BEPS: Financial transparency – the taxing question for multinationals
While proponents of the base erosion and profit shifting project claim it will facilitate appropriate taxing of global corporate profits, enforcement remains the elephant in the room, writes FX-MM’s Paul Golden.
In October, the OECD presented the final package of measures for reform of international tax rules, stating that annual revenue losses from base erosion and profit shifting (BEPS) are conservatively estimated at up to $240bn or around 10% of global corporate income tax revenues.
The measures – which include new minimum standards on country-by-country reporting, treaty shopping, curbing harmful tax practices and effective mutual agreement procedures – will be delivered to the G20 leaders during their annual summit in mid-November, after which the OECD says the focus will shift to designing and putting in place a framework for monitoring BEPS and supporting implementation of the measures.
The Chair of the Tax Committee at the Business and Industry Advisory Committee to the OECD, Will Morris, says businesses still have concerns that some of the recommendations may lead to double taxation of income and that the implementation phase will be crucial. However, he refers to a growing acceptance among countries that mechanisms for resolving tax disputes need to be significantly improved and the value of a potential monitoring mechanism on implementation of the BEPS recommendations to be overseen by the OECD.
According to John Danilovich, Secretary General of the International Chamber of Commerce, the proposals around permanent establishment and transfer pricing would much better align tax systems with the dynamics and realities of modern business, although he also refers to concerns over double taxation.
