Developing countries to play greater role in OECD/G20 efforts to curb corporate tax avoidance
12/11/2014 – The OECD released today its new Strategy for Deepening Developing Country Engagement in the Base Erosion and Profit Shifting (BEPS) Project, which will strengthen their involvement in the decision-making processes and bring them to the heart of the technical work. The BEPS Project aims to create a coherent set of international tax rules to end the erosion of national tax bases and the artificial shifting of profits to jurisdictions solely to avoid paying tax.
The strategy has three key elements:
Building on their engagement in the earlier phase of the BEPS Project, about 10 developing countries, including Albania, Jamaica, Kenya, Peru, Philippines, Senegal and Tunisia, will be invited to participate in meetings of the key BEPS decision making body – the Committee on Fiscal Affairs (CFA) – and its technical working groups. Several other developing countries are expected to confirm their participation in the CFA or the technical working groups in the coming weeks.
Five regionally organised networks of tax policy and administration officials will be established, to coordinate an ongoing and more structured dialogue with a broader group of developing countries on BEPS issues. Building on the effective BEPS consultations that took place in 2013 and 2014; these networks will strengthen the involvement of developing countries in Asia, Africa, Central Europe and the Middle East, Latin America and the Caribbean, and Francophone countries.
Support for capacity building to address BEPS issues in developing countries is imperative. The regional networks will play an important role in the development of toolkits needed to support the practical implementation of the BEPS measures and as well as some of the priority issues for developing countries (tax incentives and transfer pricing comparable data) which are outside the BEPS Action Plan. The regional networks will also be a forum for interested developing countries to discuss the negotiation and implementation of the multilateral instrument under Action 15 of the BEPS Project.
The African Tax Administration Forum (ATAF) and the Inter-American Centre for Tax Administration (CIAT) will continue to play a critical rolein leading regional discussions on the BEPS priority issues for developing countries. They will help ensure those views are reflected in discussions on the development of the BEPS measures and the practical tools for supporting implementation. They will also be invited to join the meetings of the CFA and the technical working groups, together with the international organisations (the IMF, the World Bank Group and the UN), which already participate.
A two-part report from the G20 Development Working Group shows that BEPS issues pose acute problems for developing countries, most of which have lower tax bases than advanced economies and raise a far higher share of tax revenues from corporate taxes than developed countries. The report drew extensively on engagement with developing countries: more than 80 developing countries and other non-OECD/non-G20 economies were consulted through four in-depth regional consultations and five thematic global fora in the first phase of the BEPS Project.
The report was presented last September to the G20 Finance Ministers who called on the OECD to develop a new structured dialogue process for deepening developing country engagement in tackling BEPS issues and ensuring that their concerns are addressed. Developing countries have consistently recognised the importance of addressing base erosion and profit shifting as part of wider measures to increase domestic resource mobilisation, in order to promote stable economic growth and invest in infrastructure, education and health, among other government priorities.
A two-day workshop in December 2014 will allow developing countries interested in participating in the BEPS work of the Committee on Fiscal Affairs (CFA) and its technical working groups to discuss the practical aspects of deepened engagement in the Project, as well as their priority issues. At the same time, the donor community will meet to discuss plans to ensure that developing countries have the resources necessary to engage in the BEPS project effectively.
The OECD released last September its first recommendations towards coherent international tax rules to end the erosion of national tax bases and the artificial shifting of profits to jurisdictions to avoid paying tax. The recommendations were endorsed by G20 Finance Ministers during a meeting in Cairns, Australia last September and will be discussed during the Leaders’ Summit that will take place on 15-16 November in Brisbane.
