OECD Goes Remote As COVID-19 Challenges Digital Tax Deal

The OECD said Tuesday that it has suspended in-person meetings for its project to overhaul the international tax system, but emphasized it remained committed to finding an agreement by the end of 2020 despite the novel coronavirus pandemic. 

Delegates from tax administrations around the world will keep to the organization's meeting schedule but will interact virtually, the Organization for Economic Cooperation and Development said, as they negotiate over how to best tax multinational digital enterprises and stem tax avoidance. The Paris-based organization said it would follow directives from the French government for full teleworking as the COVID-19 outbreak continues.

"The OECD secretariat team is working full steam on the project, and meetings with delegates are being held remotely," the organization said in an email to Law360.

The OECD added that its committees involved with the negotiations, such as the steering group for the inclusive framework, an advisory committee comprising 137 jurisdictions, would meet as scheduled, but virtually.

"The working methods will be adapted to allow all countries to fully participate," the OECD said.

The OECD's tax project began in 2017 as an effort to blunt a trend among European countries to consider digital services taxes in response to alleged tax avoidance among tech companies. The Group of 20, a consortium of the world's leading economies, asked the OECD to produce a report by 2020 on how to address tax issues arising from the digitalization of the economy. The project has survived against long odds and a series of expected and unexpected hurdles, but faces an uncertain future.

The groups appeared to be close to a deal that would combine a new taxing regime for consumer-based companies with anti-avoidance measures targeted at income hoarded in tax havens. But in December, the U.S. surprised the other members by backing out, as Treasury Secretary Steven Mnuchin called for the new regime to be implemented as an opt-in safe harbor. Officials from France and other European nations scoffed at the notion, and both sides continue to be at an impasse, while expressing some commitment to a deal in a January statement.

The negotiations continue amid a shaky truce between the U.S. and France to avoid a trade war over France's new digital services tax, a 3% levy on revenue from selected online activities, through 2020. The administration of President Donald Trump has threatened steep tariffs on French products, including wine, makeup and cheese, in response to the tax, which U.S. Department of the Treasury officials have described as a veiled attempt to target the U.S. technology sector. But the U.S. Trade Representative has agreed to hold off on putting tariffs in place for the rest of the year while France agreed to delay collection of the tax.

The complex political and diplomatic chess game could make a deadline extension difficult, even as COVID-19 grinds global business to a halt.

The OECD said it still hoped to make a "political decision on the key components of a multilateral consensus-based solution" by the inclusive framework's planned Berlin meeting on July 1 and July 2.

--Editing by Neil Cohen.

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