Committee on Fiscal Affairs (CFA) Ms. Fabrizia Lapecorella

Committee on Fiscal Affairs (CFA)

Ms. Fabrizia Lapecorella

1. What is the mission and mandate of your Committee?

The Committee on Fiscal Affairs is the main forum for the OECD's discussions on taxation, covering both international and domestic tax issues and tax policy and administration. As the key tax body for setting international tax standards, the CFA has become increasingly global through its engagement of a large number of non-OECD, G20 and developing countries in many aspects of its work. The prime example of this is the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) (the BEPS Inclusive Framework), which currently has 141 member countries and jurisdictions who participate on an equal footing with OECD members. It is through this global collaboration that we were able to deliver in October the landmark agreement on the Two Pillar Solution to address the Tax Challenges Arising from the Digitalisation of the Economy.

2. You have been designated Committee Chair. What is your background and what has convinced you to take up this post? How do you consider your background and experience contribute to such a role and function?

I started in this role in January 2022, but I have been participating in the CFA since 2002. I became a member of the CFA Bureau in 2012 and became Deputy Chair in 2017. I have also been a member of the Steering Group of the OECD/G20 Inclusive Framework on BEPS since 2016, so I have been involved in the full range of issues covered by our Committee for some time. I am Italy's Director General of Finance, since June 2008, and I’ve held this position longer than any of my predecessors over the last 20 years. As Director General of Finance, I am responsible for domestic, European and international tax policy, as well as the governance of the Tax Agencies, the coordination of the IT infrastructure serving the whole Tax Administration, and the administrative services for the Tax Judicial system. Prior to this role, I held various positions at the Italian Ministry of Economy and Finance and I am an economist by training. On the question of what convinced me to take up the post, the answer is simple. Tax is very high on the global political agenda and the CFA is at the forefront of fundamentally transforming the international tax landscape. It is a lot of work but it is also very exciting to have a major role in bringing countries together to drive this change.

3. What is your main priority as Chair?

Ensuring that the BEPS Inclusive Framework can finalise the implementation package to implement the landmark agreement on the two-pillar solution. As Chair of the CFA, I also need to ensure that the Committee continues to deliver on the rest of its programme of work, notably on the other BEPS Actions, and that it addresses key and emerging global issues, such as climate change, post-COVID-19 recovery, virtual assets, and gender equality.

4. How would you define the added value of your Committee in relation to the work of the OECD in an international context? How does it differ from other international fora dealing with the

The added value of the CFA is its proven record of delivering consensus-based solutions to tackle global issues, through innovative approaches such as the BEPS Inclusive Framework, which brings over 140 countries and jurisdictions together to negotiate solutions on an equal footing. The CFA’s strong record of fostering multilateral dialogue is complemented by its technical expertise in evidence-based policymaking, which relies on rigorous data collection and solid analytical methodologies, consultations with relevant stakeholders, policy guidance and implementation support. The work of the CFA is far reaching, and we have strengthened our collaboration with other International Organisations with a different focus and membership so that our efforts are complementary rather than duplicative.

5. Are you facing any specific major challenge derived from the current multilateral environment?

Despite the global challenges the world is currently facing, the October agreement and the continued work of the BEPS Inclusive Framework around the clock to implement the agreement proves that multilateralism is still alive and well. The CFA and the BEPS Inclusive Framework members recognised from the outset that it is better to have globally agreed solutions to problems such as the challenges arising from the digitalisation of the economy. The absence of a multilateral resolution to that particular issue could result in a 1% reduction in the GDP of the global economy.

6. How do you encourage, and ensure national experts engage productively in the work of your Committee?

The work we are undertaking is extremely politically sensitive and the stakes are very high. As a result, we have very active participation from national experts in capitals. We also try to ensure that the setting and implementation of international tax norms consider the capacities and priorities of developing countries as well. In the BEPS Inclusive Framework, I work closely with my Co-Chair, Marlene Parker of Jamaica, to try to ensure that developing countries can use their voice and participate effectively in the work on an equal footing.

7. How do you help maximise policy coherence through the work of the Committee?

The CFA’s work is driven by the overarching objective of ensuring a more efficient and coherent international tax system, which is crucial to promoting a level playing field and fostering international trade and investment. The CFA has consistently delivered important standards, tools and guidance for decades, from the OECD Model Tax Convention on Income and Capital, which is used by countries around the world as a basis for negotiating bilateral tax treaties, to the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, which were just updated in 2022. The CFA’s Common Reporting Standard for the automatic exchange of information on financial accounts is putting an end to bank secrecy as more than 100 countries and jurisdictions implement it. To date, over EUR 112 billion of additional revenues in tax, interest and penalties have been identified by administration. While our international taxation work is very much in the spotlight, our work on cross-cutting issues such as tax and climate change, tax and development, tax and gender, tax and skills, and participation in horizontal projects like the one on housing all help ensure policy coherence across different policy areas.

8. How do you ensure effective decision-making by the Committee?

While the COVID-19 pandemic prevented us from having physical meetings for a long time, we managed to meet virtually on a regular basis to continue our work throughout the past two years and we have been able to turn this constraint into an opportunity making our interaction more agile. The Steering Group and technical working groups of the BEPS Inclusive Framework continue to meet on a very frequent basis and the virtual set up works well. However, from my experience, putting people together in one room helps to reach

agreement on complex or politically sensitive issues and I am very pleased to see that we are resuming physical meetings.

9. Could you mention the most important documents/reports that the Committee/Group has issued in the last 2 years? Why are these important and what has been their impact?

Our biggest achievement was, of course, the landmark Statement on the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy, agreed by 137 countries and jurisdictions representing more than 94% of global GDP in October 2021. We are now working on the implementation package of the agreement which will bring the international tax system into the 21st century. We also provided timely support to countries with a range of policy advice on tax issues that arose during the pandemic. For example, we issued advice on how to keep businesses and individuals afloat, tax treaty and transfer pricing issues, as well as tax administration measures that could be taken to ease the economic pain of the pandemic We have also undertaken important work on climate change. Our flagship publication, Effective Carbon Rates measures pricing of CO2-emissions from energy use in 44 OECD and G20 countries, covering around 80% of world emissions and offers valuable insights for policymakers. We also recently published the first crosscountry report on Tax Policy and Gender Equality, analysing 43 countries’ national approaches to tax policy and gender outcomes.

10. How can you encourage synergies between policy communities?

Tax policy has a key role to play in fostering other policy objectives in areas such as environment, employment, health, development, gender equality and the promotion of inclusive growth. It is therefore essential to maximise synergies and work with other policy communities. Concerning climate change, at a time when countries are trying to lift their ambition to reach carbon neutrality by 2050, it is critical to work in a cross-cutting manner. The OECD Is uniquely placed to do this, with its Committees structure. In this perspective, the CFA is now working jointly with the Economic Policy Committee (EPC) and the Environment Policy Committee (EPOC) to establish a joint Inclusive Forum on Carbon Mitigation Approaches, to facilitate a coordinated technical work to enhance cross-border cooperation on climate mitigation policies.

11. How do you see the role played by the Secretariat?

The technical expertise in the Secretariat helps guide our policy-making and ensures the high quality and technical underpinning of the work produced by the Committee. They play a key coordination and liaison function with delegates to help find common ground that will lead to consensus. The Secretariat also undertakes important capacity building work with developing countries to help ensure all countries can advance together on international tax reform.

12. In relation to the standard-setting role, what do you suggest to maintain the relevance and impact of OECD standards over time? Which areas need strengthening?

Maintaining the relevance and the impact of OECD standards requires ongoing review by the Committees of the implementation and effectiveness of the standards, as well as consideration of emerging issues where new standards may be needed. To achieve this objective, the BEPS Inclusive Framework conducts peer reviews on the BEPS minimum standards and also called for a five year review of the BEPS minimum standards. For example, in the case of BEPS Action 5 on addressing harmful tax practices, over 300 regimes of 80 jurisdictions have been reviewed as part of our BEPS implementation monitoring and virtually all regimes identified as harmful have been amended or abolished. Over 41 000 exchanges on tax rulings between governments have taken place with peer reviews on tax rulings covering 131 jurisdictions. Through such monitoring, the level playing field between countries can be ensured. At the same time, such reviews can reveal potential areas of improvements in the standards.

13. How have you ensured a contribution of your actions or influence to continuous improvement within the Organisation?

The inclusiveness of the BEPS Inclusive Framework and its achievements are, I believe, a source of inspiration to other parts of the Organisation. The participation on an equal footing of non-Members led to the landmark agreement in October. The BEPS Inclusive Framework is not the only example. The CFA created the Global Forum on Transparency and Exchange of Information for Tax Purposes, a Part II Programme, and it is a success story for international cooperation, with 163 members (including 89 developing countries) working together on an equal footing. The Forum on Tax Administration, composed of over 50 economies and the Global Forum on VAT are other examples of how the OECD can influence global policy making beyond its membership, and promote its standards on a global scale.

14. What are the practical implications of the work of your Committee/Group?

Our work is delivering better tax policies for better lives. The comparable statistics and analytical reports that we carry out helps inform tax policy debates around the world. The Two-Pillar Solution to the tax challenges of digitalisation, once implemented will have significant and concrete implications on the global economy. For the first time, countries will apply a globally agreed minimum corporate effective tax rate of 15% (Pillar Two) and countries have now agreed to reallocate more than 125 billion dollars of profit to market jurisdictions through a formulaic approach (Pillar One). Our work is bringing a fundamental change to the international tax system. Our tax transparency standards are putting an end to bank secrecy. Between 2009 and 2019, bank deposits in international financial centres fell by USD 410 billion. The International VAT/GST Guidelines have also become a major source of revenues for countries, including those outside the OECD. South Africa, for example, collected over ZAR 15.3 billion (nearly USD 1 billion) of new revenues since implementing the OECD VAT standards in 2014.

15. What would be your key advice to a person taking up the post of Chair of an OECD Committee/Group?

I am still learning but listening and understanding all of the positions expressed around the table helps to bridge gaps and build consensus. Being Chair also requires an active engagement with members and other stakeholders, which requires a substantial personal commitment, but the results are highly rewarding.