Paris, 14 février 2013 - Visualiser l'eAlerte
In response to concerns regarding base erosion and profit shifting (BEPS), the Organisation for Economic Co-operation and Development (OECD) began a project to address those issues. The project, which has received significant attention, has been supported by the G20 and various individual governments. Today, the OECD released a related 90-page report, Addressing Base Erosion and Profit Shifting.
The report is a comprehensive diagnosis of the current situation. This diagnosis includes empirical evidence on the use of BEPS techniques, discusses corporate global business models, and provides detailed analysis.
The OECD, as highlighted in the report, has committed to develop an action plan within six months to address the issues.
Recently, tax authorities in various countries have expressed concern about losing tax revenue as a result of corporate planning that they believe erodes tax bases and shifts profits to lower-tax jurisdictions. At the same time, authorities and companies alike share a fundamental concern that the common principles by which taxing rights are shared between countries have not kept pace with the changing global business environment. This shortcoming is highlighted by the global nature of business (including the proliferation of internet-based transactions) and the increased importance of intellectual property as a value driver.
The base erosion and profit shifting report
The OECD report analyzes the key tax principles and opportunities for base erosion and profit shifting. It notes that the "jurisdiction to tax" principle, including permanent establishment (PE) rules, has come under pressure due to the development of the digital economy. Also, the report points out that transfer pricing concepts already consider economically significant activities and responsibilities undertaken, assets used, and risks assumed. In addition, the report highlights the different treatment of debt and equity in many countries and categorizes anti-avoidance techniques.
Furthermore, the report considers how to address BEPS concerns. The report identifies the following as "key pressure areas":
The OECD action plan
As for proposed next steps, the report identifies no ‘magic recipe’ that could address BEPS. However it emphasizes that the OECD is ideally positioned to advance a collaborative solution (and that this is preferable to any unilateral action which could potentially exacerbate the problem).
Although the paper does not set forth specific steps, it mentions the development of a comprehensive action plan by June 2013. The plan will (1) identify actions required to address BEPS; (2) set deadlines for those actions; and (3) identify the resources and methodology required to implement the proposed solutions.
In response to the key pressure areas, the report states that the action plan will include proposals to develop:
The report solicits input from tax administrations. Therefore, BEPS likely will be on the agenda for the Forum of Tax Administration meeting of Tax Commissioners in Moscow in May 2013.
Generally, today’s OECD report summarizes the key issues raised by BEPS and aligns with previous OECD statements about the concerns of the organization and its member tax authorities.
Regardless of this timeline, taxpayers should consider the report’s key pressure areas and the proposals to address those areas.
Click here to read the full OECD report.