ICC comments on the OECD Discussion Draft Follow up Work on BEPS Action 6: Preventing Treaty Abuse (2015)
ICC provided fundamental feedback to the G20/OECD’s BEPS Project on proposed modifications to BEPS Action 6 concerning follow up work to prevent treaty abuse.
Base Erosion and Profit Shifting (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 6 deals with the continued work related to the contents of the model provisions and related Commentary, as well as with issues related to the treaty entitlement of collective investment vehicles (CIVs) and non-CIV funds.
In response to OECD’s Discussion Draft on the follow up work on BEPS Action 6 ICC reiterates its position on preventing treaty abuse as already submitted to the OECD in 2014. (Submitted in response to Discussion Draft in April 2014). ICC notes that the proposed changes focus solely on combating treaty abuse without due regard for the fact that the vast majority of potential beneficiaries of income tax treaties do not engage in abusive practices. ICC warns that potential beneficiaries of income tax treaties in many cases could be deprived of the certainty and predictability that is the fundamental goal of tax treaties and which is essential to facilitate cross-border investment.
The OECD and G20 are urged to dedicate the required time to sufficiently analyze the repercussions of any changes to the international taxation system.