In response to one of the most significant Action points in the OECD BEPS project to date, ICC submitted high level and fundamental comments to the OECD’s Discussion Draft on Action 14 Make Dispute Resolution Mechanisms More Effective of the OECD Base Erosion and Profit Shifting (BEPS) Action Plan.
BEPS refers to tax planning strategies that exploit gaps and mismatches in tax rules to make profits ‘disappear’ for tax purposes and/or to shift profits to locations where there is little or no real activity but the taxes are low. This results in little or no overall corporate tax being paid.
OECD’s BEPS Action 14 develops solutions to address obstacles that prevent countries from solving treaty-related disputes under mutual agreement procedure (MAP), including the absence of arbitration provisions in most treaties and the fact that access to MAP and arbitration may be denied in certain cases.
As the world business organization and well-recognized arbitral institution, ICC expresses concern that while the released Discussion Draft on Action 14 provides a number of options for improving the dispute resolution process, it is disappointing that the OECD did not grasp the opportunity of taking mandatory and binding arbitration further forward to eliminate double taxation.
ICC highlights that as the business community is confronted with increasing instances of disputes and a greater risk of double taxation, a strong deliverable on Action 14 is fundamental for the successful outcome of the OECD BEPS project and therefore, more pressing than ever.
In its comments on the OECD Discussion Draft, ICC notes that international arbitration in a variety of contexts has grown significantly since it was initially addressed in 1923 with the establishment of the ICC International Court of Arbitration. ICC notes that many of the same obstacles cited in the taxation context have existed with respect to arbitration in non-taxation areas.
ICC proposes to undertake a comprehensive study as to how the hurdles facing arbitration in the tax field can be overcome taking into account ICC’s vast experience as the world’s leading arbitral institution in non-tax areas. The consideration of lessons learned may provide useful guidance for forging a path by which countries embrace international taxation arbitration, as well as establishing and administering other dispute resolution mechanisms such as mediation and the administration of expert proceedings.