BIAC Tax Chair Reflects On International Business Tax Landscape

In this episode of Tax Notes Talk, Alan McLean, chair of the tax committee at Business at OECD, discusses the developments in the international business tax world during his tenure and the committee’s priorities.

Tax Notes Talk is a podcast produced by Tax Notes. This transcript has been edited for length and clarity.

David D. Stewart: Welcome to the podcast. I’m David Stewart, editor in chief of Tax Notes Today International. This week: getting down to business.

Alan McLean has long been focused on the impacts of tax policy on businesses. He has managed the tax affairs of Shell for decades and since 2022 has served as tax chair of Business at OECD. As head of the tax committee, he has faced challenges and changes for the international business community, such as the OECD’s two pillars and the implementation of country-by-country reporting.

He recently spoke with Tax Notes chief correspondent Stephanie Soong about his experience and how the committee is handling the evolving world of international tax. Stephanie, welcome back to the podcast.

Stephanie Soong: Thanks so much for having me again.

David D. Stewart: To begin with, could you remind listeners what Business at OECD is?

Stephanie Soong: Sure. Business at OECD is an advocacy organization that officially represents the interests of the private sector in OECD discussions across all its policy areas, including taxation. It interacts with the OECD in many ways, including through OECD committees and ministerial meetings to advise on policymaking and reflecting the concerns of business. It used to be called the Business and Industry Advisory Committee or BIAC, and it’s still sometimes referred to as BIAC.

David D. Stewart: Could you tell us what you and Alan talked about?

Stephanie Soong: We talked about what the Business at OECD tax committee does, how it operates, what kinds of tax issues it’s focusing on, and Alan’s priorities as chair. We also touched on some hot-button issues, such as the two-pillar global tax reform plan.

David D. Stewart: All right, let’s go to that interview.

Stephanie Soong: Well, thanks so much again, Alan, for speaking with us today. Just wanted to ask you a few questions about the Business at OECD tax committee. I know that a lot of our readers and our listeners are familiar with Business at OECD and the tax committee, but I just wanted to get a sense of what it’s like to be on the committee, what it does, how it was created and all that.

Alan McLean: Stephanie, it’s always a pleasure and always happy to make time to talk to you and indeed to talk about Business at OECD. Because I think, as you say, people are very familiar. Many of your readers and listeners are part of the tax committee of Business at OECD, but I know that for some people it can seem a little bit mysterious, a little bit distant, so always very happy to talk about it and to dispel any myths or misunderstanding about it.

Stephanie Soong: Excellent. Well, let’s start off, tell us just a little bit about how Business at OECD Tax Committee was created.

Alan McLean: Shortly after the creation of the OECD itself, Business at OECD used to go under the name of BIAC and you’ll hear those two words interchangeably. BIAC is Business and Industry Advisory Committee to the OECD. So BIAC, Business at OECD was established in 1962, shortly after the establishment of the OECD. Its purpose really was to be the official institutional business advisory body to the OECD. I think at that point they realized that the work that they were planning to do, the work that they already had in hand was of global importance, importance to business, also important of course to workers and to the labor force.

The Business at OECD was established at that point and has flourished, I think, since then and has continued since then to provide input to the OECD across all of its policy areas, not just in tax, but probably it is good to just remind ourselves that the fundamentals or the cornerstones of what Business at OECD stands for are policies that allow businesses of all sizes — and it’s not just large business — to contribute to economic growth, sustainable development, and societal development and prosperity.

Business at OECD is a group of national business organizations. For example, the USCIB is the U.S. member, and every OECD member state, its national business organization will be or is a part of Business at OECD and will support the activities. That means that we represent over 10 million companies across the OECD countries and we are able to provide, I think, some of the greatest expertise to help the OECD shape its policy, shape its priorities, and ensure that we have economic prosperity and good global governance.

As well as business organizations, all of whom can put forward their candidates to the committee or their representatives to the committee, we also have a number of international-sector organizations that are representing, as you might imagine, banking, insurance, real estate and so on, so forth. The tax committee is just one of 30 standing committees that we have in Business at OECD, and we have got senior-level tax experts, as you know, from business, from tax advisory firms, lawyers, as well as from our own business- member organization, those sectoral organizations.

Stephanie Soong: How many people are on the committee and how are they chosen? Along with that, how long is your term as chair of the tax committee?

Alan McLean: We have actually, the tax committee is the largest of all the Business at OECD committees. We’ve got — between the business representatives, the advisory firms, the member organization representatives — we’ve got over 450 experts who all make up the tax committee. Obviously, that’s a large number of people to manage, so we also have what we call the bureau. We have — as well as myself as chair — we have a number of vice chairs and together, we in the bureau, help to make sure that we prioritize and that we manage the work of the whole committee.

In terms of terms, for the actual chair and vice chair, there is a fixed term or a maximum term for all of them. I think over recent years, for example, my predecessor, Will, was in place for quite some time. Prior to that, we’ve seen chairs who’ve been in place for two years, for five years, and for longer periods, but there’s a maximum term.

Stephanie Soong: I assume you just vote, you have a voting process and all that.

Alan McLean: Every now and then when members come to the end of their term or they decide to leave for other reasons, then the Business at OECD central organization will call for nominations. Every business organization that is a member represented on BIAC can put forward any nominations that they wish to. Then the council of Business at OECD, which sits above the committees, will decide, if there are more nominees than there are vacancies, then they will decide who they think should be appointed to those vacancies.

We are quite flexible in the way that we work. I mean, we have a number of people who are in all but name vice chairs because they play such an active role in the committee and we rely on them to a great extent.

Stephanie Soong: What are the committee’s main responsibilities and goals and what have your priorities been since being president?

Alan McLean: The main responsibilities are to provide structured consensus-based, data-based business input to the OECD across all of its policy areas, obviously, in tax, and we’ve been focused almost as long as I can remember, a lot on BEPS, on base erosion and profit shifting. We don’t only respond to the things that are coming from the OECD. We also from time to time will go to the OECD and point to areas that we think need more attention. In recent years, we’ve lobbied quite hard to have this issue of tax and mobile workforce back on the agenda or more firmly on the agenda of the OECD. Also, we focus quite a lot in our work on the need for tax certainty, which is something which is not always at the forefront of the policymakers’ mindsets.

I would say since I’ve been chair, we’ve been focused almost exclusively on BEPS, in particular the two-pillar process, the taxation of the digital economy, largely because that’s what the OECD has been focused on. We continue to operate in a whole bunch of other areas, but those have taken up the vast majority of our time and attention.

Stephanie Soong: How does the BIAC, Business at OECD, work with the Trade Union Advisory Committee, TUAC, and how do you envision that relationship to evolve?

Alan McLean: We have BIAC and then TUAC, as you say, it’s the other institutional advisory body to the OECD. We sit side-by-side as the advisers to the Secretariat and to the OECD countries. We work — I think we always had a good relationship, good dialogue with TUAC. Of course, from time to time we may have competing interests, but we actually find that quite often we have similar interests and some of those similar interests are making sure that broader perspectives are taken into account when the OECD makes its policy recommendations. Whether those are broader holistic considerations of business impact or whether they’re considerations of the impact on employees or labor, we have that same interest, and I think we also have that same interest in making sure that our voices are heard as early as possible in the process so that we’re not presented with essentially decisions that have already been taken and asked to comment on whether we like them or not.

I would like us to work better and more closely with TUAC. I think that some of the work that we’ve kicked off, which we’ve put under a banner of tax and shared growth that focus a little bit more on some of those areas where tax policy either contributes to, for example, inequality. That could be gender inequality, that could be intergenerational inequality on the one hand, or where tax doesn’t enable more equal outcomes, more shared outcomes, more sustainable outcomes we would say that, as I said earlier, is one of the cornerstones of our approach in Business at OECD, generally. We want to have policy that is sustainable and anything that undermines that we recognize means that the situation we find ourselves in is not stable and therefore will at some point begin to disintegrate. We prefer to prevent that rather than just to watch that happen.

Stephanie Soong: You advise the CTPA, the Center for Tax Policy Administration at the OECD. How exactly do you work with the CTPA? Do you have regular meetings or is there a formal process by which you meet with officials?

Alan McLean: We work very closely with the CTPA in many different ways. Every time we meet — so we have two meetings, two large meetings a year of our tax committee, historically, always face-to-face in Paris. Obviously since COVID, we’ve — first of all, they weren’t face-to-face at all, and now they’re more of a hybrid — but we always ensure that during those, we have all of the key Secretariat, CTPA, OECD Secretariat tax staff attend and engage with us. Normally, we try to make that more of a conversation. Sometimes it takes the form of an update. That in a sense are a couple of key milestones in the annual calendar. Beyond that, we are constantly in dialogue with teams in the CTPA who are working on whatever it is they happen to be working on at the moment. Of course, that means a lot of involvement with the CTPA on pillar 1, pillar 2 guidance and everything that stems from that.

We have decided, because the agenda is so broad for practical purposes, and also, I think just to share the experience and the opportunity to engage with the CTPA, in the tax committee, we set up a number of working groups. Clearly, we have a working group — otherwise known as a BAG — for the pillars, but we also have a working group on tax and environment, tax and development, tax and mobile workforce, and VAT of course, which is very important to many of our members, and also on tax certainty and the digitization of tax administration, if I can put it that way. Not tax and digital in the sense of the pillars, but tax and digital in the sense of just how we work and how we interact with tax authorities around the world.

Stephanie Soong: Would you say the pillars have been the number one concern for the tax committee lately? What are people saying?

Alan McLean: Yeah, absolutely. I think it is the thing that of course, has been a long time coming, a long time in development. We’ve spoken to many members of Secretariat, of the BIAC member policy organization, but also of course, increasingly to the inclusive framework itself and to the various working parties. That of course, has taken a lot longer than anybody had anticipated, and of course, continues to take up an enormous amount of effort.

I think our position in BIAC is that we want the two-pillar solution to be implemented. We have, as you will have seen through our public comments on consultation and other statements that we’ve made, been supportive but also constructively critical about the current versions of the two pillars. We recognize that they’re not perfect, but I think we also recognize more importantly that there was a sufficient amount of concern about the existing or preexisting tax framework for international business, particularly in relation to digital and other modern business models, let me call it that, that something had to be done to restore some balance there.

We looked to the two-pillar solution to restore that balance, to provide certainty to businesses so that we can go forward and invest in the way that we need to invest and innovate in the way that we need to innovate with confidence of what the final tax outcome is going to be. As I say, warts and all, we have been focused on trying to remove as many of the warts as possible from the two-pillar solution more than anything, to maintain the momentum and do everything that we possibly can to ensure that there is a successful outcome, not least so we can draw a line under that, move forward with investment innovation, but also move on to some of these other areas of international tax policy that have probably been a little bit more neglected than they ought to have been.

Stephanie Soong: Just sticking with the two pillars, pillar 2 is obviously a reality now that many countries have adopted and implemented and are in the process of adopting the new rules. I’m sure it’s a major concern for your members. What are the main concerns at the moment?

Alan McLean: Pillar 2 — I think it’s just the complexity of it. It is the most inordinately complex set of rules that we’ve ever come across and the challenges of complying for most of the businesses that are in scope are enormous. We hear anecdotal evidence and I’m sure you do as well, just that, quite what the challenges of collecting together the data that are required to fill in the GLOBE information return.

I would say that the biggest concern is that many large groups who are within the scope of pillar 2 don’t believe that they’re going to necessarily have any material tax to pay as a consequence of pillar 2, but they have the most inordinate compliance burden associated with it.

Our focus has been on making sure the rules make sense, but as importantly, making sure that they’re as administrable as possible and looking for ways to simplify. You’ll have seen we’ve put a lot of effort into making the safe harbors as inclusive as they possibly can be, just to minimize that — what we would consider to be unnecessary — burden of compliance which is associated with pillar 2 if we weren’t able to take advantage of those safe harbors.

Of course, that’s why we’re coming forward now with a position that says there are undoubtedly areas of uncertainty in the pillars, but rather than focus on trying to gain more administrative guidance, we’d really much rather that the OECD and inclusive framework would focus on working on a permanent safe harbor so that as many companies as possible can minimize their compliance burden associated with very low risk of taxation. Of course, on the other hand, as many country tax administrations as possible can minimize their allocation of resources to areas that are not likely to give rise to any taxes or where there’s very low risk of noncompliance.

Stephanie Soong: To that point, you mentioned a permanent safe harbor, the country-by-country reporting safe harbor, making that permanent. Tell us more about that and how likely do you think the inclusive framework will accept the proposal.

Alan McLean: We’re trying to not call it the country-by-country safe harbor as we go forward, but rather a safe harbor, which is based on consolidated financial statements. I say that not just to be cute about it, but because there is some concern in some parts that the country-by-country reporting is not as reliable as people had thought it would be. An enormous focus, and we see that in the GLOBE information return requirements, an enormous focus on people’s — almost paranoia that people might seek to get round the rules or to abuse the rules. We would want something which is to our intents and purposes like the CbCR, it would look very much at high-level data. If you are within that safe harbor, then there’s no need to go through the whole compliance. In order for that to be worthwhile, it has to be relatively high level. It may be that the rate may need to be higher than the GLOBE rate itself or the two rate, but we would at least expect a minimum number of adjustments to be made and therefore, it would be a meaningful and worthwhile safe harbor if readers or listeners are interested in that.

We’ve already been quite public on what we think the shape of that might look like. What do I think the chances of success are? The team and the Secretariat, I think, have been positive. Obviously, it’s not for them to promise anything, that’s for the inclusive framework itself. I know also that when we’ve spoken to many tax authorities around the world, that they would also very much welcome something that would enable them to ensure that they dedicated their resources as much as possible to areas of risk, whether that’s pillar 2 risk or whether that’s other areas of risk and that they don’t spend the whole time trying to wade through. There’s mountains and mountains and that’s a very physical representation there. Tons and tons and tons of data that in the end for most of us we believe are not going to actually give rise to any tax liability. Safe harbors are absolutely critical to the sustainable administration, we believe, of pillar 2.

Stephanie Soong: Is the permanent safe harbor proposal, that’s pretty much the focus? Are there any other possible solutions that the tax committee might have in mind or is most of the focus going to be just on trying to get the permanent safe harbor up and running?

Alan McLean: I think we’ve come to the conclusion that that’s the best bet. We’ve tried as the rules were developed to simplify those. We’ve tried as the GLOBE information return was developed to simplify that. We’ve tried as the administrative guidance has developed to use that as a mechanism for simplification and clarification, but met with some resistance, I think because of this concern that it’s enormously complex, it’s completely unknown and untested. I think there’s a conservatism in inclusive framework that would rather that we went overboard than under-did the compliance obligations. I don’t say that now that the permanent safe harbor is our last resort. It certainly — everything that we’ve got in front of us now has benefited, I think, has been improved from inputs that we’ve given. It’s now our main area of focus because we do believe if it can be successful and if it could be implemented, and if we can continue to keep it at the highest level, it will be the most valuable thing that we can have.

Stephanie Soong: What are your members thinking about the fate of pillar 1? The OECD has missed the deadline to finalize the multilateral convention for amount A. What is the feeling in the tax committee about the prospects of that happening?

Alan McLean: I think probably frustration is one of the feelings. We have a wide and diverse tax committee, so you can imagine there are a number of different feelings. I think frustration, because an enormous amount of work has been done by the tax committee, by the BAG, by the Secretariat, by the inclusive framework members to try to design something that deals with the perceived problem or the actual problem, depending on how you want to characterize that. It’s, I think, more or less in the bag. I mean you will have seen in the last draft there were a couple of areas that needed to be resolved. My understanding now is that the thing which is holding it up is a desire on the part of one or two countries to have a more robust amount B.

That, I think, would be unfortunate if that were to lead to the non-implementation of amount A and pillar 1, given how much effort has been put into it, and given how much it is part of a two-pillar solution that we’ve all agreed will restore stability and predictability and certainty to the tax regime. Without that pillar, it will be a little bit wobbly and we would, I imagine, foresee that some other recommendation would come forward that may be better, maybe worse. I’m very much in the camp of better the devil you know, even if it’s far from perfect, at least it’s understandable and it has benefited from an enormous amount of input from businesses through our BAG process, but also separately in its creation.

Stephanie Soong: Are businesses keeping an eye on the U.N. developments? How concerned is the tax committee about these developments at the U.N.?

Alan McLean: Well, strictly speaking, the tax committee itself doesn’t get concerned about the U.N. because our focus in Business at OECD is almost entirely on the work of the OECD. As you know, the ICC is the sort of the institutional adviser stakeholder in the U.N. processes, and we looked to the tax committee of the ICC to make representations. That said, obviously, we have a whole number of our tax committee members who are also members of the ICC tax commission and committees, so we have enormous amount of overlap and clearly, an enormous amount of interest in making sure that the two organizations work together as well as possible. I think my main concern and probably the main concern of our members at the moment is that U.N. work is quite onerous. There’s a lot of work to be done there.

It’s quite ambitious in some areas, and that puts a lot of pressure on tax policymakers from some of the countries who are also members of the inclusive framework. One of our concerns is that they get distracted from finalizing the work of the inclusive framework on BEPS, because they’re busy trying to do the work on the U.N. framework in terms of reference. Now there’s greater clarity there, that may help to simplify things. That would be, on the one hand, it’s just that there is limited bandwidth to deal with all of this international tax work, which is underway.

We leave the ICC tax people to provide the direct input, but together, we are committed to making sure that as far as possible, we don’t see divergence between standards in the U.N. and the OECD and that to the extent that the U.N. issues new instruments that they should, as far as possible, be complimentary and work together with the instruments of the OECD, which of course, have had a very important status since their inception, and their other instruments, whether that’s the model convention tax treaty, or whether it’s the transfer pricing guidelines. They’ve had the go-to status really for quite some time. Anything that would undermine that, that would create uncertainty over which standard might apply in a particular transaction or a particular country or a particular set of circumstances, just creates more uncertainty. To come back to where we started, for us, uncertainty damages confidence of business and therefore, means that there’s less growth, there’s less investment innovation, and ultimately, that’s not a good thing for the global economy.

Stephanie Soong: You mentioned the bandwidth issue. How do you balance all of this Business at OECD tax committee responsibilities, feedback, and your day job? It sounds like a lot to handle for everyone involved.

Alan McLean: Well, it is, and I think that brings us almost to one of the great strengths of the tax committee, is that we share the work and we have the access to the deepest expertise and the widest range of views, and people can participate as much as they want, as much as they’re able. I think that way across our 450-plus members, we’re able to make sure that we manage all the work. I would say that since we’ve had these various working groups more dedicated to particular aspects, that’s certainly helped me and I think helped the committee as a whole to make sure that we mobilize as well as we can, that we make the most of these enormous resources and the highest-quality resources that we have available to us in the tax committee.

Stephanie Soong: Beyond the pillars, what other issues would you say are going to be the highest priority for the tax committee, and what do you hope to accomplish when your term is up?

Alan McLean: Well, a number — I’ve mentioned some of them already — are the areas that we think will continue to take the place, if I could put it that way, of the work on the pillars once that’s finally concluded. Tax and mobile workforce, and we use that name as a sort of umbrella for handling the various challenges that arise as a result of changing business models, changing employment models, and so on and so forth.

We’re particularly concerned about the way that modern business is done and how that works together with, for example, relatively static perspectives on permanent establishments, for example. There’s a big workstream, I think, that we need to turn our attention to on tax and mobile workforce. The challenge there is just making sure that we focus on the highest priorities first. Tax and development, that goes a little bit hand in hand with some of the considerations that we discussed there on the U.N.

I mean, clearly, the inclusive framework is a large body of countries. Many of them get technical assistance from the OECD and from other organizations to ensure that they understand that they can apply things like the OECD instruments. We in Business at OECD as much as possible, want to support that, want to make sure that we can work together with OECD, for example, and educate and that way ensure that some of these developing economies understand the value of the instruments and are able to operate them effectively. That covers even things like withholding taxes and the administration of those, which sometimes might seem like relatively small beer, but often for some of our members, significant amounts of money. Then we have tax and digital, as I said. Most tax authorities are looking at how to digitize their own operations in order to be as efficient from a resource perspective as possible.

We have the Forum of Tax Administration, which is a body which operates under the OECD that is keen to ensure that that work is done together so that we don’t have a whole raft of different formats that we might need to comply with. We are also then providing a lot of input already into the development of that work and it goes onto the heading of tax administration 3.0, which is a seamless tax administration ambition, which is much to be admired. Obviously, we continue to work on VAT, and that’s an area where we’ve always worked very closely and very successfully with the OECD because it’s very transactional and getting that stuff right in the details is really important. The environment, climate change, a lot of focus in the OECD on tax and the environment.

We have an inclusive forum on carbon mitigation approaches, which is not only tax work, it looks much more broadly at a number of different things, but ultimately, we think that some of the policy instruments that will help ensure that carbon is managed as effectively as possible will be tax instruments, and that is work that we’re therefore keeping an eye on. OECD is also very interested in, just in corporate tax measures taken to try to incentivize work to mitigate the impacts of climate change, for example, so we’re working on that. Then I think finally, some of the work which I mentioned earlier about tax certainty, including some of the tax dispute prevention and resolution mechanisms — so trying to improve ICAP, the International Compliance Assurance Program, trying to improve MAP, mutual agreement procedures, and everything which is associated with providing greater certainty for taxpayers and tax authorities alike.

In terms of what would I like to have achieved, I mean, certainly, I would like to have been able to say that we delivered, and we did our best to deliver, pillar 1 and pillar 2 that were as good as they could be in the circumstances by the time I come to the end of my term. I think also then just having established these working groups that would work effectively and engage early with the OECD, with the Secretariat, with the working parties and with the inclusive framework as a whole. If the inclusive framework will continue — as I expect it will in some form or another — continue to exist, host the finalization of the policy work associated with BEPS. That’s where, as I said, I come back to this, sounds like it’s about the chair, the work of all of the members of the committee, particularly the vice chairs who lead these working groups and who participate in the business advisory groups, et cetera, is enormous. I would hope that I can hand that over in as healthy a form to my successor as my predecessor did to me.

Stephanie Soong: Well, Alan, thanks so much for being on the podcast.

Alan McLean: Thank you very much indeed. It’s been a pleasure.