Shortly before he took over as director of the OECD's Centre for Tax Policy and Administration on February 1, 2012, Tax Analysts interviewed Pascal Saint-Amans, who was then a relatively low-profile figure on the tax scene. Today, Saint-Amans has become something of a one-name celebrity, often referred to as simply "Pascal" in tax circles, thanks to his leadership on such major international tax reforms as the base erosion and profit-shifting project and automatic exchange of information.
As he marks his fifth year as the OECD's tax chief, Saint-Amans -- also known as the Silver Fox -- again spoke with Tax Analysts, this time to talk at length about the OECD's major tax accomplishments and the state of its current work, U.S. tax reform, Brexit, the European Commission's state aid decision on Apple, and tax certainty in a new world order.
Tax Analysts: What have been some of the OECD's major accomplishments in the past five years?
Pascal Saint-Amans: If we step back and look at what's happened over the past five years, we have moved from tax being just a tax geek thing to tax being a political item on the G-20 and many governments' agendas. And we've been able to respond to this political call on a couple of fronts: One has been trying to fix the existing deficiencies of international tax rules with the BEPS project, [and] the second was increasing transparency and the move toward automatic exchange of information.
So I think that's what has been accomplished, a lot of political attention on tax, and the fact that we've probably helped this political trend toward companies and individuals becoming more compliant and less aggressive in their tax planning.
Interestingly, and this is something I'm paying a lot of attention to in the new global environment, this tax cooperation that we have organized is not about harmonization. It's not about supranational entities telling countries what to do. It's the opposite. It's cooperation among countries to ensure they protect their tax sovereignty.
If the world becomes more insular, the need for tax cooperation will be even stronger now that countries really want to protect their sovereignty. We've been able to build international cooperation while respecting and strengthening that sovereignty.
TA: What are some of your priorities at the moment?
Saint-Amans: We've launched some new pieces of work, such as on tax certainty, and have been able to foster interest from countries in getting the balance right between improving compliance and paying attention to the sources of uncertainty and trying to address them so they don't hit investment. [Prior coverage.]
The priorities are advancing that tax certainty work for the German G-20 presidency, looking at tax policy and growth [as well as] tax policy and inclusivity. For the rest of our work, we are in the implementation phase. All this will depend on what happens in the world, which includes the U.S. tax reform, which, if it happens, will be something really big in terms of historic impact on the U.S. and other countries. We hope there will be a reform because it's badly needed.
TA: What do you think about some of the elements of the U.S. tax reform blueprint, such as the destination-based cash flow tax proposal?
Saint-Amans: It's a very radical, innovative one. There is nothing for or against it -- it's just unusual. Other countries don't have it, but it doesn't mean countries shouldn't move there. There are many questions that are raised in the blueprint. So we're just looking at it and waiting, and we'll be ready to offer a platform, if needed, for countries to exchange views on how to adapt to the reform.
Another outcome may also be reduced rates -- the U.S. has now the highest [corporate income tax rate] among OECD countries -- and a broadened base with a move to territoriality. Interestingly, this would be not too bad.
TA: On Brexit, how concerned are you that the U.K. will end up going the tax haven route as it withdraws from the EU?
Saint-Amans: The U.K. has been very active in the OECD and on the BEPS project and the transparency project, so there is no doubt of the U.K. engaging with other countries.
The U.K. wants companies to pay taxes -- not much tax, because they want to be very competitive, and they have a very competitive system. Now, can they go much further in [terms of] competitiveness? Yes, they may cut their taxes a bit more, but there's not much room [that] would drive dramatic change. The margin for slashing taxes is very limited because their taxes are already pretty low.
Whatever the U.K. does in the negotiations with the European Union, I think their involvement at the OECD can only be strengthened. The U.K. are cooperating, coordinating, and engaged in the international process. [Prior coverage.]
TA: What do you think about the European Commission's full state aid decision on Apple?
Saint-Amans: From an OECD perspective, what matters is that there is no building of a new standard on transfer pricing. And the commission's decision recognizes the OECD standard. They don't reinvent the wheel.
On the way they refer to the OECD standards, it's OK. But I think everybody agrees the outcome is weird -- the outcome of all the profit in Ireland seems to raise questions, which are recognized in the decision itself. This may be due to the implementation of pure competition rules based on the facts available or the contracts that had been concluded. [Prior coverage; prior analysis.]
TA: Does it have any bearing on BEPS implementation?
Saint-Amans: What matters for the OECD is that the BEPS package, and in particular, the transfer pricing guidelines as modified by actions 8-10, agreed by all EU countries, be properly implemented.
TA: There is so much uncertainty in the world right now. Is that going to affect your work on tax certainty going forward?
Saint-Amans: The environment is a bit uncertain, but that's also part of democracy, and that's something we recognize. It's true there's some level of uncertainty, but that doesn't prevent us from working on the sources of uncertainty.
We were extremely happy with the returns on our tax certainty questionnaire. We had more than 700 responses. So we are in the process of analyzing them, and there are some very good, interesting findings that will drive us to make recommendations to the G-20 in March to identify the sources of uncertainty and propose some ways to solve them.
Also, action 14 has broad minimum standards and a review mechanism. We have all the instruments to really improve the situation, which would be a big change because it's been decades since we've heard about improving dispute resolution mechanisms without concrete elements or behavioral changes. I think we're getting there now, and that's good news.
TA: How are things going with the multilateral instrument (MLI)?
Saint-Amans: There will be a signing ceremony on June 7, and we expect a very significant group of countries to sign. There's still a lot of homework to do for this to happen. It's going to take a lot of work, but we're organizing that work and spending appropriate resources to make sure countries get the assistance necessary to be ready in June. [Prior coverage.]
TA: The U.K. is planning to reject most of the revised permanent establishment standards in the MLI. What do you think about that?
Saint-Amans: The core of the MLI is action 6 on [treaty abuse], and all the countries are doing action 6 for sure. The rest is optional. The fact [that] the U.K. may not implement the entirety of action 7 is a choice. We don't have much to comment on that; we'll see what other countries are doing. But so far, [with] what we've seen on other provisions, overall, it seems to be pretty positive. This will be confirmed in the coming weeks when countries get more specific with their reservations on the MLI. [Prior coverage.]
TA: How did you come up with the acronym BEPS?
Saint-Amans: It was at the first meeting of the bureau of the Committee on Fiscal Affairs that I attended as the new director in April 2012. I told them that we needed to plan for the next five years and asked what we should focus on. All the countries said, "We need to address base erosion." And then they said, "Well, but we also should address profit shifting." So I heard "base erosion" and "profit shifting" and thought that could be the name for the project. I wrote it down and said, "Well, that's a nice acronym: BEPS," so I turned to a native English speaker and asked her, "It's a four-letter word -- does it mean anything bad in English?" And the answer was: "No, not yet!" That's how it was born.
TA: How has the OECD's mandate as a tax-standard-setting body changed in five years?
Saint-Amans: We've delivered on BEPS, so we've achieved some concrete things in a very short time span.
And we have delivered the MLI, which is a hard-law instrument that may be used in the future by countries. For instance, I hear from some in the U.S. that if the big tax reform goes ahead, there may be a need for new tax treaties, and the MLI may be a way to fix this quickly. So this is an instrument of the future.
TA: What is the biggest future danger for the OECD's ability to reach consensus?
Saint-Amans: The difficulties are about the number of countries involved in the process. The more countries you have, the more difficult it is. You can also see that in some countries, there may be trends toward protecting [their] tax base further. Having more countries is also a great opportunity to move towards one standard and avoid the proliferation of standards.
However, if you really want to ensure your sovereignty, you cannot ignore what the others are doing. It's paradoxical but interesting because tax is at the core of sovereignty. In a globalized environment, if you want to protect your sovereignty, you need to make sure you get information from other countries. Otherwise, money may leave, or there may be transactions you may not understand, which would [undermine] your own domestic changes.
TA: How have these past five years changed you?
Saint-Amans: Now I have gray, almost white, hair because the BEPS project has been extremely demanding. What I've found here is that it's almost like an entrepreneurial job. You come up with a project; you raise the funds; you get people to buy into your product; and you move forward. So that has been extremely fascinating.
Also, we have seen the anger of people who want the power given back to them. The premise of that was in tax, and that's why we started that work. People said it wasn't normal that some can hide all their money abroad without complying with the rules, or that the middle class loses because of flawed international tax rules. There was real bipartisan political demand there -- all governments wanted to act. So that's been exciting, interacting with all these governments.
Pascal Saint-Amans answers Tax Analysts' take on the Proust questionnaire.
1. What is your favorite tax word? BEPS.
2. What is your least favorite tax word? BEPS.
3. What turns you on? Reaching consensus, bridging gaps.
4. What turns you off? Misunderstandings.
5. What sound or noise do you love? The word "yes."
6. What sound or noise do you hate? The word "no."
7. What is your favorite curse word? Shoot.
8. What profession other than your own would you like to attempt? Actor.
9. What profession would you not like to do? Notary.
10. If someone were to make a movie about the BEPS project, whom would you want to play you? George Clooney.