INTERVIEW: Pascal Saint-Amans

Pascal Saint-Amans served as the Organization for Economic Cooperation and Development's director of the Centre for Tax Policy and Administration. During that time, the OECD embarked on ambitious projects to update and overhaul global tax standards, including the 2015 Action Plan for Base Erosion and Profit Shifting and the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalization of the Economy. Since leaving the organization in 2022 he has been a partner at the Brunswick Group. We spoke on March 11.

So one thing I was curious about, it must be really interesting to be on the outside watching this after having been involved for so many years. And I'm kind of just curious what that's like.

Relief. That's what it's like. And wishing good luck to my successor who has to navigate a difficult environment. Because we are reaching the point where, the moment of truth is coming in a geopolitical environment which is more difficult. I had a very tough job. She has an even tougher job.

Is there anything that has surprised you about how this has played out?

No, no, I don't think so, because the cards were well known. One is the fact that the U.S. is very demanding, and at the same time is the country where everyone has doubts on whether they will deliver or not. So, on the one hand, very demanding, on the other hand, uncertainty on whether they can deliver an agreement or not. If there is an agreement. I think that's one important thing.

Two, the dissatisfaction or the frustration of developing countries that we could sense when we reached the deal. There were a lot of voices saying, you know, we were kind of forced into the deal, they now express themselves in the [United Nations], in a geopolitical environment which has not improved. So that makes things slightly more difficult.

But three, on the very positive side, the ability of the OECD, despite these difficult circumstances, to deliver. To deliver progress on Amount B, to deliver the [Subject to Tax Rule], the [Multilateral Instrument] on the STTR. And to be close to deliver the text of the [Multilateral Convention]. We'll see, we'll see that in the coming days, because it's due by the end of the month. So, a harder environment, we're getting closer to the deadline, with a country which is difficult, the U.S., for constitutional reasons. But still progress is being made.

You said we're approaching the moment of truth. What is that, exactly?

We've postponed the deadline to deliver from December '20, until December '21. And then for delivering the agreement, and then to deliver the legal instruments, we shifted to the end of '22, then and of '23. Now or it is June '24. So we're getting to a point where it's harder to postpone. Maybe there will be a good reason to postpone further, if there is no agreement. But we're getting close to finalizing a hard text of an MLC. And then there will be the question of the ratification. So we're getting to the hard stuff. It's no longer, you know, "political agreement" or "guidelines" or "principles," but we're getting to the real thing.

That's on Pillar One. On Pillar Two, countries are already starting to implement it. It kind of feels like it's finally off the ground.

Pillar Two is done. You have a critical mass of countries implementing it. And the interlocking nature of Pillar Two is such that it's happened. It's happening and it has happened. I was talking about Pillar One, which is what remains. Now, Pillar Two requires more work for the peer review, for a lot of guidance that Working Party 11 is currently working on. But fundamentally, it's done.

They're kind of on opposite tracks. And at one point, they were seen as being necessary to be together. But you think Pillar Two can continue on even as Pillar One is in this, like you said, nebulous situation?

The link between Pillar One and Pillar Two has always been either political or artificial. There is a link, if we want, theoretically, because you want to put the floor to tax competition, and to grow the pie, and then to better allocate the pie. So they come together pretty well. But they are independent, one from the other. The link was made by politicians some time ago, because some wanted Pillar One more than Pillar Two, and some wanted Pillar Two more than Pillar One. The French wanted pillar One, and cared less about Pillar Two, the Germans wanted Pillar Two and didn't want Pillar One. And that's where the link between One and Two was made. But again, it was more contingent to political concerns, than something really technical.

So you mentioned the whole thing with the U.N. So, as you know, I've been covering this for a while, not as long as you've been involved. I feel like this comes up every couple of years. And so I wasn't sure how seriously to take it when they first starting talking about this different convention. It seems to me it's different this time, that it might actually be more substantial. I'm curious how you see it.

It's different institutionally. Since the early 2000s, proponents of the U.N. have tried to upgrade the nature of the U.N. Tax Committee, which was an ad hoc committee of experts, into an intergovernmental body. And it's not only about the words, it's about the institutional arrangement, too. Because an intergovernmental body permits countries, like individuals, to act on their own capacity. So the nature is different. So, you're absolutely right. This time, for geopolitical reasons, the U.N. managed to get a mandate to work on something. Now, what can they deliver? How much of an impact can it have? We can see in the latest meeting, they talked about decision making-rules, whether it's consensus or majority. And whether it's one or the other has a big impact on the measures they can adopt. So this is to be to be seen. But clearly, the nature of the group makes it something you cannot ignore.

Sometimes I think people wonder, does it really make that much of a difference what the forum is? Wouldn't you have the same country dynamics, the same sort of diplomacy and political issues? If the U.N. became the forum, you would have all these same complaints.

In theory, you're right, but two big differences. One is legal, the other is practical. The legal difference is, what's the decision-making rule, majority or unanimity, consensus? Consensus means you can develop meaningful rules. Because everybody is bound by that. If it's majority, you have statements and opposition between the majority and the minority. Now, a majority rule may not prevent from reaching consensus. But if the default is majority, then you have a risk of having alternative visions of the world. So that's the legal difference. Then the practical difference is, who holds the pen? It's true that the OECD, it's sometimes criticized for it, the secretariat is very strong in holding the pen. While the U.N. is known for having a practice where the secretariat is a note-taker, and not to draft or to propose things. So both differences make a very different outcome. So I wouldn't say, "After all, it doesn't matter that much," because it depends.

Another thing about this whole process–and this might be more of a U.S.-centric view–but it used to be that the OECD was the most powerful organization that nobody's heard of. And it's become much more–you've probably seen there's been Congressional hearings, Republicans have been very critical. It seems like it's become more politicized. And I wonder what that means for the OECD moving forward, if it continues to have this role or producing consensus tax standards.

I'm not sure I get the question–what is more politicized, the U.S. conversation on the OECD?

No, I meant sort of the OECD itself.

No, it's not politicized. The OECD is more divisive within the U.S. because it's always been. You've always had, you know, the Center for Freedom and Prosperity and [Grover] Norquist and others attacking the OECD for promoting high taxes. So you've always had that debate. Maybe the profile of the OECD has increased, and the impact of the measures have resulted in more attention in the US. That's how I would say it. I wouldn't say the OECD is politicized because it is not politicized.

But the fact that it does have more attention, do you think that changes its role or how it's going to work?

Well, yes. But you know, I can refer to the U.S. tax reform in 2017, where [then-Senior Tax Counsel to the House Speaker] George Callas, and chief tax counsel for the Senate Finance Committee [Mark Prater], they both called and said, "We want to implement BEPS." And there was a constructive engagement. And even the Republicans were the ones in the Senate to say, we will need a multilateral convention to implement [Pillar One]. I think it's meant more engagement, and more criticism or pushback when you have politicized things, which is the case today, where the Republican say, "We're giving up sovereignty." But in a sense, they are the ones who started this in 2018 and 19. So it's just that you have more of a profile, you're more relevant, and people therefore talk more about you.

One other thing that I think is interesting, the the OECD is talking about becoming more involved in the movement to have carbon tax and part of the climate change discussion, being kind of an arbiter of that. Or at least being involved in setting the standards. I wonder, do you think they're sort of the ideal organization to take that role, and does the BEPS experience inform that?

So the OECD is not as ambitious as you have indicated in the area of tax governance. The OECD does produce statistics, on the one hand, and they have organized an Inclusive Forum on Carbon Mitigation Approaches. Which is to say, "Europe has moved towards carbon taxation with [the Carbon Border Adjustment Mechanism]. The rest of the world has other measures, U.S. incentives, other countries have taxes or regulations. And maybe we should put all the countries together to exchange practices, to exchange numbers and see." So it's not about putting in place a global minimum tax, or putting in place a minimum carbon tax, which is what the [International Monetary Fund] is promoting. So the OECD is more a convener about data, because for the time being, you don't even have such a place, where you can exchange all this.

There's one more question, just something that I was going to get to earlier, when we were talking about the Pillar Two. This is my perspective, although I know other people have kind of said this, too. That, it started out, the idea was it's going to be GILTI [the U.S. tax on global intangible low-taxed income] for everybody. And then it kind of became about "stopping the race to the bottom" and ending tax competition. And that is a more ambitious, broad goal. And I think a lot of the issues that have come up with that have been this ambiguity about those two different goals. I wonder if you agree with that?

I'm not sure I would agree with your description. I think GILTI was kind of putting a safety net to tax, international tax avoidance, with a 10.5% average. And Pillar Two has never been about just multilateralizing GILTI. It was about multilateralism and GILTI with jurisdictional blending, which is a big difference. But the goal is kind of common. One is tougher than the other, it's more the implementation. But I'm not sure you have two different goals. So that would be my comment.

All right. I think that covers it. Thanks a lot, I appreciate it.

Thank you very much.