ICC Comments to the OECD Revised Discussion Draft BEPS Action 6 “Prevent Treaty Abuse” (2015)
The International Chamber of Commerce (ICC) provided its comments on the revised OECD proposals to Prevent Treaty Abuse released this spring in second phase of the G20 endorsed OECD/BEPS Action Plan.
The Organisation of Economic Cooperation and Development (OECD) Revised Discussion Draft on Action 6 “Prevent Treaty Abuse” is a revision of the OECD’s 2014 work on this issue in which ICC provided comments in January 2015 and April 2014. ICC is disappointed that the revised discussion draft shows little progress and is concerned that the fundamental concerns raised by business have not been addressed.
Speaking on behalf of enterprises in every sector and part of the world, ICC is fully supportive of the aim of preventing the abuse of tax treaties through both treaty provisions and domestic law anti-abuse rules. At the same time it is very worrisome that Action 6 is focusing only 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 and, 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.
In its comments to the OECD, ICC reiterates its concerns submitted in 2014, highlighting that failure to take the time necessary to consider the integration of all the actions, will result in faulty rules which will create difficulties for businesses – significantly hampering cross border trade and economic growth – and which would take years for governments to correct. Given the constraints of the process, ICC believes that the model provisions should focus on outlining the key elements without prescribing the details that will need to be worked through in bilateral negotiations between States.
ICC recommends that the OECD provide a clear mandate for countries to adhere to when seeking to deny treaty benefits. Furthermore, ICC recommends the OECD to not proceed with introducing the suggested new “special tax regime” and treaty response to certain future changes in a country’s domestic law clauses. In ICC’s view, these elements have been introduced too late in the process with insufficient time for either business or OECD members to consider their implications adequately, including the ramifications of permitting unilateral disapplication of treaty benefits.