On 24 Nov 2016, the OECD announced that more than 100 jurisdictions have concluded negotiations on a multilateral instrument that will swiftly implement a series of tax treaty measures to update international tax rules and lessen the opportunity for tax avoidance by multinational enterprises. [Australia is amongst those countries.]

The new instrument will transpose results from the OECD/G20 Base Erosion and Profit Shifting Project (BEPS) into more than 2 000 tax treaties worldwide.

A signing ceremony will be held in June 2017 in Paris.

The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS will:

  • implement minimum standards to:
    • counter treaty abuse; and
    • to improve dispute resolution mechanisms,
    • while providing flexibility to accommodate specific tax treaty policies.
  • It will also allow governments to strengthen their tax treaties with other tax treaty measures developed in the OECD/G20 BEPS Project.

The OECD/G20 BEPS Project delivers solutions for governments to close the gaps in existing international rules that allow corporate profits to « disappear » or be artificially shifted to low or no tax environments, where companies have little or no economic activity. Revenue losses from BEPS are conservatively estimated at USD 100-240 billion annually, or the equivalent of 4-10% of global corporate income tax revenues.

Over 100 countries and jurisdictions are currently working in the Inclusive Framework on BEPS to implement BEPS measures in their domestic legislation and treaties. The sheer number of bilateral treaties makes updates to the treaty network on a bilateral basis burdensome and time-consuming. The new multilateral convention helps solve this.

“The adoption of this multilateral instrument marks a turning point in tax treaty history,” said OECD Secretary-General Angel Gurría. “It will save countries from multiple bilateral negotiations and renegotiations to implement the tax treaty changes in the BEPS Project. More importantly, having more than 100 jurisdictions on board will help ensure consistency in the implementation of the BEPS Project, which will result in more certainty and predictability for businesses, and a better functioning international tax system for the benefit of our citizens.”

The OECD will be the depositary of the multilateral instrument and will support governments in the process of its signature, ratification and implementation.

On 26 Nov 2016, the Assistant Treasurer referred to this, in a media release, and announced that Treasury would soon be issuing a discussion paper on the Convention, on which interested ‘stakeholders’ can make submissions.

[OECD announcement] [Multi-Lateral Treaty – Text] [Asst Treasurer’s media release [LTN 230, 28/11/16]