David D. Stewart: Welcome to the podcast. I'm David Stewart, editor in chief of Tax Notes Today International. This week: And we're live.

We have something a bit different for you this week. On Friday, May 8, I went down to the ABA Tax Section meeting and recorded a live podcast. I was joined by three guests, Lilian Faulhaber, Aruna Kalyanam, and Nana Ama Sarfo, who you'll hear more about in just a minute. We discussed the future of international tax and the tax challenges of the digital economy. I hope you enjoy the interview as much as I did recording it. Now, let's go to that interview.

Hello, everyone. I'm David Stewart. I'm editor in chief of Tax Notes Today International, as well as the host of this podcast. I'd like to welcome you all to a live recording of the Tax Notes Talk podcast.

We recently saw nearly 150 jurisdictions agree to a side-by-side package for the global tax framework, with the hope that this agreement would bring at least part of the OECD's two-pillar project closer to implementation. However, the future remains uncertain. Some countries are pursuing digital taxes while others are seeking alternatives to the OECD-led process. So what's next for international tax cooperation? And could some underlying flaws in the work up to this point mean that we'll soon be talking about a BEPS 3.0?

Here to explore these questions, we've assembled this panel. Lilian Faulhaber is the Ralph H. Dwan Chair of Taxation at Georgetown University and previously an advisor to the OECD's BEPS project. Aruna Kalyanam is the EY Global and Americas tax policy leader. Nana Ama Sarfo is a Tax Notes contributing editor.

So let's get started with sort of setting up a baseline and talking about where do things stand now on the taxation of the digital economy. Ama, why don't you start us off?

Nana Ama Sarfo: Absolutely. So while we're in a world where digital services taxes and unilateral digital measures are still standing and there is no finalized multilateral convention to implement amount A of the OECD's pillar 1 — and that's important because if it were implemented, then that would call for the rollback of these unilateral measures. In fact, pillar 1 has actually been declared dead by a U.S. Treasury official. So now we're seeing that the Trump administration has, in some ways, revived, and perhaps even broadened, its trade response to these unilateral measures in the form of either threatening tariffs against countries that have implemented, or are thinking about implementing, these sorts of measures, or by securing assurances within trade agreements that foreign partners are not going to implement unilateral measures.

And then on the congressional side, we've seen that U.S. lawmakers attempted to implement their own response to unilateral measures in the form of the proposed section 899 retaliatory tax on jurisdictions that implement unfair foreign taxes, which include digital services taxes.

All of that is to say that right now we are sitting in a pretty uncertain and perhaps fractured environment. I think that that is especially the case if you zoom out and look at what the landscape looked like about five years ago, when about 140 countries sitting in the OECD inclusive framework decided that they would agree to the standstill and rollback of DSTs and other unilateral measures pending the implementation of amount A. At the time, the expectation was that amount A would be implemented in 2023. And as you all know, we have long blown past that.

But this is not to say that digital economy negotiations at the OECD have completely stalled, because we have received reporting that the steering group within the inclusive framework is interested in reopening discussions on the digital economy and talking about what that could potentially look like for its members. They are calling this a constructive dialogue of sorts. We know that the constructive dialogue is something that the U.S. is reportedly interested in. It's something that the EU is also open to. But I think one tension point there that will be important to watch is how long this constructive dialogue will take because the director-general of tax for the European Commission has stated that he wants an agreement to be inked within this year, whereas we know that U.S. officials have said that, well, they want to take their time and really kind of work on this. So we'll see where we will land in terms of timing.

But I also wanted to circle back to the first point I made, which is that DSTs' unilateral measures are still standing, and now that inclusive framework members are no longer barred from implementing new DSTs, we're not really seeing a groundswell of many, many countries implementing unilateral measures. So take that information for how you will take it, but I will leave my summary at that.

David D. Stewart: So at this stage, what are we looking at for the two-pillar plan? Is there a way for it to reach success? Aruna, why don't you take that?

Aruna Kalyanam: Oh, sure. I think that it's really interesting to think about how, going back to BEPS 1.0, the issues that had strong agreement all the way through the work that you're talking about. I mean, I think I was still working on Capitol Hill when Pascal Saint-Amans first came up to start talking to us about this. What we've gone through since then and the agreements that have emerged, again in these forms of pillar 1 and pillar 2, it's been quite a journey. A lot of the people that I've been speaking with in terms of clients and professionals would argue that pillar 1 was the real goal, but pillar 2 jumped the line, and we've sort of seen where pillar 2 stands now. You have this coexistence of acceptance of the U.S. system, this side-by-side agreement that will essentially exempt U.S. companies from the rules of pillar 2. Although I will reserve on that for years 2026 and 2027, which I just affectionately refer to as the choppy waters years. You're going to have to navigate some interesting times.

But at the end of the day, and I think I'm very curious to hear my colleagues' thoughts on this, as these countries navigate their own issues with implementing, changing their own domestic laws to accommodate not just the pillar 2 accession that many of these countries had already done but also now carve out the application for U.S. companies, I think that it does bring into question the durability of pillar 2, frankly. You have other countries like Brazil, who are coming in and actually, potentially, pursuing side-by-side treatment for their tax system as well. I think that, depending on the success levels of some of these other very large economies and how they lay out their cases at the OECD to the inclusive framework, you could end up with a bit of a fracturing in terms of support. So I'm of the opinion that I think that the durability question, salvaging pillar 2, is really a big jump ball at this point. I think that you're going to have to see how the world is going to react.

With respect to pillar 1, if we're talking about both the pillars here, this has been a particularly interesting time to see the reaction from the Treasury department. Again, focusing on "America First" priorities with respect to pillar 2 and then now really drilling down on resetting and restarting the DST conversation. Some of the things that we've heard in public settings are — it's not just this term that "pillar 1 is dead." It's like, "I don't know what you're talking about. We don't use that phraseology." Another person I had talked to had said, "Whatever square one is, the debate is going to start at the step before that, frankly."

My understanding is that there's a pretty good amount of frustration at the OECD, given the years of work that have gone into building consensus in this space. But from my perspective, I think my experience when these policy proposals kind of first came out — I'm not going all the way back to BEPS 1.0, but really in the first Trump administration when we first started seeing DSTs around 2017 and Treasury officials publicly discussing how they could come to an agreement here, that was really 2019 — all of that work kind of putting that aside and starting fresh, I do see some merit to that. Because I don't know if the digital economy remotely looks like what we knew it to be in 2017, 2018, or 2019, nor are we really clear on what it'll look like in the two to three years coming ahead.

It's funny to think about the first time I ever logged onto ChatGPT was three years ago. It was December of 2023. It was wild, but it's only gotten wilder since with all the competitors and advancement. So that's going to be an argument coming out of — it is already an argument of companies that are going to be implicated in any DST scheme. So "salvaged" is a pretty tough word to use, but I think that we're in this sort of growing pains period of figuring out what other countries are going to tolerate, what the U.S. will tolerate, and whether or not consensus is something possible.

I would caveat that with the idea of U.S. tech companies having to fight DSTs or comply with DSTs in 130 countries around the world, I would say suboptimal is the biggest understatement. That is not a world that they want. But there is some thinking that whether or not at the federal government level, with congressional support, if you can sort of set the terms for how this might apply on a global basis, there might be a more positive outlook here. Again, balancing that with the opinions of these 140 countries who will make an argument that some of this income is theirs.

David D. Stewart: Lily, you have something to add on that?

Lilian V. Faulhaber: Yeah. To follow up on that, I think when you talk about salvaging pillar 1 and pillar 2, I think it's worth going back and asking what pillar 1 and pillar 2 were designed to achieve, because I don't think that's that clear now, based on the conversations that we're having. But if you think about how we got to the pillar 1, pillar 2 debates, this started when there was a sense by individual countries that BEPS 1.0 hadn't gone far enough. So BEPS 1.0 had been focused on double nontaxation and also the "digital economy." And the reason I put that in quotes is because the one thing that BEPS 1.0 could really agree on between 2013 and 2015 about the digital economy was that you couldn't define the digital economy. The digital economy couldn't be ring-fenced; it couldn't have rules that were targeted at it.

So when we're talking about, are we solving the digital economy, are we going to achieve these goals, it's worth seeing how much these goals have changed. So BEPS 1.0, at the tail end of it, individual countries started to pass unilateral measures. They started to pass the DPT, the MAL, these other acronym-filled, alphabet-soup measures, which all that we really need to know about those is that they were seen by the countries who were sitting around the table in BEPS 1.0 as unilateral moves that were, in some ways, inconsistent with what BEPS was agreeing on. So then, you started to have all of these DSTs. And then the countries came back together and said, "Well, it seems as if we need to do more. What do we need to do?" And then there was this trade-off between pillar 1 and pillar 2.

Pillar 1 and pillar 2 are doing completely different things. Actually, pillar 1 now is doing something completely different from what it was doing when it was first proposed, when it had all these different amounts that were going after something different than what it's doing now. There was this sense that pillar 1 was getting at the idea that our existing international tax system was just broken. It wasn't keeping up with business as it existed, and so it was requiring physical presence. It was allowing large corporations, primarily tech companies, to not pay taxes where their users and consumers were. And there was at the same time a significant need for revenue that BEPS hadn't addressed.

On the other side, pillar 2 was focused more on rate competition. So they were seen as trade-offs, and now, as Aruna pointed out, pillar 2 has gone forward, and pillar 1 has not. But I think the idea of, can we salvage it? The bigger question is: What happens if it succeeds, and what happens if it doesn't succeed? What might happen in both situations is that we still have a space where we have demands from countries to address these problems. There's still a sense that the international tax system isn't keeping up with business processes. You can see that the United States thinks that as well because it keeps coming up with new rules. Other countries think that as well. In other countries, they have the sense that if the OECD and the inclusive framework don't succeed at addressing their concerns, then they're going to turn to the United Nations or they're going to turn elsewhere.

So it's not that we can just sort of stop where we are and say, "We can wash our hands. We're done." I don't think there are many countries who think that where we are right now is acceptable, but it's not that there's a status quo that we can revert to where countries won't be demanding change. So I do think that that's important to keep in mind, that there's not one perfect, if the United States just does X or if these other countries just do Y, that then everything will stay the same. There's going to be constant demands for change because there's a sense that countries need revenue, and they need changes to the system we have.

David D. Stewart: What is the role of the U.S. toward this ultimate fix? Given that every few years, we can have wild swings in the policy direction of the country. What will that mean for this multilateral solution that we seem to need?

Lilian V. Faulhaber: I'll take that to start, and then I look forward to hearing what everyone else has to say. One thing that I think is striking, that I think maybe doesn't get as much attention as I think it should, is the fact that the OECD was not one of the multilateral or international organizations on the executive order issued by President Trump about the international organizations that the United States was withdrawing from. In fact, the United States seems to be quite actively engaging in multilateral negotiations at the OECD inclusive framework. We can talk separately about the United Nations because that's a different story.

But at the OECD, the United States is still very involved. I think that's an important part of the story because I think one thing that people have really been focusing on is what Ama referred to as the section 899 retaliatory or revenge tax. So this is the United States Congress, as part of the One Big Beautiful Bill Act, it included this provision which was seen as essentially bullying other countries. It was going to impose extra taxes on countries that had taxes that were seen as unfair in various ways, including being extraterritorial. So these were some taxes that are part of pillar 2 and also DSTs.

The reason for including that was that this was seen as an aggressive way to push for getting pillar 2 to include a side-by-side agreement. If you look at the recent story, it feels that the United States is kind of going its own way, coming in and bullying countries. But if you look at where we were about five years ago, the side-by-side agreement, I would argue, is actually not that different from where it looked as if the United States was heading under the first Trump administration. You can look through the documents that the OECD published, and you can see that there were, it wasn't referred to as a side-by-side agreement, but there were references to global intangible low-taxed income coexistence. Essentially, the idea was special rules will have to be passed to acknowledge that the United States actually had the rule that was the predecessor to the pillar 2 rule.

Short term, the United States was aggressive and had this rule that was a revenge tax that other countries understandably saw as very aggressive. But medium term, the United States has been trying to figure out how to have its own rule be recognized as part of this process. I think that you can see the United States' engagement in pillar 2 as just part of a long story of the United States staying engaged in multilateral negotiations at the OECD level in order to protect its own interest. Because the United States knows that if it doesn't get involved in these, if it stays completely out of these, its own interests actually won't be protected.

Other countries will agree to provisions that actually won't be favorable to the United States, and/or -- the interests aren't always the same -- United States multinationals. So different administrations are going to favor different parts of those interests, or they're going to view those interests differently. But I think that you can see the U.S. consistently staying involved here as a partner which wants to be involved in these multilateral negotiations, because that's the best way for it to protect its interests. And I think you can see that even with this administration.

Aruna Kalyanam: Yeah, Lilian, I would completely agree. I think in 2025, the first year of the second Trump administration, we really saw a rapid departure from a number of large multilateral organizations, global organizations, things like the World Health Organization, and there was a real fear that the U.S. would pull out of the OECD, pull its share of funding at the OECD, and abandon these efforts altogether. I think that it's fair to say there was a collective sigh when the U.S. didn't do that. This is a very good thing that the U.S. continues to engage at the OECD, in that platform, albeit we're seeing a little more of these responsive policy measures that are emerging with respect to section 899, the so-called revenge tax. People describe it as it's not just sort of like bringing a gun to a knife fight. It's like bringing a nuclear warhead to a knife fight, and U.S. lawmakers were abundantly clear and aware of that, of the power of this provision.

I think that it's section 899's existence that really drove the reconsideration of what side-by-side could mean here, to really dig in and analyze how the U.S. system, and the argument that the U.S. had a global minimum tax before pillar 2 even came around. [What it meant to] really dig into these arguments and figure out where we could build consensus in the inclusive framework. That's with respect to pillar 2.

I think that there's a big question out there regarding section 899. A lot of my European colleagues, immediately after the side-by-side came out, are like, "So it's dead, right? Section 899 is dead, right?" The description I use, I'm like, "I think it's fair to say that section 899 is no longer on the table, but it's on the floor next to the table." You can still see it. There is no reason to think that these kinds of policies would not be resurrected if you're talking about global policies that are having discriminatory or adverse impacts on U.S. companies. I think that it's important to remember that this is a driving philosophy of the Trump administration and the Trump Treasury, that there's very much a need to ensure that U.S. companies are able to not survive but thrive in markets overseas.

One thing about DSTs that I think is important to remember, and this goes back to the 2019 Chip Harter proposals that we started seeing, unlike pillar 2, which was negotiated under the Biden administration and really took on a very partisan hue, the opposition to DSTs has historically been bipartisan. It feels very strange to use this term in a tax discussion, but there's like a bit of a patriotic lens that goes into how you view what these taxes are doing, who they apply to. Did they largely apply to U.S. companies? Are U.S. companies being targeted? Policymakers in other countries don't necessarily see it that way, as that being an objectionable thing, but U.S. policymakers, a number of them, really do.

So navigating what a path forward looks like, or what consensus or what an agreement looks like, is going to be something that is going to be a little bit interesting to see how you build, I guess, consensus for a system that is going to impact, that is going to run right into bipartisan opposition. And what will be not just good for the companies, but good for the policymakers in this space.

David D. Stewart: We're now more than 10 years past the first BEPS project. There has been a second BEPS project, and both of these have happened at the OECD. If this doesn't solve the questions surrounding the taxation of the new modern economy, is it time to move on from the OECD?

Lilian V. Faulhaber: I'll start on that. One of the things that I think is so interesting about this question is that it highlights the fact that there's an institutional competition that's going on as part of all of these projects. So you could see this before BEPS 1.0, when the G20 was what came out with the idea of a BEPS project. And there was a question as to what international or multilateral organization was actually going to do the work. Which one was going to take the lead here? Was it going to be the IMF? Or was it going to be the United Nations or the World Bank? There were all kinds of competitors who were trying to take this position, and the OECD ended up taking the lead, and that was due to a lot of the work that it had done previously in the tax space.

But then after BEPS 1.0, one of the complaints about BEPS 1.0 was that it hadn't been sufficiently inclusive. So the OECD responded to this by inviting dozens of countries, which is how we got to the 140, 150 numbers that we've been throwing around, and it created the inclusive framework. It was able to do this based on its history of having a global forum and having reached out to other countries. So it built this based on the legitimacy that it had been building over the years.

But right now, the question that you asked, David, is highlighting the question about has the OECD done enough to maintain its legitimacy? Because one of the complaints is that even though you have over 140 countries who are sitting at the table -- to use the OECD phrasing -- on equal footing, they don't feel that necessarily all of their interests are being represented. And there is a question as to whether all their interests can be represented, and if they can, what the correct venue is.

The United Nations has now reached out and started its own process, and many countries who are taking the lead in the OECD space are not taking the lead, or taking the lead by not being involved in the UN space. So the United States and many European countries are not involved in the UN space. But the fact that other countries are willing to go there is starting to show that there is a threat to the OECD's legitimacy. And I think that the OECD is very aware of that, that it had tried to create this inclusive framework. The OECD might be the one who can most clearly answer the question about: Can pillar 1 and pillar 2 be salvaged? Because if they're not salvaged in the form that they're in, that may raise questions about legitimacy.

Nana Ama Sarfo: I really like this question, so I want to weigh in on it. Because for me, the question about moving on raises another question of: What are we moving on from? Because a lot of the discussion surrounding international tax policymaking at the OECD have centered around the inclusive framework, which makes sense because it's one of the largest multilateral tax bodies and, of course, the BEPS 1.0 and 2.0 projects have been quite historic in both their scope and their ambition. But tax policy standard-setting at the OECD is much more than the inclusive framework. I mean, it also occurs within the auspices of the Committee on Fiscal Affairs, and they set general standard-setting.

So if we are looking at this topic of whether or not we should move on from the OECD, the question is: Are we moving on from the inclusive framework, whose mandate is to handle the implementation of the BEPS project and also to address the tax challenges of the digital economy? Or are we looking at moving on from this larger OECD tax infrastructure in general, which I think some stakeholders in the public space have alluded to? Or are we thinking about moving on in a different way? And that would be centering tax policymaking in a new institution that addresses issues that perhaps are not addressed at the inclusive framework or perhaps are not addressed as thoroughly as some countries might like.

I think with regards to the first option of moving outside of this OECD tax architecture, in general, that's definitely not an option because the Committee on Fiscal Affairs is responsible to its members. So it has to set tax standards for them. And then as for this second question as to whether or not we should move on from the inclusive framework, I think that for many countries, particularly OECD countries, that's a political nonstarter. Because they have made it very clear, abundantly clear, that whatever happens at the UN should not replicate the OECD's work, and it certainly should not undermine the OECD's work too. So I think what we're seeing within the UN process is that it's really focusing on this third option of focusing on work that's not really being discussed or prioritized within the OECD inclusive framework. So that's one point that I had wanted to make.

But then also another point I wanted to make is that for stakeholders who are perhaps surprised by the emergence of this UN process, I don't think that they should be. And I don't think that they should be because I see it as an outgrowth of the capacity-building work that the OECD and other multilateral organizations like the World Bank and the IMF and also the UN have been doing with developing countries for many years. So as they have gained their independence, as they have become stronger participants in the global economy, they have taken the tax technical know-how that they have received through these capacity-building efforts, and they have started to sit with them and think about them and question whether these principles apply to their national circumstances. So we're seeing them shift from this position where they are rule implementers to a position where they want to be rule setters. So within that context, I think that the UN process really is not a surprise.

David D. Stewart: Given where we are now, is it safe to say that digital services taxes are here to stay?

Aruna Kalyanam: That's a really good question, and please don't get mad at me for answering this question in this slightly different way. DSTs are one option for solving a problem that is much bigger, and a global problem, and that's truly, it applies to countries all over the world, that's the need for revenue. You have countries that emerged in disparate ways from the COVID economic crises that played just geographically all over, and some countries were much more slow to emerge. Some have persisting inflation as a result of that. You also have demographic challenges where you have social safety nets are coming up against an aging population, and these outlays affiliated with caring for older generations are becoming overwhelming. So countries everywhere, they just need more money.

I don't want to oversound like I'm Captain Obvious over here, telling this room of tax professionals what they already know. But how do you get more revenue? You can increase taxes. You can increase what you tax. You can grow the economy. You can tax new stuff. And you can go through what's sort of politically easier over here. I think it's easier for other countries to figure out a way to get revenue that isn't going to impact the people that elect them. So in some ways that looks like DSTs. I think about alternatives over here that you've seen examples of over in Europe. You could tax carbon. You have carbon border adjustment mechanisms. You can raise revenue while measuring other elements that might be disfavorable, societally disfavorable, or things like that.

But I think you're going to run out of ways here. Or perhaps AI will tell me that there's another way to get revenue out of our existing global economic framework. But so long as that question persists, who knows? There might be incredible efficiencies built in as a result of the technological wave that we're seeing just start out. Maybe those things can help alleviate some of those cost burdens. But so long as these revenue needs continue and persist — well, actually I take that back. There's one other space here where you can get revenue and that I think we are all seeing emerge here, and that's kind of increased scrutiny in tax administration.

You'll see tax administrators the world over really tightening their rules and looking for avoidance, evasion, aggressive behaviors, and taking different positions than they may have in a period of time, or in initial examinations, of what companies are doing. That's a trend that I'm seeing in tracking as well, again all over the world. I would say that in the United States, the IRS is a bit of an outlier with respect to this type of more aggressive policing of what's going on.

But when you have this list of options of how to increase revenue at a time when you need revenue, I think countries are going to continue to look at sources. But also keeping in mind that nuclear warhead is still there. That is not the only U.S. response. My understanding is that the Office of the United States Trade Representative already has analyses underway of what DSTs and other countries look like, whether or not those are economically discriminatory, and how to respond to those.

I know this is not a tariff conversation, but the whole suite of responses in the tariff policy sphere is, I think, open and ripe for game, ripe for application. So it is not like any of these decisions are going to be made in a vacuum. Be it a discussion at the OECD or at the UN, people are quite aware of what the U.S. and what the Treasury and what the Congress is ready and willing to put on the table in order to ensure that these provisions do not move forward and impact U.S. companies in an adverse way.

Nana Ama Sarfo: I agree with you that I think that DSTs are durable and they're here to stay. It's something that I've written about over the years. It's interesting to see the different policy justifications that governments are applying to DSTs. For example, around 2021, Kenya had entered this IMF financing package, and it needed to engage in tax reforms. So it decided to implement a DST to raise revenue, and it has since moved on, and it has a significant economic presence tax. The African Tax Administration Forum has even suggested for its members that they should consider implementing DSTs, and not so much from a revenue-raising standpoint but actually from a tax compliance standpoint. Because the idea is that if countries that are struggling with individual income tax compliance implement DSTs, and the general public sees that the tax administrations are tough on these big multinationals, they may be more inclined to actually pay their taxes.

And then also recently in Australia, we are seeing evidence of this, where the government announced that it is moving forward with a measure that it's calling a News Bargaining Incentive. The idea there is that it's unhappy with the rates that Google, Meta, and other online platforms are paying to local journalists. So they said, "Hey, you need to bargain with them, set some sort of reasonable pay structure. If you don't do that, we'll tax you." So I do think we will continue to see these justifications evolve and provide more cover for why DSTs will not be removed anytime soon.

David D. Stewart: Well, given this need for revenue and that we're going to be seeing these DSTs for a while, are there some models that are better than others at approaching this?

Nana Ama Sarfo: I think the word "better" is a bit of a loaded term. But I think if we are talking about ways to tax the digital economy that are perhaps less discriminatory than a DST, one thing or one area that comes to mind would be implementing VAT on digital transactions. I know that this is something that the OECD has discussed in the past. It's actually implemented guidance and toolkits in this arena.

And then the other family of provisions would be significant economic presence taxes because they apply to a traditional income tax base rather than applying to gross revenue like DSTs do.

But I think if we are looking at it, so -- many, many years ago, the OECD had published this family of guidelines that should apply to the taxation of electronic commerce. And some of those principles were that it should be neutral, There should be certainty. There should be fairness attached. I think it's hard to pinpoint measures within the digital economy space that touch upon all of these different elements, but if you're comparing VAT or SEP provisions to DSTs, I think they can hit more of those marks than others.

Aruna Kalyanam: David, if I could just comment one thing, everything that Ama just laid out is exactly what U.S. tech companies do not want to face in 140 different countries. My understanding is there are some central American countries that have taxes on digital services, but only those that apply to tourism. You can cut this pie 130 different ways, frankly, for each country to suit their own needs, but that is something that U.S. tech companies view as pretty burdensome, onerous, and unnecessary. You're also in this space where maybe some of those companies feel like they shouldn't be singled out in this space at all.

Right now, you have to take, I think, a longer view than what this year will hold, again, knowing that the Europeans really want to have some sort of a conclusion. It is abundantly clear that if we're starting at the step before step one, that conclusion is it's going to be very hard to reach, if that's even necessarily a goal for U.S. negotiators and representatives in this space. But I think the way Ama described it, these issues are going to persist, and they're going to go on just the world over.

David D. Stewart: What alternatives are out there for perhaps a comprehensive fix going forward?

Lilian V. Faulhaber: I mean, I think part of the issue here is that, to go back to the last question, when you ask, is there a better option? There are better options from different perspectives, from the perspective of different countries, but one of the issues that we see here is that the United States is going to think that the options that target its own corporations are not the best options. Whereas other countries that feel that those corporations are taking advantage of them or are getting to benefit from their consumers and their users and not have to pay taxes, they're going to see those options very differently. So I do think it's worth sometimes thinking that right now in the short term, these large tech corporations are headquartered in the United States. The United States is able to select how much it wants to tax them and defend those corporations.

In the long term, that may not be true, not because those corporations are going to lead but because there's going to be competition from other countries' headquartered companies. And the United States may end up having a different position about what counts as the best option when it's no longer our companies that we're trying to protect but actually we face a need for revenue or we're starting to face these challenges. I think that the three of us have been getting to this repeatedly. One reason that I think there's still space for multilateralism is that no country wants to be facing hundreds of different provisions. No country wants its own companies to be facing all of these provisions. So I don't think there's one silver bullet. I don't think that there's one.

There might be people who support a DBCFT or people who support a certain change to that. They may say, "Well, this is clearly the magic bullet." I don't think that that's true if we're stepping back and looking globally, and trying to say, what will all countries agree to? What is actually going to reform the overall international tax system so that it satisfies both the countries that feel that business changes are threatening their business and countries that are trying to appeal to the political demands to go after these companies and the countries that are trying to protect their own companies? Is there one ultimate solution?

I don't think there's one ultimate solution, but I do think that the countries have to be sitting together and talking in order to prevent what I think we agree is definitely not the solution, which is just everybody moving forward unilaterally trying out all kinds of new things, imposing them on corporations who are then trying to figure out how they all work together, and they're having different incentives and different consequences that are not necessarily consistent.

Aruna Kalyanam: I mean, I can tell you that the VPs of tax that I talked to would tear their hair out. If you have to sit and discuss this with -- They're already talking about how much they have to travel and the business they have to do in the difficult countries, but this is a whole new level at that point. I would totally agree.

I think the part that I struggle with, and some of my European colleagues asked me this, the question is like a little bit of a flippant question. I was like, "No, I don't think you understand where the U.S. policymakers have historically been on DSTs." I would say, "We're restarting this conversation." So I fully admit that these were like 2019 positions, that's seven years ago. Things are obviously different, and the digital sphere looks different. But I keep getting asked, "No, no, no, I get it. I get it. But what's the bare minimum that the U.S. could agree to?" As if that exists. "No, no, no, that's all kind of fluffy talk, and I get you're angry and all that, but there's got to be something you can agree to."

I have to tell you, just from my experience in seeing where this conversation has gone, it's gotten further apart, not any closer. We can identify or put up whatever is in the center of this very small Venn diagram. What could that look like? And it's something that I think that my European colleagues find a little bit interesting, surprising, and maybe baffling. But I do think that this conversation is very much in the early stages, and it's in this revisited form.

David D. Stewart: So I guess the big question going forward here is: We've been at this, again for 10 years, and as Aruna alluded to, the economy 10 years ago is not the economy of today. The economy of today is not going to be the economy of tomorrow. So what should we be doing to think about where to go from here? Ama, why don't you take that?

Nana Ama Sarfo: Yeah. First of all, as everyone has discussed here, it's abundantly clear that this discussion regarding the taxation of the digital economy is very much in play within the OECD. But I do think that there is some weariness or fatigue that has slipped into the discussions. Given the fact that, for example, the EU wants to wrap this up by the end of this year. Also, given the fact that we're seeing within the UN process, there's been a push to discuss the possibility of creating new nexus rules that would attach to the taxation of cross-border digital services. So it seems like that's some form of rethinking that's currently happening.

And then I would also, to tack onto that, point out that when the OECD created a report on the taxation of the digital economy many years ago, it had pinpointed that the allocation of taxing rights and then also nexus issues were really important for stakeholders. We are seeing that that topic appears to be cropping up again within the OECD and also within the UN process.

I know that, I think, fairly recently, a U.S. Treasury official had stated that, "Well, we are not going to dictate what happens within this reinvigorated discussion on the digital economy. But if people want to talk about residence versus store taxation, that's certainly possible, if that's something that the broader group wants to discuss as well." Given that the UN is also starting to work on this, I do think that that's an area where there could be some cooperation. And to Lily's point, it could be a place where both organizations get involved to rethink what this space should look like.

Lilian V. Faulhaber: I will say one thing that I always remind myself of is that countries and international organizations can always surprise you. I'm going to end with three examples of this that I hope leave us with a sort of optimistic, we-can-always-be-surprised lessons.

One thing is, if you think about how the United States looked at rate competition, for years, the United States always said it was a country's sovereign right to set its tax rate wherever it wanted to. From the late 1990s, there are examples of this in the early 2000s, and that was the consistent United States position.

And then, in 2017 the United States passed GILTI, which imposed a minimum rate with a carveout, and there were specific details. But this was a huge change from where it had been only a few years before. And then the European Union and other members of the OECD ended up moving forward, and this is what pillar 2 was, in passing their own minimum tax. And we're now in a place where debates over tax competition are so far away from what they were pre-2017, that it's hard to remember the role that the United States used to have in tax competition. And that's striking, and I think it's worth remembering just how quickly that turn happened.

The other example here refers to BEPS 1.0, which is that during the course of BEPS 1.0, members of Congress consistently wrote letters and brought members of Treasury in for hearings to remind them that it was up to Congress to pass anything that came out of BEPS 1.0, and they never would pass anything from BEPS 1.0. There are letters that said, "You are negotiating something. You don't have the authority to do so." This may remind all of us of something that happened more recently. "And this is Congress's right to pass, and these are not things that we want passed."

The 2017 tax reform comes along, all of a sudden, multiple outputs from BEPS 1.0 are now being put into U.S. law before it's put into laws of other countries, and that itself is also striking. There were reasons for that, and those are now parts of our law. But again, that was just a change in where I think you could have predicted where the United States would go in 2015.

The final one is just the existence of the inclusive framework. We now sort of accept that you have 140-plus countries who are sitting around the table at the OECD with the OECD secretariat. That was not foreseen at all in 2013 when BEPS 1.0 started. This was not something that the OECD had said as part of its institutional competition that they would do to sort of support legitimacy and show that they could reach out to other countries. That was not foreseen, and that now this is the role that the OECD is playing.

So I think that where we are if we sit down in five years and we talk about this, we may be very surprised based on what we could have predicted at this point. Because I actually do think that there are always unexpected things that happen in this space where countries end up realizing that something that previously didn't seem to be in their interest is much more than they realized previously, it's much more in their interest, and where international organizations play different roles. As Ama said, maybe we'll have international organizations working together. We don't know. But I do think that that gives me some room for confidence and optimism, is that you never expect where we'll end up in this space.

Aruna Kalyanam: David, I guess just for my parting thoughts over here, I think that the business environment is really complicated right now. In 2017 you weren't thinking about cross-border trade tariff inputs, geopolitical conflict, an overall fight for resources, and then tax is like another element of this that you're going to be thinking about. So companies are most certainly keeping a keen eye on how tax systems are going to work and interface with greater transparency, greater information sharing, and what that means not just for a company's bottom line but also for their public face. I think this is a really critical piece here, the whole notion of tax fairness and what that means country by country to people who are watching an extraordinary amount of wealth be created but somehow feel left behind.

So in my mind, I've thought about this a lot in the last year and a half, I think that where global cooperation was really driving these discussions, these considerations, and these outcomes for the last, I would say, 10 years plus, and make that even 15 years. It's now competition, and that means that some of the players here are going to come out better than others, and some will come out worse off than others. From where I sit and what I'm seeing, that's the window that we are sitting in and looking out of for the time being. Because I do think at the end of the day, all of our U.S. economic growth and U.S. companies, as well as companies all over, will benefit a lot more with that cooperation coming back.

David D. Stewart: Well, there's one thing that's certain from this whole thing, and there's always going to be more to talk about, but for now, we're going to leave it there. Lilian, Aruna, and Ama, thank you so much for being here.

Lilian V. Faulhaber: Thank you so much.

Nana Ama Sarfo: Yes.

Aruna Kalyanam: Thank you.

Nana Ama Sarfo: Thank you for having us.

David D. Stewart: Again, I'd like to thank my guests, Lilian Faulhaber, Aruna Kalyanam, and Nana Ama Sarfo.

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