BEPS Action Plan: Action 14 – Dispute resolution mechanisms

The OECD’s goal in action 14 of the BEPS Action Plan — of making dispute resolution mechanisms more effective — should be readily welcomed by taxpayers. We provide commentary and links to content on how the additional impetus should help to bring mutual agreement procedure (MAP) issues to a head and provide more robust ways for issues to be resolved.



Read our response to the latest discussion draft

19 December 2014

A discussion draft of 18 December acknowledges that the OECD should complement its actions to counter BEPS by improving the effectiveness of the mutual agreement procedure (MAP) but…views global consensus on mandatory binding arbitration as unlikely in the near term, so it proposes a three-pronged framework for improving MAP dispute resolution:

  • political commitments to effectively eliminate taxation not in accordance with the tax treaty in question
  • a monitoring mechanism (peer review by competent authorities) to ensure proper implementation of the political commitment
  • new measures to improve access to MAP and procedures.

Many tax authorities lack sufficient resources, and the MAP process can be lengthy, inefficient, and unpredictable. The BEPS initiatives and governments’ unilateral actions will undoubtedly place further strain on administrative processes. The draft proposes several administrative best practices, including (i) sufficient resources that are autonomous from tax audits and (ii) appropriate incentives to resolve cases.

The OECD seeks to implement four principles:

  • MAP-related treaty obligations are fully implemented in good faith. A revised Model Treaty Commentary would oblige competent authority ‘to seek to resolve’ cases in a ‘practical, fair and objective manner.’
  • Authorities promote prevention and resolution of treaty-related disputes.
  • Taxpayers can access MAP when eligible.
  • Cases are resolved once they are in MAP.

The OECD encourages the use of alternative dispute resolution options, such as bilateral Advance Pricing Agreements (APAs), which would proactively increase certainty and decrease the risk of double taxation. It is disappointing that the OECD has been unable to reach broad consensus on the need for mandatory binding arbitration.


10 September 2013

It’s to be hoped that the additional impetus provided by the Action Plan should help to bring MAP issues to a head and provide more robust ways …

for issues to be resolved. MAP has been a problem for some time, with access to the process being denied to some taxpayers in some territories and failure to reach agreement not uncommon.


9 September 2013

The OECD’s goal here of making dispute resolution mechanisms more effective should be readily welcomed by taxpayers. The OECD has been …

focusing on making MAP more successful and, has been working with tax authorities to understand the problems. This is a matter on which business, through the OECD’s Business and Industry Advisory Committee (BIAC), has for some time been lobbying the Organisation.

The importance of this point is emphasised by recently published OECD statistics which show a continued rise in unresolved disputes. They indicate that at the end of the 2012 reporting period, the total number of open MAP cases reported by OECD member countries was 4,061 — a 5.8% increase as compared to the 2011 reporting period, and a 72.7% increase as compared to the earliest available 2006 reporting period. This is at least partly due to the generally upward trend of new cases across the OECD as a whole during this period. The average cycle times for cases to be completed, closed or withdrawn actually decreased slightly in 2012 (23.20 months) as compared to 2011 (25.59 months), and at its lowest point in 2010 (27.30 months), but is otherwise similar to what it has generally been in earlier years.


19 July 2013

Difficulties currently experienced in resolving bilateral treaty-related disputes between jurisdictions over taxing rights were highlighted…

 in discussions between the Business and Industry Advisory Committee to the OECD (BIAC) and tax authorities during the course of the initial BEPS discussion. Many, but not all, bilateral treaties include a mutual agreement procedure (MAP) based on the OECD Model Treaty, and in many cases this has worked well. But even where there is a MAP article in a bilateral treaty, it often requires only that the competent authorities use their best efforts to reach agreement. Reasons for unresolved double taxation range from restrictions imposed by domestic law on the tax administration’s ability to compromise to stalemates on economic issues such as valuations.

The action, with a timeframe of two years, is to agree on ways of resolving disputes where MAP does not work or is not applied. The OECD has looked at this issue previously, resulting for example in its Manual on Effective Mutual Agreement Procedures (MEMAP), so the issues are fairly well known. The challenge remains whether jurisdictions can now be persuaded to do anything about them.