The OECD developed Base Erosion and Profit-Shifting is causing alarm in corporate treasury departments as governments gear up for a global programme to manage corporates’ use and exploitation of transfer pricing opportunities. Yet it could be the fairest and most consistent global tax programme ever. 

There are two parts to the programme:

• a set of rules and standards including message and file formats for goverments to exchange of tax to ensure world-wide tax transparency
• a legal framework for multi-lateral instrument amendments to bilateral trade agreements, which requires the introduction of the multi-lateral instrument transfer tax policy locally.

(For more details see.)

In the short term

All governments will welcome the rules and standards for exchange of data, as it will generate significiant cost savings and increase their tax harvest. These new standards are likely to be implemented relatively quickly.

In the longer term

The problem will be with the second part of the BEPS programme as it requiries legislative action of some kind by each government. No government will want to give up their country's tax advantage, particularly given the poor state of the global economy and how they have to compete for companies’ business.

This is why several transfer pricing experts expect this part of the programme to be developed very slowly, if at all, in some countries.

However, the G20 leaders meeting in Novmber could surprise us all and decide to drive the BEPS programme at full speed, but then this will only happen if key countries, such as the US and Germany, actually implement.

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CTMfile take: Don’t worry until after the G20 meeting.