Base Erosion and Profit Shifting (BEPS)
On February 16, the OECD released the final batch of BEPS Action 14 peer reviews, on the efforts of 13 jurisdictions to improve how they resolve tax-related cross-border disputes.
The stage 1 peer reviews were for Aruba, Bahrain, Barbados, Gibraltar, Greenland, Kazakhstan, Oman, Qatar, Saint Kitts and Nevis, Thailand, Trinidad and Tobago, United Arab Emirates and Vietnam.
The OECD has now published stage one peer review reports for all jurisdictions and published three batches of stage two reports. In total, 82 stage one peer reviews and 37 stage one and stage two peer reviews have been finalized, with the fourth batch of stage two reports to be released in a few months.
Of the recently assessed jurisdictions, Gibraltar, in particular, welcomed the findings, issuing a statement to that effect this week.
The Government welcomed what it viewed as an endorsement of the territory’s framework … Read More »
The OECD has revealed that it will be streaming the two-day 11th meeting of the BEPS Inclusive Framework, to be held on January 27-28, 2021.
The OECD explained that opening the event to the public online will allow stakeholders a glimpse into the various international tax-related workstreams undertaken by the Inclusive Framework to date.
One of the key issues that will be under discussion by participants are the tax challenges arising from digitalization and the future of international taxation, including 2021 priorities of the G20.
In October 2020, the OECD released its proposals for reform of international tax rules. Under pillar one of its proposals, new rules will be established on where tax should be paid (“nexus” rules) and there will be a fundamentally new way of sharing taxing rights between countries. The second pillar would introduce a global minimum tax, which the … Read More »
The OECD has released new guidance for multinational groups and tax agencies on the impact of the COVID-19 pandemic on transfer pricing compliance matters.
The new report, titled ‘Guidance on the Transfer Pricing Implications of the COVID-19 Pandemic’, is intended to address practical questions relating to transfer pricing and is part of the BEPS Inclusive Framework’s commitment to improving tax certainty.
The OECD explained that the guidance is intended to aid both taxpayers in reporting the financial periods affected by the pandemic and tax administrations in evaluating the implementation of taxpayers’ transfer pricing policies. The Guidance provides clarifying comment on, and illustrations of, the practical application of the arm’s length principle in four priority issues, identified in consultation with Business at the OECD (BIAC): comparability analysis; losses and the allocation of COVID-19 specific costs; government assistance programs; and advance pricing agreements.
For more … Read More »
At a multilateral level, the OECD has been busy over the last few weeks on the base erosion and profit shifting front, and on December 23 released new tools for tax administrations to gauge how they are performing in the area of tax debt management and the reduction of compliance burdens.
It announced that it has developed new “maturity models,” featuring performance benchmarks against which tax agencies can better self-assess how their processes are performing against best standards and their peers.
Tom Boelaert, the Administrator General of the Belgian Debt Management Agency, which led the work on this model, explained that: “Tax debt management plays a crucial role in ensuring the effective and fair operation of the tax system. We should therefore always challenge ourselves to do better. Within my own agency, this new maturity model has facilitated frank and in-depth conversations … Read More »
The United States Internal Revenue Service has issued final regulations and proposed regulations on the base erosion and anti-abuse tax (BEAT) under section 59A of the tax code, which provide guidance for taxpayers affected by the tax provision.
Added to the tax code by the Tax Cuts and Jobs Act of 2017, the BEAT is designed to penalize those companies that make deductible payments to foreign affiliates to substantially reduce their exposure to US taxation. The BEAT is calculated by adding back certain deductible payments made to foreign affiliates and applying a minimum tax to a percentage of the difference between the taxpayer’s modified taxable income and their regular tax liability, at a rate of five percent for 2018, 10 percent from 2019, and 12.5 percent from 2025.
The provision primarily affects corporate taxpayers with gross receipts averaging more than USD500m over … Read More »
We all know that corporate taxation entails more than just a simple percentage of a company’s profits; it is far, far more involved than that. The 15 weighty tomes that are the final reports of the base erosion and profit shifting project – the fruits of the OECD’s countless hours of labor – are a testament to that.
At the heart of it all is transfer pricing. But, mention the phrase “transfer pricing” to the uninitiated, and they will probably return a blank, bovine stare, almost puppy-like in its wide-eyed, head-slightly-tilted innocence. You’d almost see cartoon-esque question marks forming in their eyes. Start to talk about transfer pricing to them for any length of time, and you might be in danger of losing a valued friend or acquaintance (“where’re you going? I haven’t finished explaining the comparable uncontrolled transaction method yet!”). … Read More »
There are plenty of things in this life that can do us harm. One of them can be taxation. But not, as conventional wisdom might have it, because taxes are too high, and too difficult to work out. No, in the world of BEPS and uber-transparency, taxes become harmful when they are too low. Or, as the European Union’s Code of Conduct Group (Business Taxation), a body tasked with rooting out harmful tax regimes, puts it, when tax measures “unduly affect the location of business activity.” Which is quite ironic really, given that the mysterious and shadowy Code Group has itself been accused of operating in a less-than-transparent fashion.
However, despite the time and resources devoted to this matter, the war against harmful taxation has yet to be won. Although, if recent OECD figures are anything to go by, the final … Read More »
Here’s a conundrum: How do you go about BEPSifying the entire global network of double tax avoidance treaties – or the majority of them at least – without testing out the theory that time is infinite? You use an instrument of course! By which I don’t mean you rewrite the world’s tax treaties using the power of song. This is the OECD’s BEPS Multilateral Instrument, which is considerably less entertaining. But more effective. Probably.
Given that the MLI went into effect on July 1, it’s too early to tell how the changes to be brought about will work in practice. But while it’s likely to shorten the global treaty reform process by several years, the process isn’t going to be an easy one by any stretch of the imagination.
Here’s the thing about the MLI: it’s not a one size fits all … Read More »
For better or worse, BEPS has permeated deep into the fabric of the world’s tax regimes. You can tell this by the sheer volume of tax developments that are related to, directly or indirectly, the issues discussed in the OECD’s BEPS report each week. And the remainder of those tax developments that aren’t exclusively about BEPS likely still reference them in one way or another.
From Liechtenstein to Luxembourg, from Andorra to Anguilla, the list of jurisdictions now incorporating new international standards on tax avoidance and tax transparency tells you all you need to know about how far the BEPS project’s tentacles have spread into the tiniest jurisdictional nooks and crannies.
Combined with tax reform in the United States and elsewhere, for tax commentators, this is boom time – a fiscal Klondike Gold Rush, if you like, with a rich, golden seam … Read More »
Maybe it’s because we now live in increasingly fast-paced, on-demand economies, but there seems to be a growing sense of impatience at the pace – or lack thereof – of the OECD’s work on some crucial areas of the BEPS project – notably around the taxation of the digital economy.
That the European Union went charging into this matter like the proverbial bull in a china shop can be put down to its usual enthusiasm for fixing international tax problems. But even the saintly United Nations now can’t wait any longer, having decided to press ahead with its own work on digital taxation. When the UN can bear the OECD’s procrastination no more, you know the game’s up. The patience of saints is only finite, it transpires.
The official line of most governments is that it is preferable to work in conjunction … Read More »