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BEPS Mul­ti­lat­er­al In­stru­ment

On 7 June 2017 Finance Minister Schäuble signed the OECD Multilateral Instrument. The instrument represents a vital step forward in the fight against base erosion and profit shifting (BEPS) and is a remarkable consensus agreed upon by OECD and G20 countries alike.

BEPS Multilateral Instrument
Source:  dpa
  • Date 07 June 2017
  • Location Paris

Dr Wolfgang Schäuble, German Federal Minister of Finance, on the Multilateral Convention and the G20/OECD BEPS Project at the Signing Ceremony of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting.

Let me begin by thanking the OECD, and Secretary General Gurría, for hosting today’s signing ceremony, and for all the organizational support it has provided leading up to this occasion. 

I would also like to thank the OECD in general for assuming the responsibility of coordinating the work going into the BEPS project. You have managed – in a remarkably short timeframe – to analyse the causes of base erosion and profit shifting, and to propose suitable measures to tackle this practice. It cannot have been easy to balance the differing interests of the roughly 100 countries that participated in the work. And still you have attained an admirable consensus.

In fact, the consensus is so solid that the group of participating states now comprises all OECD members, G20 members and a growing number of other countries, including many developing countries. Truly a global consensus. 

And finally my thanks to the ad hoc working group for your work in drawing up this multilateral instrument. The technical challenges you have had to deal with were formidable.

You were asked to develop an instrument of international law which would allow the recommendations of the BEPS project to be transposed into the global system of double-taxation agreements.

In doing so, the instrument had to have the right balance between flexibility and solidity, and you have managed to do this Congratulations on a job well done! 

Today’s signing ceremony sends a powerful signal. The battle against tax avoidance and excessive tax evasion is not easy. Sometimes it can feel like Hercules battling the Hydra. 

Globalisation and digitalisation, are constantly opening up new opportunities for companies, Unfortunately, this includes opportunities to avoid tax. International companies have long since known how to use differences in national taxation regimes to their own benefit. Indeed, this is what many shareholders demand from them. But such tax planning has both a financial and a political cost.  

International tax planning practices can result in lost tax revenue of billions of euros. And the political cost is potentially much higher. 

When Lehman Brothers collapsed, it resulted in an economic and financial crisis, but also in a crisis of confidence across the globe. Many people were left wondering how bad business decisions, made thousands of miles away, could have such a huge and damaging effect on their lives. Their confidence in globalisation, and especially in the ability of the global political community to shape globalisation for the better, was shaken.  

Taxpayers were asked to shoulder losses for which they were not responsible. And these same taxpayers, who every year faithfully declared and paid the taxes they owed, looked on as multinational companies were able to use their international mobility to seek the best deals and avoid paying a fair amount of tax on sometimes massive profits. This is an ideal breeding ground for resentment and feelings of injustice, feelings that demagogues quickly look to exploit. It is up to us, national politicians and international bodies, to restore this lost confidence. That is why today is so important.

By working together, by agreeing on and implementing common measures in a coordinated fashion, we will be able to secure the tax revenues of all countries, and show that international cooperation can work – and does work – in the interests of everyone.

Of course, international cooperation is not just limited to tax matters. The challenges posed by globalization and digitalization mean that today, more than ever, we need a mechanism that balances all of our interests in many areas and ensures that globalization can be managed in a fair, inclusive and transparent way. 

I believe that the best forum for such cooperation is provided by the G20, which has evolved into the world’s most effective and cooperative platform for global governance. It was the G20 Group which asked the OECD to look at the tax practices of international companies and which, together with the OECD, developed and implemented the BEPS project. The G20 remains politically committed to the results of this work and is working for its implementation in as many countries as possible.

The BEPS project is part of a more comprehensive goal within the G20 for better global governance. This year, Germany is pleased to hold the presidency and has decided, in the financial track, to focus on three main areas:

  1. Strengthening the resilience of our economies.
  2. Improving investment conditions, especially in Africa.
  3. Shaping digitalisation.

I will not go into detail on these goals today. But the common philosophy behind all three goals is the desire to shape globalisation in a positive manner. The key to success in the G20 is implementation and continuity. 

With regard to BEPS, we have asked the OECD to compile a progress report on implementation for the coming G20 summit in Hamburg. And the project has been extended beyond the G20 group. But work is also continuing in many areas beyond taxation, for example on banking regulation and the international financial architecture.

We have to ensure that our financial markets, and also our real economies, become more competitive.

Long-term global stability and growth cannot be achieved without a well-functioning system of global financial market regulation, based on resilience, proportionality and trustful international cooperation. 

We have also agreed to tackle the problem of cyber security, which can pose a big risk for global financial stability. The Financial Stability Board has been asked to identify the threats and come back to us. And we have asked the FSB – together with the Financial Action Task Force – to clarify workable rules for remittances. 

The G20 process works. It works because it allows for differing views, while still keeping the channels of dialogue open. This does not mean that we have to reach a breakthrough every time we meet. It is the small steps in the right direction and the spirit of open dialogue that are important. This spirit of cooperation and trust has been clearly present in our meetings so far this year. 

International cooperation is not a zero-sum game, where there are only winners and losers. It has been the driving force behind the great advances we have made since the middle of last century. 

It is only by coming together, to find mutually acceptable and transparent global rules, that we can make a fairer, more prosperous society for all.

The Multilateral Convention is a perfect example of this. 

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