ICC welcomes conclusion of BEPS project but underscores significant implementation challenges ahead
The largest business association in the world welcomes OECD recommendations on most fundamental reform of global tax system in a century but notes significant challenge ahead to ensure rules are implemented in a coherent and coordinated fashion—including with non-OECD countries.
The International Chamber of Commerce-the world’s largest business organization representing over 6,5 million members globally-welcomed the conclusion of the OECD Base Erosion and Profit Shifting (BEPS) project announced today in Paris.
Commenting on the release of the final BEPS reports, ICC Secretary General, John Danilovich said: “This is the first fundamental reform of the international tax architecture in a century. We’ve said all along that it’s vital that the BEPS project produces rules which are coherent, transparent and predictable. Though the substance of the OECD recommendations will require very careful analysis, it’s clear that in a number of areas, such as permanent establishment and transfer pricing, the BEPS package contains proposals which would much better align tax systems with the dynamics and realities of modern business.”
As regards implementation of the package, Mr Danilovich added: “It is now imperative that the overall package is implemented in a coherent and coordinated manner-and, moreover, in close cooperation with business to ensure the reforms are both practicable and effective. This will be a challenge, but we have to get implementation right both to protect government revenues and to safeguard cross-border trade and investment.”
Though the substance of the OECD recommendations will require very careful analysis, it’s clear that in a number of areas, such as permanent establishment and transfer pricing, the BEPS package contains proposals which would much better align tax systems with the dynamics and realities of modern business.
Going beyond the OECD
ICC has also stressed the importance of ensuring that all countries-not just OECD states-work together to ensure a consistent international tax landscape following the publication on the BEPS recommendations.
Christian Kaeser, Chair of the ICC Commission on Taxation and Global Head of Tax at Siemens AG, said: “For the business community, the integrity of the international tax system is of critical importance. It is therefore vital that OECD and non-OECD countries work closely together on a common understanding to prevent inconsistencies between national tax legislations and to avoid unilateral disparate tax rules.”
Dispute resolution – urgent action needed
ICC remains highly concerned that compliant taxpayers will suffer collateral damage as a result of a tightening of international tax rules under the BEPS project Today Pascal Saint Amans, OECD Tax Policy Director, fully acknowledged that there will be an increase in double taxation risks going forward. In this context, effective dispute resolution mechanisms are imperative to mitigate the possible “tsunami” of double taxation cases and associated tax disputes are anticipated in the coming years.
Donia Hammami who leads ICC’s work on taxation policy, said: “We are delighted that 20 countries-which together were responsible for 90% of outstanding Mutual Agreement Procedure (MAP) cases at the end of 2013-have signed up to mandatory binding MAP arbitration. This – and the minimum standards agreed upon – are an important first step, but there needs to be a comprehensive debate to make sure that all countries come on board to ensure the required legal certainty to facilitate economic growth and FDI. This must be a first-order priority for policy makers in the coming months”
In this context, Ms Hammami underscored the importance of the planned work of the UN’s Committee of Experts on International Cooperation in Tax Matters on tax dispute resolution: “We welcomed the recent decision to provide the UN Committee with additional resources and we hope that this will ensure rapid progress in the months ahead on the issue of dispute resolution.
“It is important that the work of the UN Committee continues to be technical rather than political in nature. Close cooperation with the OECD is essential to ensure synergy and to work towards one single set of effective rules with a sense of joint ownership and in dialogue with the business community.”
ICC has been extensively involved in the OECD BEPS process representing global business views-from major multinational firms through to SMEs in every region of the world. Please visit our tax portal to view the full set of ICC recommendations to the BEPS process over the past two years.