1. Centre for Tax Policy and Administration Organisation for Economic Co-operation and Development Promoting a Pro-Growth Tax Environment for Global Business The OECD’s role in setting international standards Jeffrey Owens Director OECD Centre for Tax Policy and Administration OECD-BIAC Business Day Seoul, 16 March 2006

2. Centre for Tax Policy and Administration Organisation for Economic Co-operation and Development 2 Business is increasingly global Tax systems remain national How to reconcile: –Tax harmonisation; –Tax coordination.

3. Seoul, 16 March 2006 Centre for Tax Policy and Administration Organisation for Economic Co-operation and Development 3 Role of the CFA: Promoting better international tax coordination Agreement on the Models, Guidelines and Best Practices. Monitoring their implementation Providing a framework for resolving disputes. Extending the dialogue to NOE’s. Working with business to provide a Global Tax Framework

4. Seoul, 16 March 2006 Centre for Tax Policy and Administration Organisation for Economic Co-operation and Development 4 Limited Membership but Global Reach Country Program: Argentina, Brazil Country Program: China, Hong Kong, India, Malaysia Latin America Program Baltic Program Regional Programs: Asia Regional Programs: Southern/Central Africa West/North Africa Country Program: South Africa OECD Multilateral Tax Centres: Austria, Hungary, Turkey MENA NEPAD SEE Country Program: Russia Korea Tax Centre

5. Seoul, 16 March 2006 Centre for Tax Policy and Administration Organisation for Economic Co-operation and Development 5 Working with business A presumption of consultation –Discussion drafts –Public consultations –Joint groups BIAC privileged partner

6. Seoul, 16 March 2006 Centre for Tax Policy and Administration Organisation for Economic Co-operation and Development 6 Emerging challenges in the global economy Removal of tax obstacles to cross-border trade and investment The balance between source and residence taxation Pressure from financial markets and new financial instruments Pressure from tax havens Pressure from e-commerce and new technologies Expansion of the service economy Adjusting to rapidly changing business structures Tax and good corporate governance

7. Seoul, 16 March 2006 Centre for Tax Policy and Administration Organisation for Economic Co-operation and Development 7 The OECD response: four examples (i) The OECD Model Tax Convention: The basis for a worldwide network of bilateral tax treaties which aim to relieve double taxation; Influence extends beyond OECD countries. (ii) The OECD’s Transfer Pricing Guidelines: Transfer pricing determines how much tax is paid by MNE in each jurisdiction; National legislation tends to follow the 1995 OECD Guidelines; But we need to monitor and extend the guidelines to get a more a consistent application.

8. Seoul, 16 March 2006 Centre for Tax Policy and Administration Organisation for Economic Co-operation and Development 8 The OECD response (continued) (iii) Improving Tax Dispute Resolution Mechanisms Major concern to business. Disputes increasing in number and complexity. Need more effective procedure to resolve disputes OECD’s project covers both Transfer Pricing and Treaty issues. The OECD approach: –Improve existing Mutual Agreement Procedures; –Set up a framework for arbitration. Need continuing input from both business and non- OECD economies.

9. Seoul, 16 March 2006 Centre for Tax Policy and Administration Organisation for Economic Co-operation and Development 9 The OECD response (continued) (iv) From e-commerce to cross-border services Providing a tax framework for e- commerce. Extending the debate to all cross border services –Issues under VAT –Issues under direct taxes

10. Seoul, 16 March 2006 Centre for Tax Policy and Administration Organisation for Economic Co-operation and Development 10 What Korean business gains from the OECD work on taxation An international forum for dialogue between business and governments The removal of tax obstacles for cross border trade and investment Greater certainty in the application of international tax rules Better mechanisms for avoiding and resolving tax disputes Access to comparative data on tax systems around the world

11. Centre for Tax Policy and Administration Organisation for Economic Co-operation and Development Part II Trends in Tax Reform

12. Seoul, 16 March 2006 Centre for Tax Policy and Administration Organisation for Economic Co-operation and Development 12 Tax Revenue as % GDP (2004) Note: Countries have been ranked by their total tax to GDP ratios. *) 2003 figures **) IMF data, for China and India data cover only Central government 0 5 10 15 20 25 30 35 40 45 50 Korea Japan* United States Australia* Canada Germany New Zealand United Kingdom Italy France Singapore** India** China**

13. Seoul, 16 March 2006 Centre for Tax Policy and Administration Organisation for Economic Co-operation and Development 13 Change in tax as % of GDP Countries ranked by their change in tax as % of GDP *) Series start with earliest data available **) 2003 figure

14. Seoul, 16 March 2006 Centre for Tax Policy and Administration Organisation for Economic Co-operation and Development 14 Source of tax revenue (2003) *) IMF Data, central government. For Singapore PIT and CIT are aggregated

15. Seoul, 16 March 2006 Centre for Tax Policy and Administration Organisation for Economic Co-operation and Development 15 VAT–Tax rates and revenues 1 (2003) 61.4% 0.2% 1) Countries ranked from highest VAT standard rate to lowest rate *) IMF data, Central government only

16. Seoul, 16 March 2006 Centre for Tax Policy and Administration Organisation for Economic Co-operation and Development 16 Top personal and corporate tax rate Countries ranked from lowest CIT rate to highest rate Includes Central, State and Local taxes, except for China, India and Singapore

17. Seoul, 16 March 2006 Centre for Tax Policy and Administration Organisation for Economic Co-operation and Development 17 How does Korea’s Tax System Compare to other leading economies? % OF TOTAL TAX REVENUES TAX / GDP % PIT% CIT % CON- SUMPTIO N TOP PIT RATE CIT RATE TAX WEDGE TOP RATE ON DIVIDENDS STANDARD VAT RATE Australia 31.638.516.729.748.53028.648.510 Canada 3334.610.426.146.436.132.356.17 France 43.717.55.725.555.735.447.457.319.6 Germany 34.623.53.529.447.538.950.752.416 Italy 42.225.16.625.746.13345.744.820 Japan 25.317.51320.35040.926.664.55 Korea 24.612.715.337.139.629.716.648.710 New Zealand 35.441.913.635.2393320.73912.5 United Kingdom 36.128.77.832.7403031.247.517.5 United States 25.435.38.129.741.639.329.650.88.4 China 17.66.713.764.34533-2017 India 15.717.520.542.33035-2212.5 Singapore 13.846.538.32220-485