ICC Comments to the OECD Discussion Draft on Action 11: “Improving the Analysis of BEPS” (2015)
In the context of the G20 endorsed OECD/BEPS Action Plan, the International Chamber of Commerce (ICC) provided feedback on the OECD Discussion Draft on Action 11 centred on improving the analysis of BEPS.
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. However, it is challenging to differentiate the real economic effects from those of BEPS behaviours based on the data currently available, which in turn, hampers taking effective decisions on the other items of the Action Plan.
In this context, in its comments, ICC welcomes an ongoing analysis of the magnitude of BEPS and the effects of measures taken, while at the same time pointing out that it would have been highly desirable if an appropriate analysis had been conducted of the magnitudes involved prior to the proposals being presented within the OECD/BEPS project.
In the on-going effort to quantify BEPS, it is critical to analyse the effects of both profit shifting techniques and measures taken against it. For this to be accomplished, analysis would have to be undertaken counterfactually i.e. what results can be attributed solely to BEPS? Within this context, ICC believes that the indicators included in the draft, such as the concentration of Foreign Direct Investment, fail to separate the real effects from those of BEPS.
As the world business organization, ICC highlights that the examination of BEPS must not become overly burdensome for business. Moreover, ICC urges tax authorities to safeguard that business sensitive information remains confidential.