International Tax Review: How has your career thus far prepared you for your new role as OECD head of tax policy and administration?
Pascal Saint-Amans: I’ve always been involved in international tax matters. I started my career in the French Ministry of Finance as a member of the Monti group. Some might remember the tax package prepared by Monti back in 1997. At that time in the French Treasury, there were not many people involved in European tax matters and I was asked to be the junior member of that group. I worked there for two years preparing the grounds for the Savings Directive.
I became the chair of Working Party One and became the French delegate to the UN for four years. I got involved in OECD tax matters of course and that’s where I was offered to take up the position.
I’ve been at the OECD for four years dealing with transparency and exchange of information. But because of my background making the links with transfer pricing, tax treaties and tax administration, progressively I’ve been involved in the management. It’s been a couple of years now.
I would add to all this, that one of the key priorities for the OECD is to work more closely with a number of non-OECD countries. The experience of the Global Forum [Transparency and Exchange of Information for Tax Purposes] that I have headed for the past two years is to have all countries on an equal footing with China, Brazil, India, South Africa and many others working quite closely together, happy and comfortable together.
I think I have a good relationship with these countries to engage in further discussion to address the challenge of how to remain relevant and provide good tax outputs which will facilitate the cross-border investments on the one hand, but also at the same time the proper implementation of tax treaties and policies. I think we have many challenges ahead of us and I’m very excited.
ITR: You’ve been very involved in tax transparency and exchange of information at the OECD. Will this be one of the central themes of your leadership?
PS-A: No. For the future, no. Transparency of course is key, and we do have an agenda there. But for me, the core business of the OECD is tax treaties, transfer pricing, and the elimination of double taxation. We should get back to our core business, I’m not sure we’ve left it, but we could strengthen that to make sure we have the right and implementable principles.
On this part of the core business, maybe what could be done is more emphasis on the practical aspects . How do you make sure that developed as well as developing countries implement the rules properly? Sometimes I wonder whether we are over sophisticated on transfer pricing and tax treaties and maybe we should bring more clarity.
International tax matters and working method require consensus. It’s very hard to work on a consensus basis, but that’s the beauty of it, when you have a rule which is a standard. But on the other hand, sometimes it is better to identify the divergences and bring them out, rather than trying to reach compromise which doesn’t bring clarity. Because at the end of the day, if tax administrations implement rules differently, we have double taxation. And we know that competent authorities are not that good at eliminating double taxation and going to arbitration. I’m a big fan of arbitration. That’s one core priority.
Another is that we should strengthen our work on tax policy. We should definitely work more on better tax policies to address the fiscal consolidation over the next 10 years. And finally, of course there is the work on tax administration and compliance.
If there are three main pillars, I would start with tax treaties and transfer pricing, with simplification and clarity second, and then I would go with tax policy and compliance, which includes transparency.
ITR: Is there anything you would do differently from Owens?
PS-A: Of course, yes. Owens has developed something which is really amazing and that’s a great success story. The Centre for Tax Policy and Administration cannot be managed without him as it was with him. We need to change the business model and structure it differently, make sure we have a strong team here and sustainable development for the future. And we need to build on the successes that Jeffrey has ensured.
ITR: What projects that Owens began are you particularly keen to expand on?
PS-A: It’s not a one man show, the OECD. But I would like to develop the holistic approach to the non-OECD countries so they’re happy with our work, they’re more involved and we learn from them.
We need to strengthen our relationship with the IMF, the World Bank and the UN. There is no turf here, we should converge and make sure we deliver at the best cost. I have started to develop strategy.
I’m meeting a lot of government officials. In the coming weeks, I’m travelling to South Africa, Argentina, China, Brazil, India. I’ve just got back from Turkey and I’m going to Washington. I’m also meeting a lot of people in the business community, which I think is very important.
ITR: Owens was a very public figure and very outspoken. Do you see this as a key part of the role at the CTPA?
PS-A: I like speaking in public. I’m not shy. So I will have to refrain and make sure it’s not only one face and the team is up front.
ITR: What do you expect to see emerging from Cannes next month?
PS-A: I expect to see a recognition for the progress made in the area of transparency. That’s a success story. The Global Forum has been successful to get engagement from countries across the world. We have 105 member countries now. All the offshore centres are members and I think pretty happy to be members. At the beginning it was a bit of a pain for them. The G20 economies are all strongly committed, as are the OECD countries, and now the developing countries.
We have produced around 60 reports for the G20. But more than the reports, we have delivered change. Almost all countries have introduced changes. Bank secrecy for tax purposes is over. And those that have been found to have too many deficiencies have been active in transforming.
We also expect a recognition that domestic resource mobilisation in developing countries is a key feature for their future. We know that it is diminishing and that the best way to promote accountability, to promote democracy, is for developing countries to have good tax administrations. We have been working very hard on that at the OECD. We hope the G20 will realise that.
ITR: You say that bank secrecy for tax purposes is over. What about Switzerland, where agreements with the UK and Germany to apply withholding tax have not ended banking secrecy?
PS-A: That’s wrong. The communication by the Swiss has not been that genuine. It is a bit aggressive and wrong of them to say there is bank secrecy. No, there is no roll back. These agreements include information exchange on request when it is relevant with no limitation. It also provides for things that look like fishing requests as well as withholding tax and tax on assets. These agreements try to prevent from moving to automatic exchange of information. But they are not a roll back from the existing situation. So bank secrecy is over.
ITR: What about arguments from the Tax Justice Network (TJN) who say the OECD has no tax havens on its blacklist and have, in response, come out with their own secrecy index? How would you rate their methodology?
PS-A: I would rate it very poorly. I am in contact with the TJN and it’s very important to have NGOs engaged. I’m grateful for people in their own time trying to promote better tax compliance. That’s good. That said, I wish that their financial secrecy index would be a bit more robust. They have a secrecy index that built on a number of criteria that are disputable and based on information that is outdated.
The information in the peer reviews is dated and they work on self-statements that are wrong. They came up with a financial secrecy level made up with a mathematical formula to get countries they want on the top of the list to be on top of the list. That’s disingenuous, it’s not fair, it’s not good and it sends the wrong message.
Of course our list is outdated. The purpose of it is to be successful. And it was successful. Successful to what? Ending secrecy? Not completely. Let’s remember the aim of that list. In 2008, the major financial centres of the world said they would never exchange information. Ever. That’s the situation. We needed to level the playing field. We needed to get the major financial centres, Switzerland, Luxembourg, Hong Kong, Singapore, to change their policy. Done. March 13 2009, they all changed their policy.
We realised that getting commitments was good, but not good enough. We needed something to start showing there was implementation. But that’s the past. The real test is not the agreements, but with whom.
I don’t mind Monaco signing tax information exchange agreements with St Kitts and Nevis, Luxembourg and other offshore centres. It doesn’t make sense, it’s not helpful. But what we mind is do they have agreements with all the people who are interested in signing them? That’s the standard. Not the original OECD list. Now we assess the countries and they assess themselves. It’s an inclusive project with all the financial centres. If San Marino doesn’t have an agreement with Italy, not good. If Uruguay doesn’t have agreement with Argentina, not good.
Second, it’s good to have agreements, but if you don’t have the power to assess the information, or worse if the information doesn’t exist, that’s a joke. We have engineered checks to see if the legal framework is in place. But that’s just phase one. The real truth will be in the information exchange in practice. How many requests have you received and responded to? What do your peers think of the quality of your responses? That’s the phase two reviews.
ITR: What do you think about arguments for country-by-country reporting? Is it a panacea or a pipe dream?
PS-A: I like the idea of more transparency. Maybe in some cases, having a better idea of country-by-country tax reporting would be good. We’re working on that. But I think what really matters is what do developing countries need.
I think they need to be assisted in transfer pricing, to get the rules right, and there I think the arm’s length principle (ALP) is probably the most protective rule for them. This is disputed and sometimes contested by people who don’t really get it right. They think that the apportionment method would be more protective. I don’t think so. The ALP is the best way to ensure that tax is paid where it must be paid.
There are dramatic key implementation aspects of all that. That’s where we must add to simplification and the capacity of tax administrations. We just don’t need to divert resources, we need to concentrate on the key issue. That’s why I’m visiting developing countries. We have a project in Kenya for technical assistance on transfer pricing and exchange of information, funded by the Department for International Development here in the UK. We are working very closely with ATAF. Here, we need to understand the needs of developing countries. I would be cautious about the white man telling them what they need. Let’s work with ATAF and hear what they need. What I hear is transfer pricing, let’s get it right, information exchange, let’s get it right.
ITR: The Global Forum on Transparency and Exchange of Information is meeting soon. What do you expect to come out of it?
PS-A: We want to deliver a report to the G20 that is a success story and complete our reports. Rather than naming and shaming, we want the true story of the progress made. We also want to keep up the pressure so that countries realise the process is ineluctable, while rewarding them for the efforts they have made.
We have two other aspects. One, getting the competent authorities to better communicate. We have a plan to have competent authority meetings. We will also act as a platform to coordinate technical assistance in the field of transparency.
