He’s no Tom Cruise, but Pascal Saint-Amans is signed up for a Mission Impossible.
Amid a stand-off between the United States and France over how to tax companies like Google and Facebook, the Frenchman — who heads the tax policy center at the Organization for Economic Cooperation and Development (OECD) in Paris — has been given less than a year to hammer out a global deal on digital tax.
If he fails, an all-out trade war could ensue.
“There’s no plan B,” said Saint-Amans, while tucking into a Caesar salad earlier this week in Brussels during a break between meetings at the European Commission, the European Parliament and local think tanks.
His next destination: a two-day meeting of G20 finance ministers and central bankers starting Saturday in Saudi Arabia, the latest attempt to rally support for a global deal. They are expected to give their backing for his work.
“There is a Plan C — for chaos,” he added. “And I believe that.”
It’s a well-rehearsed line. But the 50-year-old OECD official is not wrong about the high stakes.
If Europe, the U.S. and much of the world can’t agree on new rules by December, a raft of countries including Austria, France, Italy and Spain will restart their own domestic digital tax plans, forcing mostly American tech giants to cough up billions, collectively, in extra revenue each year.
Washington, in return, has threatened to levy billions of dollars in retaliatory tariffs, targeting the likes of French cheesemakers and Champagne producers to stop what U.S. officials view as international efforts to pocket money owed to American taxpayers. If other countries follow France’s lead and Washington retaliates against each of them, a domino effect could ensue that may stall the global economy.
After last-minute talks in Davos earlier this year, global leaders eventually backed down, postponing any action — either domestic digital taxes or retaliatory tariffs — until early 2021, at the earliest. The U.S. presidential election in November may still throw a last-minute spanner into the already tense negotiations.
Still, governments across Europe, the United States and elsewhere have pinned all their hopes on the OECD, a group of mostly-rich countries, doing what years of negotiations have yet to achieve: reach a global agreement to revamp the world’s tax rules for the digital age.
“Let’s say we are reasonably confident the international process will deliver,” said Benjamin Angel, a director in the Commission’s tax department. But “if the OECD process fails and it proves to be impossible to reach an agreement at international level, the Commission will table an initiative for EU action.”
Focus on the OECD
At the center of this maelstrom stands Saint-Amans.
A former French finance official who has spent much of his career in the depths of wonkish tax policy, he is the closest thing to a referee that countries have in determining what the future rules should be, which companies should be included in the new regime, and how governments can resolve disputes when they inevitably bicker.
The OECD has a track record of banging heads together. It successfully reworked global tax rules to stop companies shifting much of their profits, often through opaque shell companies and complex corporate structures, to low-tax havens like Bermuda and Barbados.
“That was a sea change in how multinationals should be taxed,” said Clark Armitage, president of law firm Caplin & Drysdale and a former senior official at the U.S. Internal Revenue Service, in Washington. “But what they’re trying to do now is bigger than any of that. It’ll change the fundamental rules of how the global tax regime operates.”
Under Saint-Amans’ guidance, the OECD forged ahead with plans to overhaul tax rules again at the end of 2019 after almost three years of tense negotiations. The new push included suggestions that some of the profits generated by tech firms globally should be shared with countries worldwide and that a minimum global corporate tax rate should be created that all companies must pay, no matter where they operate.
In OECD offices in Paris and other capitals around the globe, a handful of senior officials from the group’s member countries, including Chip Harter, the U.S. Treasury’s deputy assistant secretary, and Gael Perraud, a senior tax policy official at France’s Ministry of Finance, have steered the negotiations.
The goal: figuring out the details so that global leaders can agree to a new regime by July or, at the latest, December.
Those who have worked with Saint-Amans say he’s ambitious, engaging and politically astute.
Some U.S. officials were initially skeptical of his motivations because of his background at the French finance ministry. But Saint-Amans’ ability to get previous tax reforms through the OECD, often contrary to what some EU countries had wanted, won him grudging respect in Washington.
“I’m encouraged by the progress that has been made at the OECD to reach a multilateral global tax agreement on the digital economy,” Chuck Grassley, who chairs the U.S. Senate’s Committee on Finance, said in a statement.
Some EU government officials, though, aren’t sure that Saint-Amans can deliver a workable solution in time to avoid an all-out trade war. A U.S. policymaker openly questioned if he had bitten off more than he could chew with the current negotiations.
“It’s really, really complicated,” said one EU official who spoke on the condition of anonymity given the high political stakes surrounding OECD negotiations. “It’s like choosing between the plague and cholera.”
Saint-Amans is doing what he can to keep the talks going.
After Steven Mnuchin, the U.S. Treasury secretary, surprised most participants in December when he told the OECD that Washington wanted any global deal to be merely optional, Saint-Amans spent weeks hopping between capitals in Europe and Asia — often only staying for a matter of hours — to shore up support when the negotiations were on the brink.
“He’s working to make this a success,” said Paul Tang, a Dutch Socialist MEP, in Brussels. “But he’s very much aware that all possibilities are still open. We could end up in a trade war. This is the danger of the situation.”
Beware the months ahead
Saint-Amans knows the pitfalls — and is clocking up frequent flyer miles to stay ahead of the game.
Since January, he’s been traveling around the world to keep everyone at the table — a tricky task when almost all of the OECD’s membership opposes U.S. demands that the new global digital rules be optional.
To get around that stumbling block, negotiators have made a play for extra time, agreeing to decide whether to make any deal optional or not only after the draft rules are completed. That will likely lead to last-minute horse-trading among countries — with the threat of a global trade war in early 2021 keeping minds focused on the task.
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“We must deliver by November,” said Saint-Amans, dressed in a well-cut gray suit, sporting hipster black-rimmed glasses with a mop of silver hair. “Because if we don’t, we lose credibility and countries will act.”
With time counting down to reach a deal, he has to keep moving.
Thorny issues, including which corporate activities should be included in the new system and how countries can resolve any disputes, are all topics that still need to be figured out.
Governments from Beijing to Dublin also have cast doubts on the need to create a global minimum corporation tax rate. A handful of Northern and Eastern European governments also fear a blanket rate would undermine their ability to cut tax deals with companies to entice them to set up shop locally.
To complicate matters, Berlin and Paris have said such a minimum tax rule is a must for talks to continue. Saint-Amans is aware of those concerns, saying the OECD is considering the inclusion of certain carve-outs to the minimum tax proposals to bring reluctant governments on board.
With only months to go before he runs out of time, the Frenchman remains upbeat about his chances. But he’s under no illusion about what happens if he fails.
“We feel the pressure,” he said before dashing off to his next meeting in central Brussels. “Our job is about ensuring that … we don’t have a trade war.”
Aaron Lorenzo contributed reporting from Washington.
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