A little more than two years ago, OECD and G20 countries embarked in the most significant rewrite of the international tax rules.
This was done amid the most severe financial and economic crisis of our lifetime, with an ambitious goal: revise the rules to align them to developments in the world economy and hence ensure that profits are taxed where economic activities are carried out and value is created.
The confidence of citizens into the fairness of the tax system at large is at stake when there is a perception that some can play tricks and avoid their tax liability by walking on the thin line that divides what is legal from what is not.
At the same time, there was a need to prevent that the existing consensus-based international tax framework unravelled and that increased economic integration results in decreased international cooperation and uncoordinated unilateral actions, multiplying uncertainty and unpredictability.
As the diagnosis of the issues contained in the report Addressing Base Erosion and Profit Shifting released in February 2014 shows, no single rule or provision can be finger-pointed as the cause of BEPS. This is because it is in most cases the interplay among different rules that generates BEPS: domestic law rules which are not coordinated across borders, international standards which have not always kept pace with the changing global business environment, and an endemic and worrying lack of data and information.
The Action Plan on BEPS identified 15 actions, along three fundamental pillars:
For the first time in history, all G20 and OECD countries worked on an equal footing to revisit some of the fundamental rules of the international tax rules. What looked a hazardous bet for many has now proven to be a success story. G20 and OECD countries have worked relentlessly together to achieve consensus on complex technical issues, respecting different countries’ perspectives and striving to identify agreed solutions to the shared challenges caused by BEPS.
Developing countries were engaged extensively from the beginning of the project via a number of different consultation mechanisms. Subsequently, they provided input directly, by participating to the meetings of the Committee on Fiscal Affairs and its Working Parties, and also via regional networks meetings organised in Africa, in the Asia-Pacific region, in Latin America and the Caribbean, as well as in the Eastern Europe and Central Asia region. These consultations have been held jointly with regional tax organisations, with a key role played by ATAF, CREDAF, IOTA and CIAT, and other international organisations such as the UN, the IMF and the WBG. Developing countries’ input has focused on the items of key relevance for them and helped shape the final outputs.
The EU Commission was fully engaged and provided its views throughout the project. The parallel work carried out by the EU Commission, and in
Stakeholders have been consulted widely. In total, the BEPS project received more than 1,400 submissions from industry, advisers, NGOs and academics, totalling approximately 11,000 pages of comments. A total of 14 public consultations were held, gathering a variety of stakeholders discussing in an open and frank manner their views and suggestions. To ensure full transparency towards the public at large, these public consultations were streamed live, as were a number of webcasts where the OECD Secretariat periodically updated the public and answered questions. Stakeholders’ input has been in most instances of great relevance given in particular the fast-pace of the project. It helped ensure that the measures are well targeted, do not unduly burden business with compliance requirements, while at the same time they address the policy concerns that were the root cause of the Project.
Stakeholders’ input was also useful to identify areas where ‘collateral damages’ could have been generated. Examples of this include the application of the rules on tax treaties to collective investment funds and other funds. Importantly, a number of rules have been tailored so as to carve out SMEs when they do not raise the same concerns compared to large MNEs. This is
After two years of strenuous work, the 15 actions have been completed. Following the release of the September 2014 outputs, endorsed by G20 finance ministers and leaders, additional measures have been devised and all these outputs have been consolidated into a comprehensive BEPS package.
The BEPS package comprises reports on each of the 15 items identified in the BEPS Action Plan and supersedes the September 2014 deliverables which were agreed but left in draft form so as to be able to take into account the interactions with other action items.
Once the new measures become applicable, the expectation is that profits will be reported where the economic activities that generate them are carried out and where
BEPS structures that have become well-known to everyone and that relied on outdated rules or on the lack of coordination among domestic measures will become ineffective.
The work is not over yet and effective implementation of the different outputs by all relevant jurisdictions will be critical to
In conjunction with the BEPS project, a dedicated work stream under the G20 Development Working Group (DWG) will deliver practical guidance on the priority issues identified by developing countries during the course of the engagement, whether they are part of the BEPS project or not. OECD and G20 countries have also agreed to continue to work on an equal footing on the follow-up technical work on BEPS, and to establish an even more inclusive framework for all interested jurisdictions to support and monitor implementation of the BEPS package and its impact over time. A proposal in that respect will be presented in early 2016.
The BEPS project not only marks a turning point in the history of international tax policy
A little more than two years ago, OECD and G20 countries embarked in the most significant rewrite of the international tax rules.
This was done amid the most severe financial and economic crisis of our lifetime, with an ambitious goal: revise the rules to align them to developments in the world economy and hence ensure that profits are taxed where economic activities are carried out and value is created.
The confidence of citizens into the fairness of the tax system at large is at stake when there is a perception that some can play tricks and avoid their tax liability by walking on the thin line that divides what is legal from what is not.
At the same time, there was a need to prevent that the existing consensus-based international tax framework unravelled and that increased economic integration results in decreased international cooperation and uncoordinated unilateral actions, multiplying uncertainty and unpredictability.
As the diagnosis of the issues contained in the report Addressing Base Erosion and Profit Shifting released in February 2014 shows, no single rule or provision can be finger-pointed as the cause of BEPS. This is because it is in most cases the interplay among different rules that generates BEPS: domestic law rules which are not coordinated across borders, international standards which have not always kept pace with the changing global business environment, and an endemic and worrying lack of data and information.
The Action Plan on BEPS identified 15 actions, along three fundamental pillars:
For the first time in history, all G20 and OECD countries worked on an equal footing to revisit some of the fundamental rules of the international tax rules. What looked a hazardous bet for many has now proven to be a success story. G20 and OECD countries have worked relentlessly together to achieve consensus on complex technical issues, respecting different countries’ perspectives and striving to identify agreed solutions to the shared challenges caused by BEPS.
Developing countries were engaged extensively from the beginning of the project via a number of different consultation mechanisms. Subsequently, they provided input directly, by participating to the meetings of the Committee on Fiscal Affairs and its Working Parties, and also via regional networks meetings organised in Africa, in the Asia-Pacific region, in Latin America and the Caribbean, as well as in the Eastern Europe and Central Asia region. These consultations have been held jointly with regional tax organisations, with a key role played by ATAF, CREDAF, IOTA and CIAT, and other international organisations such as the UN, the IMF and the WBG. Developing countries’ input has focused on the items of key relevance for them and helped shape the final outputs.
The EU Commission was fully engaged and provided its views throughout the project. The parallel work carried out by the EU Commission, and in
Stakeholders have been consulted widely. In total, the BEPS project received more than 1,400 submissions from industry, advisers, NGOs and academics, totalling approximately 11,000 pages of comments. A total of 14 public consultations were held, gathering a variety of stakeholders discussing in an open and frank manner their views and suggestions. To ensure full transparency towards the public at large, these public consultations were streamed live, as were a number of webcasts where the OECD Secretariat periodically updated the public and answered questions. Stakeholders’ input has been in most instances of great relevance given in particular the fast-pace of the project. It helped ensure that the measures are well targeted, do not unduly burden business with compliance requirements, while at the same time they address the policy concerns that were the root cause of the Project.
Stakeholders’ input was also useful to identify areas where ‘collateral damages’ could have been generated. Examples of this include the application of the rules on tax treaties to collective investment funds and other funds. Importantly, a number of rules have been tailored so as to carve out SMEs when they do not raise the same concerns compared to large MNEs. This is
After two years of strenuous work, the 15 actions have been completed. Following the release of the September 2014 outputs, endorsed by G20 finance ministers and leaders, additional measures have been devised and all these outputs have been consolidated into a comprehensive BEPS package.
The BEPS package comprises reports on each of the 15 items identified in the BEPS Action Plan and supersedes the September 2014 deliverables which were agreed but left in draft form so as to be able to take into account the interactions with other action items.
Once the new measures become applicable, the expectation is that profits will be reported where the economic activities that generate them are carried out and where
BEPS structures that have become well-known to everyone and that relied on outdated rules or on the lack of coordination among domestic measures will become ineffective.
The work is not over yet and effective implementation of the different outputs by all relevant jurisdictions will be critical to
In conjunction with the BEPS project, a dedicated work stream under the G20 Development Working Group (DWG) will deliver practical guidance on the priority issues identified by developing countries during the course of the engagement, whether they are part of the BEPS project or not. OECD and G20 countries have also agreed to continue to work on an equal footing on the follow-up technical work on BEPS, and to establish an even more inclusive framework for all interested jurisdictions to support and monitor implementation of the BEPS package and its impact over time. A proposal in that respect will be presented in early 2016.
The BEPS project not only marks a turning point in the history of international tax policy
