Pascal Saint-Amans: 10 Years Of OECD Tax Leadership

Pascal Saint-Amans discusses his decadelong tenure as the director of the OECD Centre for Tax Policy and Administration and what’s to come in the future.

This transcript has been edited for length and clarity.

David D. Stewart: Welcome to the podcast. I’m David Stewart, editor in chief of Tax Notes Today International. This week: a busy decade.

For the last 10 years Pascal Saint-Amans has headed up the OECD’s efforts to coordinate reforms to international taxation. As director of the Centre for Tax Policy and Administration (CTPA), he’s overseen two major projects aimed at changing the way multinationals are taxed.

First, with the base erosion and profit-shifting project, the OECD updated rules for transfer pricing, hybrid entities, and harmful tax regimes, and it introduced the country-by-country reporting regime. Now, the OECD is completing work on a project to reform the taxation of the digital economy with a two-pillar solution.

As Saint-Amans passed the latest milestone, Tax Notes chief correspondent Stephanie Soong Johnston caught up with him to talk about the last decade and what’s coming in the near future. Stephanie, welcome back to the podcast.

Stephanie Soong Johnston: Thanks for having me again.

David D. Stewart: Now, your guest doesn’t require much by way of introduction, but could you tell us about what you talked about?

Stephanie Soong Johnston: Sure. Pascal has been director of the CTPA at the OECD since February 1, 2012. I have been covering him basically since I started this job and in fact, actually wrote an article about his priorities when he first started the job. Then I checked in with him at five years and we talked about the developments that were happening then.

Ten years later, looking back, the number of changes in the international tax system under his watch have been remarkable. In the past, we hadn’t even talked about the two-pillar solution. This is a massive change that has basically transformed the international tax landscape. I wanted to check in with him and see how he views the past 10 years and what was good about it, what was bad about it, and where things are going.

We covered a lot of topics. Most of it was about the two-pillar solution that everyone wants to know what’s going on with that project. We did touch on transparency, the importance of tax cooperation, and the prominence of tax cooperation over the years, and how that has actually been at the root of all of this change. Now we’ve got significant international corporate tax reform through BEPS and BEPS 2.0.

We’ve also got automatic information exchange and how carbon taxation is going to be the next big thing. We talked about all of these changes, plus on top of that, this crazy pace of work that the CTPA has been doing.

David D. Stewart: All right. Let’s go to that interview.

Stephanie Soong Johnston: Pascal, welcome and congratulations on 10 years as director of the CTPA.

Pascal Saint-Amans: Thank you.

Stephanie Soong Johnston: Yes. We’ve been on a crazy journey, haven’t we?

Pascal Saint-Amans: Yes, we have. I don’t have the feeling to have been on the same job for 10 years and that’s why I didn’t even realize that on the very day, but the day after to say, “Well, well, well, maybe something has happened.” I guess a lot has happened for the past 10 years. Indeed.

Stephanie Soong Johnston: How have the past 10 years shaped the CTPA and its work and yourself as director?

Pascal Saint-Amans: Extremely fast, with the promise I make every day to the team, next year will be cooler and nicer, and we realize that it’s never been the case. It’s been an escalation of work, of things at stake. I’m really hopeful that we’re now coming to the end of a cycle, the cycle being the fundamental revision of international tax rules, which started with the global financial crisis back in 2008 and which is probably culminating with the political agreement reached. Hopefully in the course of the year, the legal instruments to implement this political agreement.

When you look backwards, you can see these different phases that you are not necessarily aware of when you’re in middle of it. It started with tax cooperation, and then it moved to the other part of the weaknesses of the international tax framework, which was taxation of multinational companies.

We had been in a box, which was the League of Nations box, for a century and the world had changed. The box was no longer fit for purpose so we started changing it. Given that this was quite new and fundamental, countries were reluctant. That was the first phase of the BEPS work.

The big surprise, which afterwards is not that big of a surprise, is the United States tax reform, because without the U.S., you can’t change whatever you want. You don’t really have the impact. Then the U.S. implemented BEPS, which allowed us to move to the second stack of the BEPS work, pillar 1 and pillar 2.

Parallel to that, you have the deepening of the tax cooperation with automatic exchange of information. All that you have to put against the background of inclusivity of the fact that global problems would call for global answers, and meaning global players.

That’s where you build from the global forum of transparency to the inclusive framework on BEPS and the inclusivity of the work. The inclusivity of the work means also deployment of technical assistance of special programs for developing countries like Tax Inspectors Without Borders.

When you put all these pieces together at the end of the day, and hopefully, we’re at the end of the day, you can see the coherence and the narrative. But when you write it, you don’t necessarily know what the next step is.

That’s where we are. I think it’s the end of a cycle, which has taken almost 14 years, which still needs to be completed with the legal instrument. Then we’ll have to think in a new box, which we have shaped with other countries for the past years.

Stephanie Soong Johnston: After our interview in February 2017, the German G-20 presidency then mandated you to work on the interim report, follow up in Action 1. Here we are five years later and two pillars later.

Thinking back to that moment, what was your reaction when you first got your marching orders? How has this project met or fell short of your expectations?

Pascal Saint-Amans: Falling short of expectations is not something I could say because I think we went beyond what anyone was expecting. I think that at some point, probably nobody was betting any penny on us delivering anything. Sometimes we also had some doubts on the ability to deliver a solution. No, we didn’t fall short of our own expectations.

The marching orders, that’s an interesting expression because I never really received marching orders. There were some ups and downs throughout 2017 until last year. I would say, if marching orders they were, it was because of the renewed impetus coming from the fact that the Biden administration made a priority to move both on a multilateral basis and the domestic basis towards a minimum tax, even though they are not yet there. But that’s where I think we really had all the political support to build this two-pillar solution.

Not only were some countries interested in one pillar, some other countries were interested in the other pillar. I think we had, throughout 2021, a real common objective and therefore kind of marching orders with strict timelines. It’s still the case with drafting a multilateral convention, or was the case in drafting the technical design of the model rules of pillar 2, which were delivered in record time.

It’s been a few hectic years. You remember all the episodes; it’s like a Netflix series, actually. The safe harbor for pillar 1, which actually was not well perceived by U.S. partner, and then us trying to keep that alive when pillar 2 was progressing, but with a lower political profile.

Things came together probably in January or February 2021, one year ago. This year has been really frantic in terms of getting countries all together and agree on what they ended up agreeing on the October 8, 2021.

Stephanie Soong Johnston: Now that pillar 1 at least is coming together with the first building block: the revenue sourcing and nexus rules. Can I just touch on that a little bit? How do you respond?

People are talking about how these sourcing rules are so complicated and companies need to collect data that they don’t even have. You’ve obviously probably heard of these complaints. How do you respond to that? I know that there was a concerted effort to simplify as much as possible.

Pascal Saint-Amans: A few elements of response. The first one is that we fully acknowledge the complexity of the rules and the frustration of a number of players not to have been consulted in more detail. We acknowledge that’s a fact, but there are reasons for that.

First, I don’t know any piece of legislation, tax legislation, which is simple. It’s a bit the easy thing to say. It’s true, and one can only regret the complexity. But when it’s about stitching 100-plus domestic tax regime to make sure that they have the global view, the tax administrations have the global view, and the taxpayers also can articulate their action within all these countries which will play with each other, it has to be complicated. It cannot be simple.

By the way, I’m not sure that companies were complaining much about the complexity of check-the-box or many other deficiencies of the arm’s-length principle or other rules when it was to their benefit. At some point, yes, it’s complex. The world is complex. Business is complex. I don’t know about any simple mechanism. Complexity is there. We’re trying to reduce it.

The other part of the question was about information. Yes, in the new world, we are in an information-based world. That’s also true for tax. I must say that companies are fantastic at gathering information to serve their clients. They’re extremely good at managing information systems.

I’m pretty sure they will find the solution to respond to this new global approach where all the countries, one way or another, need to know about the information. I say need to know about instead of exceeding directly or accessing directly the information because there is also something extremely important, which is data protection, the confidentiality of the information.

You cannot have a central database in an international organization which would put all the commercial, sensitive information of companies available to the world. Not at all. That’s not what we have in mind. That’s not what’s going to be designed.

What’s going to be designed is a mechanism where drawing on the country-by-country reporting, which by the way has a number of limitations, too many limitations, but limitations to make sure that protection of the confidentiality is ensured. We draw on that. We develop that. There will be a need for further information.

On the global anti-base-erosion rules on pillar 2, you also need to have information to have the proper allocation of the undertaxed payment rule or get the income inclusion rule right. But it’s part of what we’ve built for the past 13 years, all this exchange of information mechanism. Fifteen years ago there was not even a legal instrument to exchange information. We have one which is signed by more than 140 countries.

You can see the trends. Yes, there is complexity. Yes, there is too much complexity. Yes, there was insufficient public consultation in a sense. We’re fixing this, but on the other hand, you can say that the blueprints were developed with a lot of public consultation. We had much times countries were not ready to implement the solution, but could build these solutions with a lot of input.

As regards to the political deal, I’m not sure it was the right time to ask businesses, “Do you think this political direction is right?” Because we know the answer. The answer is no. Do you want to pay more taxes? No. They will say, “Oh, yes.” But because they want to be politically correct. That’s the situation. Not ideal, but when you look backwards, not that bad after all, I would say.

Stephanie Soong Johnston: You alluded to business and their complaints about being left out in the cold. This relationship, do you think it’s back on track now? I saw in the news release that you’re all working with the BAGs, the business advisory groups. Business at OECD set them up. How is that relationship now?

Pascal Saint-Amans: It’s never been off track, let’s be clear. It’s never been off track because we’ve always had BAGs to give advice on some technical design.

Now, after the political negotiation on the technical negotiation, there is public consultation. There will be massive public consultation on pillar 2. There is a rolling public consultation on pillar 1. So that’s it, and it’s good.

It’s certainly with business. It’s also with nongovernmental organizations or other stakeholders who should have an opportunity to comment. It’s there. It’s fine, and we’re just looking forward to useful, constructive comments.

Stephanie Soong Johnston: Recently, Denmark said that they were going to introduce a 5 percent tax on revenue of streaming companies to help fund domestic film into productions. Do these kind of taxes violate the spirit of those rollback and standstill provisions of pillar 1 in your view?

Pascal Saint-Amans: I don’t know about the Danish tax. I would not be properly informed because I’ve literally had no time to look into that, except for one or two questions from journalists. 

From what I understand from a superficial look at this tax, it’s about funding the cultural industry. It’s not a tax on digital services; it’s a tax on documentary or movie production or streaming to fund the movie industry, which seems to be a quite different approach. But again, I don’t know. I need to look into that.

What we are working on is the standstill and rollback, which one or another should be in the multilateral convention as per the agreement reached on October 8, 2021. Countries will have to decide whether they fit the box or not, together with possible bilateral disputes, which could result from unilateral actions.

For the time being, we are on the design of the rules to be included in the multilateral convention and relief for bilateral discussions, whatever problem there may be, if there is a problem, which I cannot say because again, I literally have not looked into that yet.

Stephanie Soong Johnston: This is the eternal question about the U.S. The Build Back Better package is apparently going to be reset with no deadline for passing. How are you feeling these days about the U.S.?

Pascal Saint-Amans: In my job, you don’t have many feelings. You are a cold-blooded person, because you just need to deliver what is in your reel, so there’s no feelings.

Now, if you ask about whether we think the U.S. will move or not, I don’t know more than you do. We think there is a strong political view. We recognize that in Congress, there are some difficult conditions, but we haven’t heard anyone say that Build Back Better will not be adopted.

There are some people in the crowd saying it, but not in the government saying that. The plan is U.S. implementation of Build Back Better, which is pretty fair alignment with the pillar 2 rules.

We have noted no disengagement of the U.S. from the work. On the contrary, there is extremely strong support, including at the top political level, so I will not speculate.

We just do the work and we see. No bad feelings, no good feelings, no feelings at all. Just hard work to deliver what needs to be delivered, which is a multilateral convention by midyear, on the one hand for pillar 2, and on the other hand, the rules on pillar 2 commentaries which should be adopted in the coming days.

We hope after the technical rules, the countries should move pretty fast. Then because pillar 2 is not limited to the global anti-base-erosion rules, moving to the subject to tax rules so that we can hear to advance quickly.

You can see that whatever happens in the capitals, we are at work and working very hard. I would add that this work is delivering what was requested from us.

Stephanie Soong Johnston: You mentioned that the next big project would be focusing on climate change and tackling carbon pricing and the OECD was going to establish inclusive framework for carbon pricing.

I understand that the secretariat actually made a proposal to the OECD council on January 25 or 26. Is that right?

Pascal Saint-Amans: Yes, it is.

Stephanie Soong Johnston: Can you tell me more about that? Is that going to be under CTPA or under the environment directorate?

Pascal Saint-Amans: The OECD is working on what we call an inclusive framework on carbon pricing. That may not be the right name of what we have in mind, but the idea is the following: Climate change is the big thing ahead of us for the next decade or decades. One of the instruments to mitigate climate change is to put a price tag on carbon emissions.

We know that today, countries are insufficiently doing it. The price tag is very low. I mean, 60 percent of emissions are not priced, and the 40 percent which are taxed are taxed or priced through emission trading system or whatever other mechanism at a very low price, on average €3 to €4, which is insufficient.

But a number of countries also say that they are not going to move towards an explicit price on carbon because there are other climate mitigation policies which are not price-based and which may result in even more efficient or into more efficacy in terms of decarbonization. You have this wide range of policy mix and countries not ready to fix a minimum price of carbon.

The CTPA monitors the price of carbon through a joint meeting of tax environment experts without getting too much into the details of the OECD machinery, which is a subgroup of experts bringing people from environment, people from industries of finance, mainly tax people. We work on data gathering and providing this data.

What we see is missing, given the political debates, given the fact that the number of countries will move to higher prices for carbon emissions, the European Union in particular, and that’s to avoid carbon leakage which would result from them increasing the price and others not following. Carbon leakage, meaning that you may just have a delocalization of industries in Europe because the price of carbon is too high, to countries where the price of carbon will be lower.

Europe is importing these goods, and Europe says, “We are going to have to put a border carbon adjustment mechanism, the CBAM.” In that environment, you can see the potential of trade tensions. You can see the lack of information and the need to bring countries together to discuss this based on information. We need to provide the information.

That’s the idea of this inclusive framework on carbon pricing. Inclusive because that’s a global issue. You need all the countries around the table as we have done for BEPS, for the Global Forum on Transparency, and on carbon pricing, because whether it’s explicit carbon pricing, effective carbon pricing, or implicit carbon pricing, you need to be able to benchmark the different policies to coordinate them ideally. But before coordination, benchmarking them and try to identify what works, what doesn’t work, and how things compare.

Will Europe put the CBAM on goods which would be decarbonized because of an extremely efficient regulation? Good question. You don’t know until you try to put a price, an equivalent price, on the impact of these regulations. This is what we have in mind.

We have made not yet a proposal, but a presentation to the OECD Council. The secretary-general of the OECD, Mathias Cormann, wrote to all G-20 and all OECD finance ministers. We’re about to write to non-OECD, non-G-20 finance ministers to tell them there is a lot of interests in this initiative, and there would be a lot of usefulness for this data gathering that are providing to address what is the top priority of the world today, addressing climate change.

Stephanie Soong Johnston: Over the years I’ve seen how stressed out everyone has been at the CTPA over the BEPS project, the two pillars. Can you talk a little bit about the human side of tax policymaking? How do you deal with all the stress and long hours? It’s a lot.

Pascal Saint-Amans: It’s a lot. It’s too much, and we are tired. We’re also tired of COVID-19 like everybody else, but it’s true that doing that work from a distance, not meeting with the team, not meeting with the delegates, is taking a toll. It’s exhausting, literally exhausting. Just before our call, I was talking to a team member saying, “I took one day of vacation, but I cannot recover from that day of vacation.”

It’s so exciting that people have been extremely dedicated, motivated, and I’m so fortunate to have a team which is absolutely fantastic. It will be time, however, midyear to move to another pace. Not only for us, but also for the delegates from all the countries, which have done an extraordinary piece of work and are really dedicated. People work over the weekends. You have email traffic on Saturdays and Sundays. You don’t have vacation.

COVID-19 has taken a toll. I realized that by doing a trip not long ago to Kenya. Unfortunately, it may have brought COVID-19 together with the trip, but the fact that you meet people not on Zoom where you have a targeted, focused conversation and you’re very good and very efficient talking about the thing which is on the agenda, but you’re missing all the rest like a horse on the race. You don’t see anything else but the objective. 

It’s really time that we resume physical working. It’s real time that we meet with the people, and it’s also time that we can move to a slightly more relaxed pace because you cannot ask people to work 24/7, 12 hours a day, seven days a week without vacation.

Thanks for giving me the opportunity to thank the team. In 10 years the CTPA has grown and we more than doubled the staff, not as a goal per se. In spite of being French and being a civil servant by training, I don’t see growing a public servant team as a goal, but I think it responds to the fact that the world has changed and you need a better service, which meant more people.

But this team is really extraordinary. I think it’s recognized worldwide. We have individuals from the whole world and we’re very fortunate for that. Very exciting, but very challenging. Yes, they have paid tributes to the world changes, so I hope at some point, the world will pay some tributes to their contribution.

Stephanie Soong Johnston: That’s a nice thought. I like that. What is your favorite memory as CTPA director so far?

Pascal Saint-Amans: Good question. I have many, many memories. I’m trying to bring them back and maybe one day write a book on all that. There are many, many anecdotes which are pretty funny and which shows that tax is all but boring. There is not one coming out.

The most vivid and recent one is, of course, October 8, 2021. Is it a good memory? I cannot even say it’s a good memory because the level of stress until the very last minute. You may remember that India joined after the deal was concluded. I can tell you October 8, 2021, which should have been the day where you just savor champagne and celebrate, was actually pretty much a day of extremely hard work and stress and uncertainty.

So, you see, no easy memory, which I think reflects the fact that this work has been extremely hard. But at the same time, many, many positive notes from the different progress made, the overall recognition of the work.

I guess the best memory will be when the team will be able to be back and that we’ll celebrate the Multilateral Convention. Best memory still to come.

Stephanie Soong Johnston: I think that’s actually a good note to end on. It’s been great covering you and the CTPA’s work for 10 years. Looking forward to seeing what comes next.

Pascal Saint-Amans: Well, thank you, Stephanie, and good to see you.