Business Significance of the OECD: Impact on the Design, Negotiation and Implementation of Global Services. The Organisation for Economic Cooperation and Development (“OECD” in English, “OCDE” in French and Spanish) counts 30 developed countries as members. With over 2,500 employees, it is one of the largest multilateral intergovernmental bureaucracies.
As a mature multinational organization, the OECD plays a vital role in the design and administration of national laws, international treaties, multilateral conventions and “best practices” governing global sourcing. OECD principles affect both domestic and cross-border outsourcing. Service providers and enterprise customers alike can glimpse the future of the legal, tax and regulatory environments across borders by studying the OECD’s agendas and programs. These range from the classic issues of international investment and business development to emerging issues of corporate social responsibility, climate change, environmental responsibility, corporate and relationship governance. In outsourcing contracts, emerging public policies constitute risks with costs for compliance.
Goals and Scope. The OECD serves as a platform to bring together the governments of countries committed to democracy and a global market economy. The OECD has a significant impact on the legal framework governing outsourcing, particularly global sourcing across borders. Its goals are to:
- Support sustainable economic growth
- Boost employment
- Raise living standards
- Maintain financial stability
- Assist other countries’ economic development
- Contribute growth to world trade
The Organization promotes a dialogue among governments to compare policy experiences, seek answers to common problems, identify good practice and coordinate domestic and international policies in the fields of economics, technologies (including information technology, telecommunications), social welfare, regional development, finance, insurance and taxation; democratic and regulatory governance and economic and environmental sustainability (including energy and sustainable development).
OECD’s Legal Frameworks. The OECD has promoted a wide variety of legal frameworks to promote globalization. These include:
- Taxation:
- The OECD Model Income Tax Convention (bilateral tax treaty) for the avoidance of double income taxation on international transactions in goods and services, including, more recently,
- Commentary dealing with the application of tax treaties to state-owned entities, including Sovereign Wealth Funds.
- Commentary with the OECD Model Tax Convention dealing with tax treaty issues relating to common telecommunication transactions
- Proposed changes to Article 7 on business profits for the Attribution of Profits to Permanent Establishments.
- Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations.
- The OECD Model Income Tax Convention (bilateral tax treaty) for the avoidance of double income taxation on international transactions in goods and services, including, more recently,
- Business Practices, including anti-bribery strategies and policies such as:
- The OECD Bribery Convention and related instruments (Commentaries on the Convention, Revised Recommendation, 1996 Recommendation on Tax Deductability of Bribes).
- The OECD Bribery Awareness Handbook for Tax Examiners with information on the various bribery techniques used and the tools to detect and identify bribes.
- Employment, labor and social affairs (see www.oecd.org/els ).
- Opening and transparently regulating cross-border investment (see www.oecd.org/investment), such as
- the OECD Declaration on International Investment and Multinational Enterprises, with 42 country signatories committed to supporting an open environment for international investors and encouraging responsible investment by multinational companies as a means to promote prosperity and growth.
- Coordination with the United Nations Global Compact for socially responsible global investing.
- Guidelines for Recipient Country Investment Policies relating to National Security have been adopted by the OECD to help governments maintain fair treatment of international investors while meeting their countries’ security needs.
- Regulation and governance of financial services, insurance and pension investments, including:
- The OECD Core Principles of Occupational Pension Regulation for policymakers to improve the regulation and supervision of private pension systems, covering the various aspects of the operation of these systems, such as licensing, governance, funding, investment and the rights of pension plan members.
- Regulation of Information Technology, Telecommunications and e-commerce, including:
- OECD’s Guidelines for Consumer Protection in Electronic Commerce to tackle the growing challenges of protecting consumers’ rights and privacy and fighting fraud.
- E-commerce regulatory frameworks
- Business-to-consumer developments in advertising, cross-border trade and payment protection
- Mobile commerce
- Consumer-to-consumer online transactions
- Public policy issues in online digital products
- Participative web and “social networking” issues
- Children’s protection online
- Dispute settlement, enforcement, and related issues in consumer use of the Internet.
- Environmental, social responsibility and governance issues, such as:
- Economic studies on the use of economic tools, like “climate change” taxes and tradable permits, as “environmentally effective” and “economically efficient” policy instruments to change business behaviors.
Risk Management in Global Sourcing. The OECD agendas reflect current policy debates in member countries as well as non-members. Global sourcing advisers and participants should take time to become familiar with its workings.
Links:
www.oecd.org