The OECD have come out with a 44 page Action plan on tackling base erosion and profit shifting. The plan is squarely aimed at limiting the ability of multi nationals to reduce their corporation tax bills.
He confirmed measures to address double non taxation of profits through an Action Plan containing 15 initiatives which will be worked on over the next two years:
Action 1 – Address the tax challenges of the digital economy
Action 2 – Neutralise the effects of hybrid mismatch arrangements
Action 3 – Strengthen CFC rules
Action 4 – Limit base erosion via interest deductions and other financial payments
Action 5 – Counter harmful tax practices more effectively, taking into account transparency and substance
Action 6 – Prevent Treaty Abuse
Action 7 – Prevent the artificial avoidance of PE status
Actions 8, 9 and 10 – Assure that transfer pricing outcomes are in line with value creation
Action 11 – Establish methodologies to collect and analyse data on BEPS and the actions to address it
Action 12 – Require taxpayers to disclose their aggressive tax planning arrangements
Action 13 – Re-examine transfer pricing documentation
Action 14 – Make dispute resolution mechanisms more effective
Action 15 – Develop a multi lateral instrument
I hope to provide more commentary after going through the Action Plan in more detail but arguably one of the more interesting developments is the proposal for a new multi lateral agreement.
A multilateral agreement addressing the areas covered in the plan would have the advantage of greatly accelerating change and the adoption of common standards and approaches, which currently rely on the renegotiation of some 3,000 bilateral treaties and agreements.
For all that higher tax bills may be on their way many companies will welcome this greater standarisation if it can be achieved.