OECD flags lack of tax transparency across 'sizeable' number of jurisdictions

Efforts to improve tax transparency on information exchange on tax rulings is still failing to meet the standards set by the OECD as part of the Base Erosion & Profit Shifting (BEPS) project Action 5

Over 90 tax jurisdictions have now been assessed as part of the OECD’s Inclusive Framework on BEPS focusing on the quality of information exchange on tax rulings as part of Action 5 of the OECD/G20 BEPS package, part of a number of measures introduced following the 2008 financial crash.

The 2017 Peer Review Reports on the Exchange of Information on Tax Rulings show that one key aim of the BEPS Project – increasing transparency on tax rulings –  is a long way to being achieved.

Over 16,000 tax rulings have been identified and almost 21,000 exchanges of information have taken place to date. However, the measures are still being ignored by a sizeable number of tax authorities, says OECD.

There are still 60 jurisdiction-specific recommendations outstanding on issues such as improving the timeliness of the exchange of information and ensuring that exchanges of information are made with respect to preferential tax regimes that apply to income from intellectual property.

The OECD confirmed that the UK had dealt with under-reporting on the grandfathered IP regime over 2018, with a big push to collect relevant information on new IP assets of existing taxpayers. All this information has now been exchanged with relevant jurisdictions.

France was flagged as being slow to exchange information on tax rulings while Italy was also told to improve the way it identified and exchanged information on new entrants to the grandfathered  IP regime.

BEPS Action 5 is one of the four BEPS minimum standards which all Inclusive Framework members have committed to implement.

One part of the Action 5 minimum standard is the transparency framework for compulsory spontaneous exchange of information on certain tax rulings which, in the absence of transparency, could give rise to BEPS concerns.

Over 120 jurisdictions have joined the Inclusive Framework and take part in the peer review to assess their compliance with the transparency framework.

Specific terms of reference and a methodology have been agreed for the peer reviews to assess a jurisdiction’s implementation of the minimum standard. The review of the transparency framework assesses jurisdictions against the terms of reference which focus on five key elements: i) information gathering process, ii) exchange of information, iii) confidentiality of the information received; iv) statistics on the exchanges on rulings; and v) transparency on certain aspects of intellectual property regimes. Recommendations are issued where improvements are needed to meet the minimum standard.

This report reflects the outcome of the second annual peer review of the implementation of the Action 5 minimum standard and covers 92 jurisdictions. It assesses implementation for the 1 January 2017 – 31 December 2017 period.

OECD Harmful Tax Practices – 2017 Peer Review Reports on the Exchange of Information on Tax Rulings published 13 December 2018

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