OECD BEPs work for consultation in March

The OECD is set to release a series of discussion documents on its action plan on Base Erosion and Profit Shifting (BEPS) and will be holding public consultations in the spring on topics including the digital economy, transfer pricing and harmful tax practices before drawing up its recommendations to be presented to the G20 in September 2014.

In an update on its work, the OECD's Committee of Fiscal Affairs (CFA) said it would be making the reports available at the end of February or early March, with consultations scheduled for April.

On the topic of the digital economy, the OECD said it had been analysing the features which make the digital economy different, including the mobility of the assets, data and employees, and looking at whether these exacerbate profit shifting.

The OECD says media attention on taxation of intangibles such as royalties on intellectual property has led them to look into transfer pricing as an aspect of BEPS. While its investigations suggest there are some 'very serious problems' with transfer pricing of intangibles, CFA said it had found 'no reason' to replace the current arms' length principle which underpins the approach.

Marlies de Ruiter, head of the tax treaty, transfer pricing and financial transactions division said: 'We think the arm's length principle is fit for purpose as a means of coming to the right transfer pricing, but it may need special measures to ensure it meets the core aim of focusing on value creation.'

On the issue of harmful tax practices, CFA said the main emphasis is on defining 'substantial activity' and 'transparency'. The committee said that the main challenge was to balance the need for R&D activity to drive growth with the objective of avoiding situations where there is 'erosion of shifting of the tax base of other countries'. It said it wanted to address the scope for aggressive tax planning by multinationals who have the money for both R&D and tax planning advice.

The OECD repeated its concerns that bi-lateral tax treaties can be used for cross-border activities involving an entity in a third country which then benefits in a way which was not intended. CFA is looking at developing a multilateral convention which would provide one instrument to amend all treaties at once, saying that otherwise changing some 3000 treaties 'would take years'.

Pascal Saint Amans, the OECD official in charge of the BEPS project said all their work programmes are on track for political decisions at the G20 summit in September, and it is now starting to involved non-OECD countries to ensure widespread adoption of the proposed changes.

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