Russia stands to gain 'tens of billions of rubles' annually from global corporate tax - Sazanov
MOSCOW. Sept 8 (Interfax) - The introduction of a global tax for international groups of companies, being developed by the OECD, will allow Russia to receive additional tens of billions of rubles annually, Deputy Finance Minister Alexei Sazanov said.
OECD is working on changes in international taxation, which suggest a new approach to the distribution of rights for profit taxation with respect international groups of companies between different countries where these groups are represented, as well as setting a minimum tax for such companies.
"When Pascal [Pascal Saint-Amand, director of the OECD Center for Tax Policy and Administration] presents the final documents, we will assess things more precisely. According to our conservative estimates, it will be tens of billions of rubles annually if we are lucky," Sazanov said, speaking at the Moscow Financial Forum.
"Pillar 1 is, of course, the tax base, which will be determined on an international platform, and each country in proportion to the level of consumption of those goods and services that international groups of companies provide, will receive part of its tax base. Russia will certainly benefit from this because our domestic consumption is large enough, our import is large enough and, of course, Russia will benefit from applying a mechanism such as Pillar 1," the deputy minster said.
Russia certainly supports this initiative, he said. "Basically, if we talk about Pillar 1, in our opinion, it is a breakthrough in the field of taxation, comparable with the flight of a man into space, because it is the first tax base that will be determined at the supranational level on an international platform, and there have been no such precedents in the history of taxation. Of course, Russia is trying its best to assist in the development of this mechanism," he said.
The emergence of Pillar 1, said the deputy minister, is due to the fact that over the past few decades, a number of very large international groups of companies have arisen that have large financial and human resources and which use "absolutely progressive tax optimization tools." Countries' tax administrations, Sazanov said, could no longer fight those tools used against them alone. "Because if tax administrations in one country tried to tighten the screws, naturally, an international group of companies could just move the business to another jurisdiction. And that risk has always served as a counterbalance to the tax administration measures that each country could implement at its own level. When we move to the international level, when it is a union of countries, a union of tax organizations, then, of course, the response to those tools of tax optimization, which are used by international groups of companies, can already be proportional," Sazanov said.
Pillar 2, according to him, is also a kind of breakthrough, because for the first time, tax administrations at the local level will be able to tax the profit of a consolidated group, when the company is incorporated not only in the country where the parent company is located, but along the entire value-added chain. "If the tax administration of the parent company sees that somewhere the level of taxation is below 15% as a result of the use of tax optimization tools, the tax administration of the parent company will have the right to take that tax and bring the effective tax rate to 15%. That hasn't happened in the history of taxation," he said.
"I know Pascal is at the origin and he's one of the people who came up with both Pillar 1 and Pillar 2, certainly that's genius. So, Pascal, we have a lot of respect for you, and thank you for the opportunity to access the profits of international groups of companies. We are very grateful," he said.
The deputy minister also explained that under Pillar 1, a supranational international agreement will be concluded, which will be developed on the platform of the OECD. "And those countries that want to participate in it, having studied it in detail, will simply join, and it will be an international convention. And with regard to Pillar 2, there will be model changes to the tax laws of each of the countries that want to implement Pillar 2 in their tax laws, and, accordingly, based on these model changes, each country will undertake (I am talking now about the minimum tax rate) to implement in their legislation within a minimum time frame the model tax rules that will be developed on the platform of the OECD. The second part of Pillar 2, which concerns the minimum tax source rate, here changes will be developed to the standard on bilateral agreements on avoidance of [double] taxation, and based on this standard, which will assume a minimum level of tax source in respect of passive income, each country in the bilateral agreements will make these changes to their double taxation treaties," Sazanov said.
"Accordingly, we hope that our colleagues from the OECD will help us to implement these changes in their double tax treaties, that there will be a "black list" of uncooperative jurisdictions that refuse to make changes. Because without, so to speak, the 'stick' from the international community to force countries, especially low-tax jurisdictions, to make appropriate changes to bilateral agreements on avoidance [of double taxation] will be quite difficult," the deputy inister said.