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October 20, 2023
2023-1751

OECD Forum on Tax Administration agrees on action to support continued digital transformation, delivering Pillar Two and capacity building

  • The Forum on Tax Administration's 16th plenary meeting held on 11-13 October agreed on actions and commitments in three key areas.
  • Specifically, they agreed to: (1) collaborate on projects to utilize new technology to enable further digital transformation of tax administration; (2) work together on the consistent, effective implementation of Pillar Two; and (3) enhance the effectiveness and reach of its global capacity building.

Executive summary

The Organisation for Economic Co-operation and Development (OECD)'s Forum on Tax Administration (FTA) held its 16th plenary meeting in Singapore on 11-13 October 2023. The theme of the meeting was "collaboration and partnership," with a focus on three priorities:

  1. Supporting the continued digital transformation of tax administration
  2. Effective and consistent Pillar Two implementation
  3. Enhancing the effectiveness and reach of the FTA's global capacity building efforts

Detailed discussion

The FTA was created in July 2002 by the OECD's Committee on Fiscal Affairs, with the aim of promoting dialogue between tax administrations and identifying good tax administration practices. At the time of the plenary meeting, the FTA comprised 53 members, with the heads and representatives of 43 of the members attending the meeting. Representatives of business and the profession (including EY) attended part of the event.

The Statement of outcomes: 2023 FTA Plenary Meeting released at the conclusion of the plenary meeting outlined the agreed-upon actions and commitments made by the FTA in three key areas, with the FTA members agreeing to:

  • Collaborate on projects to utilize new technology to enable the vision of the FTA's 2020 publication Tax Administration 3.0: The Digital Transformation of Tax Administration to be met, through reducing tax gaps and compliance burdens
  • Work together on the consistent and effective implementation of Pillar Two and the strengthening of cooperation between tax administrations to provide certainty over administration of global minimum tax rules
  • Enhance the effectiveness and reach of its global capacity building efforts through closer partnership with other international and regional organizations

Digital transformation of tax administration

The FTA recognized that digital transformation of tax administration can provide significant economic benefits and reduce the compliance burden on taxpayers. According to the statement, this has the potential to generate more than €130b in additional revenue for each one-percent increase. The FTA agreed to work together with business and academic stakeholders on a set of projects to:

  • Enable seamless digital cross-border tax processes both between tax administrations and with third parties, based on the interoperability of digital identity
  • Develop thought leadership on common issues to help inform digital transformation in the areas of digital identity, digital strategy and artificial intelligence

Work will begin on the projects following approval after the FTA meeting in Singapore, with progress to be discussed at the 2024 plenary meeting.

Implementation of the Two-Pillar Solution and Tax Certainty

The FTA members discussed the challenges and opportunities of implementing a global minimum tax. It had previously agreed that a standardized return would enable the collection and exchange of Pillar Two information. The FTA highlighted the publication a manual on multilateral mutual agreement procedures and advance pricing arrangements earlier this year. The next FTA Tax Certainty Day will be held virtually on 14 November.

Tax capacity building

The FTA recognized the importance of making sure all tax administrations can benefit from its work, and highlighted its range of capacity-building programs, including:

  • The launch of the Knowledge Sharing Network (KSN) to provide a forum for exchange of knowledge between FTA members and support for the implementation of Pillar Two; almost 400 officials from 98 jurisdiction already participate in the KSN
  • Piloting a new Tax Inspectors Without Borders program to aid in digitalization of tax administrations
  • Promoting the Digital Transformation Maturity Model, now completed by 58 tax administrations, and the Inventory of Tax Technology Initiatives
  • The ongoing development of tools to support capacity building such as the Knowledge Sharing Platform for Tax Administrations
  • A new sub-group of the FTA's Capacity Building Network, focusing on long-term bilateral capacity programs

The plenary group also discussed emerging risks facing tax administrations, and matters connected with maintaining and building trust, tax debt management, assistance in tax collection, tax fraud, tax crimes, and progress on tax transparency awareness.

Future FTA plans

The FTA agreed the projects on Tax Administration 3.0 are expected to begin in December 2023. The 2024 FTA Plenary Meeting will be held in Greece.

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For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP (United Kingdom), London

Ernst & Young Belastingadviseurs LLP, Amsterdam

Ernst & Young LLP (United States), Global Tax Desk Network, New York

Published by NTD's Tax Technical Knowledge Services group; Carolyn Wright, legal editor

 

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