With the debate over base erosion and profit shifting (BEPS) having reached the highest levels of governments, and with growing attention from the media and the public on perceived international tax avoidance techniques of high-profile multinationals, the Organisation for Economic Cooperation and Development (OECD) has taken up the matter of BEPS.
The OECD’s Action Plan on BEPS was published in July 2013 with a view to addressing perceived flaws in international tax rules. The 40 page Action Plan, which was negotiated and drafted with the active participation of its member states, contains 15 separate action points or work streams, some of which are further split into specific actions or outputs. The Plan is squarely focused on addressing these issues in a coordinated, comprehensive manner, and was endorsed by G20 leaders and finance ministers at their summit in St. Petersburg in September 2013.
The first stage of work under the Action Plan has resulted in reports on seven of the 15 workstreams. While agreed and approved by the G20 finance ministers in September 2014, the proposed measures are not yet finalised as they may be impacted by further deliverables.
Explore the latest developments and PwC’s global tax specialists’ perspectives on each action point below, and read our responses to the current discussion drafts here.
Completion of all 15 actions will take until December 2015. While it may take considerably longer for the impact of these changes to be fully applied in practice, the BEPS project and related developments are already leading to the need for business to take action (in some cases, urgent action) both to comply with new requirements and to consider the ways in which they do business in different countries. To the extent that the changes relate to the OECD’s Model Tax Convention and Transfer Pricing Guidelines, their implementation is assured and should follow fairly quickly. The speed with which they are then implemented in existing bilateral tax treaties will be heavily linked with the success of the OECD’s proposed “multilateral instrument”, which the OECD has reported can be applied without any obvious technical barriers (though practical issues may be of more concern). The proposed OECD rule changes that involve amendments being made by individual territories to domestic tax rules are likely to be widely but not universally adopted, though consistency and timing is uncertain.
Governments, revenue authorities and business will all have a material role to play over coming months if the proposed changes are to be effective.