OECD Action Plan for International Tax


OECD Action Plan for International Tax

The OECD has published (19 July 2013) its Action Plan to address Base Erosion and Profit Shifting (BEPS) by multi-national enterprises. Produced at the request of the G20, the Action Plan identifies 15 specific actions, to be delivered in the coming 18 to 24 months, which will give governments the domestic and international instruments to prevent corporations from paying little or no taxes.

This follows international coverage of US and UK investigations into tax structures used by multinational companies to reduce their tax bills.

The project, known as BEPS (Base Erosion and Profit Shifting) is looking at whether, and if so why, the current rules allow for the allocation of taxable profits to locations different from those where the actual business activity takes place.

The Plan recognises the impact of the digital economy and intangibles, whereby national borders and tax regimes do not capture a corporates income or services allowing entities with no tax residency.

The OECD says that the actions “should provide countries with domestic and international instruments that will better align rights to tax with economic activity”.

The Plan's 15 Actions and themes

The 15 Actions specified in the Action Plan are as follows:

1. Address the tax challenges of the digital economy

Establishing international coherence of corporate income taxation

2.   Neutralise the effects of hybrid mismatch arrangements 3.   Strengthen controlled foreign company (CFC) rules 4.   Limit base erosion via interest deductions and other financial payments 5.   Counter harmful tax practices more effectively, taking into account transparency and substance

Restoring the full effects and benefits of international standards

6.   Prevent treaty abuse 7.   Prevent the artificial avoidance of permanent establishment (PE) status 8.   Develop rules to prevent BEPS by moving intangibles among group members 9.   Develop rules to prevent BEPS by transferring risks among, or allocating excessive capital to, group members 10. Develop rules to prevent BEPS by engaging in transactions which would not, or would only very rarely, occur between third parties

Ensuring transparency while promoting increased certainty and predictability

11. Establish methodologies to collect and analyse data on BEPS and the actions to address it 12. Require taxpayers to disclose their aggressive tax planning arrangements 13. Re-examine transfer pricing documentation 14. Make dispute resolution mechanisms more effective

From agreed policies to tax rules: the need for a swift implementation of the measures

15. Develop a multilateral instrument to enable jurisdictions that wish to do so to implement measures developed in the course of the work on BEPS and amend bilateral tax treaties

The BEPS report may usher in the most dramatic international tax changes for many years.


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