conference that U.S. Treasury Secretary Steven Mnuchin was of the view that moving away from traditional methods of calculating a company's tax liabilities was too controversial, but the existing system was too complex.

"What he explained was, we may have the existing system but [companies] would be pushed toward the new system because it would provide certainty," Saint-Amans said.

Saint-Amans also took the opportunity to dismiss media reports that the U.S. intended to withdraw from the negotiations.

"The U.S., because of the election, was not keen on reaching an agreement" before it takes place, Saint-Amans said. Still, he added, "it is not the case that the U.S. is pulling out of the negotiations."

The outcome of the election will have an impact on the OECD process, he said.

"It is important to know what the administration will be, what the majority in Congress is, what are the different scenarios we have to play with," Saint-Amans said.

By the same token, he said, the global tax negotiations are "on the radar screen of whatever administration we have." 

The U.S. Department of the Treasury did not immediately respond to a request for comment.

--Editing by Neil Cohen.

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