The Organisation for Economic Co-operation and Development (OECD) has launched its Action Plan on Base Erosion and Profit Shifting (BEPS) which it says “offers a global roadmap that will allow Governments to collect the tax revenue they need to serve their citizens”, and also “gives businesses the certainty they need to invest and grow”.
Produced at the request of the G20 and introduced at the G20 Finance Ministers’ meeting in Moscow on 19-20 July 2013, the Action Plan identifies 15 specific actions that the OECD says will give Governments the “domestic and international instruments to prevent corporations from paying little or no taxes”. OECD Secretary-General Angel Gurría said the Action Plan will be rolled out over the coming 2 years and will allow countries to draw up co-ordinated, comprehensive and transparent standards they need to prevent BEPS.
Domestic and international tax rules should relate to both income and the economic activity that generates it, the OECD said. Existing tax treaty and transfer pricing rules can, in some cases, facilitate the separation of taxable profits from the value-creating activities that generate them. The OECD said the Action Plan will restore the intended effects of these standards by aligning tax with substance – ensuring that taxable profits cannot be artificially shifted, through the transfer of intangibles (eg patents or copyrights), risks or capital, away from countries where the value is created.
Complementing its Action Plan BEPS by companies, the OECD also called on G20 finance ministers to increase international tax cooperation and transparency through the promotion of automatic exchange of information between jurisdictions. The proposal provides a definition of the financial information to be exchanged automatically. It also provides for the development of an operational platform. The OECD points out that for automatic exchange of information to function effectively, the right legal and administrative framework needs to be in place to ensure confidentiality and to avoid misuse of the data transmitted.
Source: OECD media releases, 19 and 20 July 2013
[LTN 139, 22/7/13]