Base Erosion and Profit Shifting (BEPS) Action Plan
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.
Explore the latest developments and PwC’s global tax specialists’ perspectives on each action point below:
Explore additional BEPS action plans:
Completion of these 15 actions will take one to two years. While it may take considerably longer for the impact of these changes to be fully applied in practice, there are indications that the BEPS project and related developments are already leading to a material shift in the behaviour of tax authorities.
Governments, revenue authorities and business will all have a material role to play over coming months if the proposed changes are to be effective.
Why focus on BEPS?
- Countries experiencing fiscal deficits
- Climate of austerity and renewed focus on the contribution from business
- Attention from politicians and the media
What is the goal of BEPS?
- Focus on double non-taxation (or less than single taxation) through “cracks” in the interaction of domestic tax systems
- Primary aim is to address situations where profits are perceived as geographically divorced from activities
What are the time frames?
- 2014 - Projected completion of approximately half of Action Plan (September)
- 2015 - Completion of remainder of Action Plan (September/ December)
- 2016 onwards - Monitoring, additional/ on-going actions
Will it be effective?
- Some important changes were already agreed by the OECD in the run up to BEPS
- Threshold PE changes
- Beneficial ownership changes
- Material work has been in progress pre-BEPS on what are now central BEPS issues
- IP and TP
- Transparency and disclosure measures
- A clear behavioural shift by tax authorities in many areas has already been seen
- There is unprecedented political backing so no/little movement on BEPS package seems very unlikely – and there is the continuous spectre of unilateral taxation if the package falters
- Overall, there is a high likelihood of there being a material impact from all these factors
- Concentrated work on the action points by the OECD and Member States
- Business Consultation
- OECD reporting in the short term
What action might you take?
- Be aware of OECD work in progress/areas of focus
- Input into business consultation
- Identify significant risk areas and begin remediation as required, based on current actions of tax authorities and the future impact of OECD work
- Monitor the domestic impact of BEPS work – especially on behavioural changes