On the legitimacy of the OECD to set the global tax agenda

By Adrián Grant


Since the publication of the first documents related to the OECD’s Project on Base Erosion and Profit Shifting (the ‘BEPS Project’), we have witnessed a consolidation process of the hegemony of the OECD in international tax policy matters. Despite efforts of several regions and jurisdictions to avoid the recommendations of the organization, the BEPS Project has succeeded in making more than a hundred countries (inside and outside the OECD) comply with the implementation of at least a portion of its measures (referred to as Minimum Standards) via the so called Inclusive Framework. This constitutes an unprecedented penetration of the OECD into several non-OECD jurisdictions.

This situation raises the following question: how can the same fiscal rules sprout in such different jurisdictions? This is a matter that tax specialist of each country will have to deal with  carefully, analyzing the interaction between OECD-imposed measures and their respective tax systems, paying attention to local problems regarding implementation, pertinence, adequacy, etc. It will doubtlessly be a tough and technically demanding task, but also a rewarding and necessary one.

However, the global landscape resulting from the implementation of the Minimum Standards of the BEPS Project also raises other interesting questions, for these are mandatory rules for those who adhere to the project. Although it is true that nobody outside the OECD is obliged to adopt OECD proposals, it is also true that the BEPS Project, which has a global intent, has been proposed in a context of enormous political pressure to ‘do something’ to solve the many loopholes that allow several multinationals to avoid paying taxes whenever possible. Therefore, it could be said that many States had no alternative but to adhere to the BEPS Project, even though its proposals may not be necessarily beneficial to them.

Thus, the OECD has reinforced its position as the dominant actor in international tax policy, with the power to design tax rules that will be followed by so many jurisdictions that one can only ask: why is there an Inclusive Framework in which non-OECD countries can discuss the implementation of measures proposed by the OECD, but only the OECD can decide beforehand which solutions will be discussed? Or, in other words: what legitimacy does the OECD, an institution with interests that are often incompatible with those of other regions, to set the political agenda and decide which are the problems and how they should be solved?