David D. Stewart: Welcome to the podcast. I'm David Stewart, editor in chief of Tax Notes Today International. This week: graceful exit.

Grace Perez-Navarro has been a mainstay of the tax community for three decades, working first at the IRS Office of the Chief Council, and later at the OECD Centre for Tax Policy and Administration (CTPA). She has worked under two separate CTPA directors, and most recently took over for Pascal Saint-Amans after his departure.

But now Grace is set to move on. As her retirement approaches, Tax Notes chief correspondent Stephanie Soong caught up with her to discuss her plans for the future as well as her time in the trenches of tax policy.

Stephanie, welcome back to the podcast.

Stephanie Soong: Thanks for having me.

David D. Stewart: Could you tell us a bit about what you talked about with Grace?

Stephanie Soong: Well, we talked a little bit about her career trajectory: how she started out in Houston, Texas, ended up in Paris, France; the effect her work has had on international tax policy; the future of the OECD as a standard-setting body. We talked about her accomplishments and what she's most proud of, what she wishes she could have worked on during her tenure at the OECD. We just wanted to get a sense of her final departing thoughts about her career at the OECD.

I've been covering her since 2011, like 2012, so it's been a long time. So it was a really nice conversation. It's always great to see Grace. She's always been a very good source and [I] wish her all the best in her future endeavors.

David D. Stewart: All right, let's go to the interview.

Stephanie Soong: All right, well, thank you so much, Grace, for coming by our studio in the Tax Analysts building. It's an honor to have you here. Especially since you're super busy these days. So thank you for coming.

Grace Perez-Navarro: My pleasure. It's my first time here. Maybe my first time in Falls Church.

Stephanie Soong: Oh, wow. Well, hopefully not your last, but you're always welcome back. I just wanted to catch you before you leave the OECD, which is really the end of an era. I've been covering you since basically when I started in 2011, so a very long time. It will be sad to see you go, but we wanted to ask you a few questions before you leave and get your thoughts on how your career has taken off, where you're going, what are you doing next? What can we expect from the OECD in the years you're not there, which is really sad?

Let me just start by asking — your journey to become the head of the CTPA started in Houston, Texas. You were at the IRS's Chief Counsel Office in the 1990s, and you were working on international tax issues like negotiating tax treaties and information exchange agreements. Tell us more about your career trajectory. Did you ever expect to find yourself where you are now?

Grace Perez-Navarro: No, I guess it depends how far back you go. I'm not sure I would have expected to have become a tax lawyer. But I was talking recently with some other tax lawyers, and we were all talking about how what we loved about tax was the flexibility, the constant change in tax, and how it is not strictly black and white. There's so many opportunities to play with tax. I think that is what attracted me to it, the complexity of it and the versatility of it. And so I did end up going to the IRS in Houston, working primarily on litigation.

I was very excited to be given the opportunity to go to Washington to work in the — what was then the new — international division because I had always wanted to work on international issues. My litigation background from Houston served me very well. I had been doing some tax shelter litigation there. And then I got to Washington and started working on Brazilian foreign tax credit cases. I'm still working with Brazil, but on different issues. But that was really interesting.

Because I speak Spanish, I started working on the Mexican tax treaty, other tax treaties. And I mean, I loved it. I loved my work in Houston. It was a lot of fun doing litigation. I really liked doing tax treaty negotiations and also the international litigation, which was much harder than the litigation we were doing in Houston, because much more was at stake.

The litigation teams on the other side were much bigger. We were basically like two people. It was much more challenging, but also really fascinating. All of that was great. And then the opportunity arose to go to the OECD for one year, and that ultimately translated into more than 25 years. And, I've really enjoyed it.

It's been a very hard job. It's had its political ups and downs, depending on who is in not only the White House, but in other leadership roles around the world. But I do think we've achieved a tremendous amount at the OECD during my tenure. I mean, when I was hired, one of the big issues, and I think part of the reason Jeffrey Owens hired me, was to work on bank secrecy, which is what I had told him was something that needed to be fixed.

I was very frustrated in Washington when we would get the field auditor saying they can't get information out of Switzerland, like the trails were leading to Switzerland. And I would say to Treasury, "Please go and terminate that treaty." And they'd say, "Yeah, yeah," and come back with a new treaty. It was something that could not be resolved unilaterally. Even though the United States is the number one economy in the world, it still was not able to address this issue alone. I think that is the biggest achievement of the OECD, is being able to bring countries together to facilitate change in fundamental areas, where countries otherwise couldn't resolve the problem.

So it's been just a great career for me doing that. Then with the BEPS (base erosion and profit-shifting) project, making so many changes in so many countries and bringing so many countries together to work on these issues. And doing the after-sale service, all the capacity building and support for countries and all the different programs we've put in place — like the Tax Inspectors Without Borders, which is really helping developing countries a lot. For every dollar we put in, it's a $120 return on average. You can't get that kind of return on anything. So it's been really wonderful.

I have to say I've enjoyed every job. So if I had stayed at the IRS, I think I would've been very happy there. But being at the OECD, we're able to have impact really on a global scale. And that has been very rewarding.

Stephanie Soong: You officially retire at the end of March. Last we talked, you were about to become the director of the CTPA. How has it been for you these past few months? And your tenure, how has it been?

Grace Perez-Navarro: Well, it's been very challenging. It's an odd time to become director, for five months before retiring. It's been a very challenging period. We have not only the pillars to deliver. Getting pillar 2 out the door was a big lift, but we did it. So that was challenging, but we did it.

We still have the multilateral convention to deliver. And that is moving along, but it's not easy. And then we launched the Inclusive Forum on Carbon Mitigation Approaches, another major initiative where we're trying to bring over a 100 countries together to work on this issue.

All of that has made it for a very intense period. So I'm definitely not cruising to the finish line.

Stephanie Soong: Yeah, the Inclusive Forum on Carbon Mitigation Approaches, I think, is super important too, especially because of that report from the U.N. saying that we have to make some major progress by 2030-2050 or else we'll see some really serious environmental effects. So that's a huge deal.

Obviously you were the first woman to become a CTPA director. How significant was this for you? And how significant is it for you that you're passing the baton on to Manal Corwin?

Grace Perez-Navarro: Well, I didn't actually think of it so much as being the first woman, so that didn't really influence me a whole lot. I am very happy I'm passing it on to another woman. I guess it didn't matter so much for me because it was a limited tenure, but I am happy to see that we will have a woman at the head of CTPA and also such a capable woman. So I'm really happy about that.

We do have very few women at the top of CTPA. We only have Zayda Manatta, who's the head of the Global Forum. And we have now Sandra Knaepen, acting as the head of one of the divisions. But we need to do better. And so I'm glad that at least at the very top we have a woman.

I have been struck over the last few months how many young women have come to me and said, "You don't know how much it's meant to me to have you there as a role model." I think for women in leadership roles, we often don't realize just by being there at a senior position, we give younger women hope and inspiration to aim high.

Stephanie Soong: Speaking of strong women and awesome women, I want to give a shout-out to my colleague, Nana Ama Sarfo, who wrote a really great piece on you when you first became CTPA director. You said during that profile that your priority was finalizing pillar 1 and pillar 2. And you mentioned this a little briefly earlier. Is there anything you can tell us at this stage? Do you feel like that goal has been fulfilled? And can you update us with anything new?

Grace Perez-Navarro: Yes. Well, I can say a few things. One, on pillar 2, I think we are all very satisfied at CTPA that we have delivered the global minimum tax. Obviously, there is more guidance that will be coming out. We're really ramping up our capacity building. Because so many countries, especially developing countries, want to implement the minimum tax, and we want to make sure they are able to do it and to do it in a consistent manner so that later on when we do peer reviews, we don't have to go back and have them do more legislation. That has been a tremendous success.

If you think about when I first started at the OECD, I arrived in the middle of 1997, and the harmful tax competition project was underway and being finalized. Back then, you could not have talked about establishing a global minimum tax.

As much as countries were concerned about tax competition, they weren't able to agree then. They didn't even talk about a minimum tax. One was talking about, "Well, just zero tax in itself should be considered a harmful tax practice." But obviously, with only one country supporting that view, that did not win the day. And now we do have a minimum tax that is putting a floor on tax competition to help all countries protect their tax bases. So I think that is a major achievement.

We are making good progress on the other part of pillar 2, the subject-to-tax rule, which in the grander scheme of things is not huge, except it is very important for developing countries that may have negotiated treaties that did not end up being so favorable to them. This is a way to help developing countries protect their tax base. So, that we hope to finalize soon.

Then on pillar 1, we have the multilateral convention. We have been making progress. You have seen all the different public consultation documents we've put out. We are heading towards the finish line. We are supposed to finalize it by the middle of the year. We are making progress. There's still some tough issues to resolve, but I think there is a real determination and goodwill in the inclusive framework to try to get there.

On amount B, people often forget about the simplification of transfer pricing. We are finally making really good progress on that. I think if we nail that, that will be a major, major achievement. Not only for tax administrations that are challenged in administering the transfer pricing rules, which as you know, it's facts and circumstances. You have to look at this with every case. For developing countries, they often don't have comparables, and they have limited resources. So it's a real challenge.

If we can take a big chunk of these fairly routine cases off the table with simplification, that will be a benefit for all, and business is very supportive. So I think it's a win-win, and it looks like we'll be able to get there.

I would say it's a shame it's not all done. I would've liked that. We're not there yet, but I think we're getting close. And I think the question will be, can we nail down these difficult issues? Are countries willing to make compromises?

Stephanie Soong: Launching off that a little bit, how do you think the role of the OECD will evolve as a tax standards setter for international tax in the future, after you've left?

Grace Perez-Navarro: Well, I think it's already evolved quite a bit. I think it will just continue along the same path, which is to work with a wider group of countries to develop standards. And then the other important part that we added was the capacity building and support afterwards.

If you go back to when I first arrived at the OECD, we would just set standards. While we did do some consultation of other countries, basically the standards were being set by OECD countries. And then everyone was pretty much left to their own devices to implement. And so, even if you had a beautiful standard, it might get implemented in different ways.

We see that happening, and business always complains about that — that we have set a standard, but then countries aren't applying it consistently. And so we've done, I think, a good job over the years of not only supporting countries in implementation. But also the peer review process, I think, is really important to make sure there is consistency and no sort of slipping backwards and not implementing the standards in the appropriate way.

I think we will just continue on that path. You can already see in the Inclusive Forum on Carbon Mitigation we're not even trying to set standards. What we're trying to do is gather data from all the countries about what pricing and non-pricing measures they're taking, and then mapping those to the emissions they're trying to target in the different sectors and having a dialogue, allowing countries to talk about what works well, what could help them.

Because as you said, the goals that each country has set for itself will not be met with the measures that they're currently taking. So more needs to be done. And the question is, what more can be done? Both from a political perspective, which carbon taxes are just not something that many countries can implement. What other alternatives can be used to do that?

I think this data dialogue and, in this case, ultimately leading to decarbonization, my three D's, is a good model going forward. But I think what we have done already in terms of evolving in how we carry out our work is we're just putting much, much more emphasis on facilitating implementation and ensuring that it's consistent.

Stephanie Soong: How do you think the role of the OECD CTPA director will change after you depart?

Grace Perez-Navarro: Well, I think for one thing now, I am being replaced as deputy with two deputies. I've already spoken to Manal about that. She needs to think about how she wants to divide up that role and then what her role is in that whole mix. But other than that, I don't know that it will change that much, because the areas of work that we are doing will remain largely the same.

We now pretty much cover all of tax, domestic and international. The only thing we don't really cover is customs, because you have the World Customs Organization dealing with that. But so I suppose the role itself may not change that much. Perhaps the areas of emphasis will change.

Stephanie Soong: Well, I look forward to covering whatever comes out next.

What are you most proud of during your time at the OECD?

Grace Perez-Navarro: Well, I do think the elimination of bank secrecy was a major achievement. As I said, I really think that that could not have been done without a global effort, and without the political support that we had from the G-20. This is something I started working on when I first arrived, was working on bank secrecy. We put out a report, which you probably have never seen, called "Improving Access to Bank Information for Tax Purposes." It was so controversial then that we couldn't call it the "Bank Secrecy Report." Some of our secretive countries insisted we may get this very factual title.

We knew what had to be done, but we just didn't have the political weight. And I think one of the things that the financial crisis taught us was how important getting political backing for major changes in tax policy is needed. Because we had done the work at the technical level, but technical people can only go so far. To have that kind of fundamental change in policy and try to push that in countries where their whole business model depended on it, you needed that political support.

I guess the other thing that I would add to things I'm proud of is the work we are hoping will be done soon on reforming Brazil's transfer pricing. I think from the day I arrived, and even before when I worked at the Chief Counsel's Office, one of the things I worked on was the U.S.-Brazil tax treaty, which as you know, does not exist. I worked on the negotiations, and a big part of the challenge was that Brazil's tax policy in the international area was just so different from the rest of the world.

Having spent the last five years working with Brazil to help them move to the OECD standard, not for the sake of moving, but because they see now that they are losing revenue with their current system, that a lot of multinationals are not paying tax in Brazil for value that has been created in Brazil, I think it will be a major achievement to have taken a country from such a different position to the international standard.

Stephanie Soong: Yeah. That will be huge, yeah. I'm looking forward to seeing that too. What do you think you could have done better? What do you wish you could have accomplished you didn't get to?

Grace Perez-Navarro: Well, I guess on the substantive side, one of the things that I really wish we had been able to spend more time on is looking at the intersection of tax trade and investment policies. And bringing all those things together because I do think — and we're seeing it now more than ever, with the minimum tax and what that is doing to tax incentives and what that might mean for the subsidy space. I really think it would've been nice to work on that. But we just had so many big other projects; it was hard.

Stephanie Soong: You were a little busy with things.

Grace Perez-Navarro: But I do think that is an area that is definitely worth exploring. On the sort of broader areas of CTPA, not substantive, but I wish I would've been able to spend more time developing staff and really helping them reach their full potential. I did do quite a bit of that, but it's really important in an international organization where you have people coming from different cultures, different work cultures, different languages, different tax systems. I think more support is needed than in the ordinary workplace. But despite those things, I think we have been able to accomplish a tremendous amount.

I will say that one indication of the fact that we have been doing pretty well is that all through the pandemic, we were hearing from other organizations and other parts of OECD, how people were suffering from depression, isolation. And we didn't really have that in CTPA, because everyone was so focused on delivering the pillars that there was a tremendous sense of purpose. I think that helped keep the team together, and we have a really great team spirit in working on all of these challenging, exciting issues.

Stephanie Soong: I guess that might answer my next question then. What will you miss most about the job?

Grace Perez-Navarro: Oh, well, I will miss the policymaking. It is challenging, and there have been many challenging moments over the last 25 years. But I do miss that. I mean, there's nowhere else where you can have this kind of impact on global tax policy. So that has been very exciting.

I will miss the people, all the delegates and the staff. Hopefully I'll see them still after I leave. But no, that has been just really great. Getting to know people from around the world and working with them to improve their tax systems, to improve the overall international architecture. So I think I will miss all of that.

Stephanie Soong: What won't you miss?

Grace Perez-Navarro: Oh, I won't miss working 24/7. It's been really intense. I don't think people realize how much we all work. I won't miss the increasing bureaucracy that we find everywhere. But no, overall, it's just been a wonderful experience at the OECD. I feel very fortunate that I somehow magically ended up there.

Stephanie Soong: So the big question then is what will you do next? That was one question that you did not answer in that profile.

Grace Perez-Navarro: All right. Well, I still don't know that I'll answer it in full. But I will take some time off. I am going to spend two weeks in Italy enjoying the very southern part of Italy. Then afterwards I will do projects of interest. I am not looking for a full-time job.

I'm not actually looking for anything, but I have been approached with a lot of different really interesting opportunities that will be time limited. So I will be doing different things. So that's it. I'll just do some interesting projects here and there and enjoy life.

Stephanie Soong: That sounds like a great plan. And I look forward to hearing more when the time comes, what you'll be doing next. Will you still be in tax you think? Will you be like Pascal and keep a foot in tax?

Grace Perez-Navarro: Yes, definitely. I mean, most of the interesting opportunities that I have been presented are related to tax. But I would like to do something beyond tax, so you'll have to stay tuned for that.

Stephanie Soong: OK. OK. Well, thanks so much again, and I want to do something really fun, if you don't mind.

Grace Perez-Navarro: OK.

Stephanie Soong: Do you know the Inside the Actor Studio, that TV show with James Lipton. He's like the director of the New York University's Tish School of the Arts? He'd interview celebrities and ask them a questionnaire.

Grace Perez-Navarro: OK.

Stephanie Soong: Really short, really fun. OK, so what is your favorite word?

Grace Perez-Navarro: Favorite word? Oh, yes.

Stephanie Soong: What is your least favorite word?

Grace Perez-Navarro: No.

Stephanie Soong: What turns you on?

Grace Perez-Navarro: Fun in the sun with friends.

Stephanie Soong: What turns you off?

Grace Perez-Navarro: Arrogant people.

Stephanie Soong: What sound or noise do you love?

Grace Perez-Navarro: Oh, the sound of the ocean.

Stephanie Soong: What sound or noise do you hate?

Grace Perez-Navarro: Complaining.

Stephanie Soong: What profession, other than your own, would you like to attempt?

Grace Perez-Navarro: Realistically or in my fantasy world? Architect.

Stephanie Soong: What profession would you not like to do?

Grace Perez-Navarro: Well, I guess pick up the trash, given the situation in Paris.

Stephanie Soong: Is there a strike?

Grace Perez-Navarro: A massive strike. Trash piling up everywhere.

Stephanie Soong: Oh. Oof. OK. If heaven exists, what would you like to hear God say when you arrive at the pearly gates?

Grace Perez-Navarro: Oh, "so glad you finally made it."

Stephanie Soong: Well, we are very glad you finally made it here to the office. Thank you so much for sitting with me and answering all my questions. And we will truly miss you when you're gone. But we will stay in touch, and we're looking forward to seeing what you're doing next.

Grace Perez-Navarro: Thanks so much, Stephanie.

David D. Stewart: And now, coming attractions. Each week we highlight new and interesting commentary in our magazines. Joining me now is Executive Editor for Commentary Jasper Smith. Jasper, what will you have for us?

Jasper B. Smith: Thanks, Dave. In Tax Notes Federal, William Pauls examines the background and operation of the life-nonlife consolidated return regulations. Brian Reed examines some of the most pressing concerns regarding the broad funding rule introduced by Notice 2023-2.

In Tax Notes State, Richard Cram compares Pennsylvania's questionable due process violation determination in Online Merchants Guild with the Washington Board of Tax Appeals' well-supported finding that Amazon sellers had nexus where their inventory was stored and shipped to purchasers. Darien Shanske evaluates the California Office of Tax Appeals on its fifth anniversary.

In Tax Notes International, Mindy Herzfeld explores how Manal Corwin, incoming director of the OECD Center for Tax Policy and Administration, can draw upon her experiences to take the organization on a different path from the one paved by former director Pascal Saint-Amans. Five practitioners with PwC examine how tax credits would be treated under the OECD's pillar 2 proposal.

In Featured Analysis, Marty Sullivan examines the claims made in a recent Wall Street Journal editorial regarding the extremely affluent paying their fair share of taxes.

And finally, on the Opinions page, Robert Goulder critiques congressional plans for a carbon border adjustment mechanism.

David D. Stewart: That's it for this week. You can follow me online @TaxStew, that's S-T-E-W. And be sure to follow @TaxNotes for all things tax. If you have any comments, questions, or suggestions for a future episode, you can email us at podcast@taxanalysts.org. And as always, if you like what we're doing here, please leave a rating or review wherever you download this podcast. We'll be back next week with another episode of Tax Notes Talk.

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