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CNBC Interview with OECD Secretary General, Angel Gurria, from the World Economic Forum 2018

Following are excerpts from a CNBC interview with Angel Gurria, OECD Secretary General and CNBC's Geoff Cutmore and Steve Sedgwick from the World Economic Forum 2018.

GC: Welcome, everybody, to the World Economic Forum in Davos. I'm Geoff Cutmore. Let's just talk a little bit about Disney very quickly. Disney is the latest corporate giant to announce a special bonus for employees, following the passage of the US Tax Reform Bill. The company said 125,000 members of staff will now get a $1,000 bonus, and it's also launched a $50 million higher education fund. So, one of the benefits, perhaps, of Donald Trump's tax reform agenda. Angel Gurria has joined us, he is the Secretary-General of the OECD, and a man who's talked a lot about tax in his time. Angel, nice to see you this morning-,

AG: How do you do? Hello.

GC: Thanks very much for coming. Look, one of the-, one of the benefits, whichever way you feel about the tax reform program, is that it may introduce more tax arbitrage, forcing countries to be more aggressive on structural reform. Is that how you would see the downstream impact of what Donald Trump has implemented?

AG: I think, what-, you know, on the face of it, you're talking about lowering corporate taxes, promoting repatriation, and, of course, well, the big infrastructure project, the big infrastructure program. That all adds to more growth, and, therefore, this very great interest, and the 26,000 mark in the stock market, etc. We'll have to see, the detail have to still be worked out, some definitions, the consistency with WTO, consistency with BEPS, consistency with other international arrangements. It's-, it's early days. The question about structural change is that, regardless of what tax structure you have, structural change has to happen. We've run out of room on monetary policy, or almost. We've run out of room on fiscal policy, or almost. And we have structural change, and the problem is, we are measuring the fact, objectively, that structural change is slowing down, at a time when it should be accelerating. And I'm talking about education, I'm talking about regulation, I'm talking about more competition. I'm talking about flexibility in the labor market, flexibility in the product markets, I'm talking about R&D. All the things that will make the recovery sustainable, medium and long-term. If we only use the short-term cycle, the consumption, etc., the-, the, somewhat, the euphoria-,

SS: Angel-,

AG: Then we will not be able to make it sustainable.

SS: Angel, you and I have had some brilliant conversations, over the years, and one of them you're most passionate about is wages, and empowering people across the globe, and letting them make their own financial decisions, rather than just some, kind of, largess, and trickle-down, as well. Isn't the US tax reform basically for US shareholders, US corporations, and relying on a trickle-down, when actually, what you want to see is people at the grassroots being paid more, paying less tax, and actually dragging themselves in to higher income levels, rather than getting these odd $1,000 bonuses, and then just spend it and it's done?

AG: But the problem with wages being very flat, in some cases, for now many, many years, actually, over very minimum growth, is not new, and it doesn't have to do with the tax reform. It's a secular problem that we've had, it has to do with technology, it has also to do with the fact that we're coming out of the greatest ever crisis that we've had, so, your recovery-, now, in the United States, it's been like a factory of jobs-,

SS: Mm.

AG: And it's not out of this administration, it's already been many, many years-,

SS: Sure.

AG: Where we've created 16, 17 million jobs, and therefore, now, we are ahead of where we were before the crisis, in terms of job creation. It's not the same in every single country, but the question of lower wages, and therefore of the need for skills, skills, skills, reskilling, upskilling, greater productivity, it just-, you know, it speaks for itself. This is not of toady, this is not of, you know, the tax reform. It was always there. We have to get on with it.

GC: One of the issues that you've been incredibly strong on is tax avoidance, and the whole offshore tax haven system. Again, just to come back to this, if we lower taxes, doesn't this introduce less incentive for people to actually engage these complicated structures, to hide their assets? Does this push us in the right direction, in terms of getting companies to bring money back onshore, and getting individuals who are wealthy to stop engaging in malpractice?

AG: We never tell countries that they should have a particular number, in terms of a tax number, you know, if countries can make do with whatever average tax they have. The question is, do they apply it to everybody? Or do they give sweetheart deals to some companies? You know, this is the-, this is the thing. So, we are not recommending homogeneity. Now, in the case of the United States, they had the highest nominal tax rate, but not the highest real tax rate-,

GC: Mm.

AG: The real tax rate was around 24%, or something like that. It's okay that they've moved it down to the 21%. It's also good that, again, there's-, there's this encouragement to repatriate, ideally to invest in the United States. The growth of the United States will help us all. But, the question is, the fight against tax evasion is, on the individual side, automatic exchange of information, already happening since last September, nowhere to hide. If you've got an account anywhere in the world, it's going to be reported to your authorities, no matter what. The bank will tell the authorities, the authorities will tell, you know, your own country of origin, and that's mandatory. The other one is BEPS, base erosion and profit shifting. The multinationals. Are they paying their fair share? We have seen, lately, that they haven't, and the question is, they should, and what we are doing now is that we are putting in place a system which will make that possible, and, in fact, all the things that we've had, for example, the Double Irish, the Double Dutch-,

GC: Yes.

AG: All these tax avoidance schemes are no longer there, we've dismantled them, they could not be repeated over again-,

GC: Angel-,

AG: Because we wiped them off.

GC: Great to see you, thanks so much for coming to us, Angel Gurria, joining us-,

AG: Thank you very much.

GC: The Secretary-General of the OECD.