OECD and ICC Agree on Implementation of BEPS in the Developing World

The International Chamber of Commerce (ICC) has expressed deep approval for the Organization for Economic Cooperation and Development’s (OECD) plan to allow all countries to participate in its Base Erosion and Profit Shifting (BEPS) plan.

BEPS is an international policy proposal designed to counteract the negative effects of multinational companies’ tax avoidance strategies. Many nations use differing legal standards and tax rates to shelter assets from taxation in other countries. Using BEPS, it would be more difficult for these companies to game international laws for corporate gain at the expense of the nations in which they operate.

In short, BEPS is an attempt by the world’s various economies to address the widespread concern that corporations may not be paying their fair share of taxes in the nations in which they operate.

The OECD’s BEPS plan has been developed as a joint collaboration between the OECD and G20. They announced a framework for the plan following the G20 Finance Ministers meeting in Shanghai in February. For months, however, both the ICC and OECD had insisted that the rules for BEPS needed to be implemented in a manner that would include non-OECD countries and nations in the developing world in order to ensure a consistent international tax landscape.

According to a statement on the ICC website, the international organization strongly favors the idea of including developing nations and non-OECD countries into the program.

In support of the OECD’s insistence of uniformity, ICC Chairman of the Commission on Taxation said, “This is a positive development that helps to ensure that all countries work closely together in an effort to prevent inconsistencies between national tax legislations and to avoid unilateral disparate tax rules… From the perspective of the business community, international consistency is an important prerequisite to avoid double taxation: steps to reach alignment at a global level are always welcome.”

Under the OECD’s proposed framework for the BEPS implementation, any country can participate in BEPS if the country agrees to pay an annual fee and adopt certain minimum project standards relating to tax practices, treaty abuse, dispute resolution, and reporting standards.

Paul Morton, Vice-Chair of the ICC Commission on Taxation said: “The interpretation and implementation of the BEPS recommendations will create uncertainty and lead to a higher risk of double taxation. This would increase the number of taxation disputes which is why ICC believes that a solid dispute resolution mechanism with mandatory agreements should remain a corner stone of the BEPS outcomes.”