The framework announced by the OECD early last week was endorsed by G20 Finance Ministers during their February meeting in Shanghai.
At the conclusion of the G20-mandated OECD/BEPS project in October last year, ICC underscored the need for the rules to be implemented in a coherent and coordinated manner, including non-OECD countries, to ensure a consistent international tax landscape.
“This is a positive development that helps to ensure that all countries work closely together in an effort to prevent inconsistencies between national tax legislations and to avoid unilateral disparate tax rules,” said Christian Kaeser, Global Head of Tax at Siemens and Chairman of the ICC Commission on Taxation. “From the perspective of the business community, international consistency is an important prerequisite to avoid double taxation: steps to reach alignment at a global level are always welcome.”
From the perspective of the business community, international consistency is an important prerequisite to avoid double taxation: steps to reach alignment at a global level are always welcome.
The OECD’s framework for the BEPS implementation will allow any country to participate in future BEPS work under this new mandate if the country agrees to pay an annual fee and adopt the BEPS project minimum standards on:
• harmful tax practices (action 5);
• treaty abuse (action 6);
• country-by-country reporting (action 13);
• dispute resolution (action 14).
As part of these conditions, countries would in effect need to agree to implement the mutual agreement procedure (MAP) in their tax treaties which would enable them to better carry out the interpretation and application of the substantive treaty provisions. Twenty countries have already signed up to mandatory binding MAP arbitration and ICC has consistently urged all governments to do so to ensure the required legal certainty to facilitate economic growth and foreign direct investment.
Paul Morton, Head of Group Tax, RELX Group PLC, Vice-chair of the ICC Commission on Taxation said: “The interpretation and implementation of the BEPS recommendations will create uncertainty and lead to a higher risk of double taxation. This would increase the number of taxation disputes which is why ICC believes that a solid dispute resolution mechanism with mandatory agreements should remain a corner stone of the BEPS outcomes.”
The principal aim of country-by-country reporting should be to develop a high-level risk assessment tool to provide tax authorities with a better overview of multinationals’ global activities and taxes paid. To this end, ICC urges all national governments not to go beyond the scope of international guidelines, in favour of legal certainty and confidentiality of commercially sensitive information.
ICC recognizes OECD efforts to ensure a consistent global approach in the implementation of the BEPS project which included the signing of the Multilateral Competent Authority Agreement on country-by-country reporting by 32 countries earlier this year.
With only eight of the G20 countries signing on, ICC cautions against countries taking unilateral action that could stifle cross-border trade and economic growth, and encourages governments to implement measures that help establish a level playing field for the international tax landscape.
Click here to learn more about the ICC Commission on Taxation.