Corporates face uncertainty and tax compliance burden, as BEPS announced
The Organisation for Economic Cooperation and Development (OECD) yesterday announced the final version of its action plan to tackle corporate tax evasion. The base erosion and profit shifting (BEPS) project aims to put an end to multinationals being able to transfer profits to lower-tax jurisdictions in order to pay less tax. It consists of a 15-point action plan that is non-binding and that countries will implement from 2016.
The measures include new minimum standards on:
- country-by-country reporting, which for the first time will give tax administrations a global picture of the operations of multinational enterprises;
- treaty shopping, to put an end to the use of conduit companies to channel investments;
- curbing harmful tax practices, in particular in the area of intellectual property and through automatic exchange of tax rulings; and
- effective mutual agreement procedures, to ensure that the fight against double non-taxation does not result in double taxation.
BEPS will be approved by 15 November by G20 finance ministers. According to Pascal Saint-Amans, director of the OECD Centre for Tax Policy and Administration, the rules will affect 90% of the global economy when they come into force. He added: “The era of tax evasion is coming to an end.”
According to the OECD, between $100 and $240 billion worldwide (or 4 to 10% of global corporate income tax revenues) is lost each year from the corporate tax bill.
However, NGOs have criticised the plan, saying that it doesn't go far enough and does not adequately tackle so-called 'cash boxes', which companies can use to transfer their profits abroad.
EY's global vice chair, tax, Jay Nibbe, commented: “For businesses, the pace, volume and complexity of tax change create uncertainty and increased risk of tax disputes. The BEPS recommendations also include significant new tax compliance obligations. Companies will need to invest in their tax function - both people and technology - to ensure they have the resources to meet these new demands.”
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