The OECD has released public comments on the BEPS discussion draft on action 14 (making dispute resolution mechanisms more effective). See the 413-page document.
The discussion draft represents the preliminary result of the work done to identify comprehensively the obstacles that prevent countries from resolving disputes through the mutual arbitration process (MAP) and to develop possible measures to address these obstacles. The draft recognises that further progress remains to be achieved, and that there is no consensus on moving towards universal mandatory binding MAP arbitration. The draft suggested that complementary solutions should be provided which will have a practical, measurable impact, rather than merely providing additional measures or guidance which may not be fully used or implemented.
Many respondents commented on the importance of the action and called for more to be done. The CIOT said that ‘improving MAP is essential if double taxation is to be reduced. After all, there is only resort to MAP in cases where double taxation arises.’ The lack of consensus on moving to a universal binding MAP was ‘disappointing’. The Institute added: ‘It is therefore important that the proposal to adopt minimum standards of responsiveness by all member states to the challenges identified in the action 14 paper, is accepted.’
Similar concerns were echoed by the Association for Financial Markets in Europe and the British Bankers’ Association. Those organisations ‘strongly encouraged’ the OECD to be ‘more ambitious’ in delivering a consensus on an effective arbitration process. They suggested that ‘establishing best practice guidance for mandatory time-bound and binding arbitration between countries would guide and encourage its development.’
William Morris, chair of the BIAC Tax Committee, said the action was a ‘critical factor in the success of the entire BEPS program. This was not because it dealt itself with base erosion and profit shifting, but because it provides the necessary predicate for those issues to be successfully dealt with.’ He made the following points:
‘As this is primarily an issue of tax administration, and as tax authorities have the greater interest in maintaining cooperative compliance models, we believe that the FTA and, in particular, the MAP Forum, should be central, rather than parallel to this process. The FTA can make a real difference here.
‘A “political commitment” is not enough. There have to be robust mechanisms and processes actually brought into effect as a direct outcome of the BEPS process.
‘Binding arbitration is a critical part of any solution. We understand some countries have genuine concerns, but that is not a reason for binding arbitration not to be the general standard for countries that are fully committed to avoiding double taxation.
‘The MAP process must be properly resourced and suitably positioned in the structure of a tax authority.’
A public consultation meeting on action 14 is scheduled to be held in Paris at the OECD conference centre on 23 January 2015. This will be broadcast live.
The OECD has released public comments on the BEPS discussion draft on action 14 (making dispute resolution mechanisms more effective). See the 413-page document.
The discussion draft represents the preliminary result of the work done to identify comprehensively the obstacles that prevent countries from resolving disputes through the mutual arbitration process (MAP) and to develop possible measures to address these obstacles. The draft recognises that further progress remains to be achieved, and that there is no consensus on moving towards universal mandatory binding MAP arbitration. The draft suggested that complementary solutions should be provided which will have a practical, measurable impact, rather than merely providing additional measures or guidance which may not be fully used or implemented.
Many respondents commented on the importance of the action and called for more to be done. The CIOT said that ‘improving MAP is essential if double taxation is to be reduced. After all, there is only resort to MAP in cases where double taxation arises.’ The lack of consensus on moving to a universal binding MAP was ‘disappointing’. The Institute added: ‘It is therefore important that the proposal to adopt minimum standards of responsiveness by all member states to the challenges identified in the action 14 paper, is accepted.’
Similar concerns were echoed by the Association for Financial Markets in Europe and the British Bankers’ Association. Those organisations ‘strongly encouraged’ the OECD to be ‘more ambitious’ in delivering a consensus on an effective arbitration process. They suggested that ‘establishing best practice guidance for mandatory time-bound and binding arbitration between countries would guide and encourage its development.’
William Morris, chair of the BIAC Tax Committee, said the action was a ‘critical factor in the success of the entire BEPS program. This was not because it dealt itself with base erosion and profit shifting, but because it provides the necessary predicate for those issues to be successfully dealt with.’ He made the following points:
‘As this is primarily an issue of tax administration, and as tax authorities have the greater interest in maintaining cooperative compliance models, we believe that the FTA and, in particular, the MAP Forum, should be central, rather than parallel to this process. The FTA can make a real difference here.
‘A “political commitment” is not enough. There have to be robust mechanisms and processes actually brought into effect as a direct outcome of the BEPS process.
‘Binding arbitration is a critical part of any solution. We understand some countries have genuine concerns, but that is not a reason for binding arbitration not to be the general standard for countries that are fully committed to avoiding double taxation.
‘The MAP process must be properly resourced and suitably positioned in the structure of a tax authority.’
A public consultation meeting on action 14 is scheduled to be held in Paris at the OECD conference centre on 23 January 2015. This will be broadcast live.
