In July 2013, the Organisation for Economic Co-operation and Development (OECD) released its Action Plan on Base Erosion and Profit Shifting (BEPS). The report followed negative media coverage surrounding international tax structures adopted by some high-profile multinational corporations. It also came at a time when European governments, their treasuries depleted by years of stimulus spending, were eager to maximize tax revenues.
Under these circumstances, it is not surprising that the OECD BEPS Action Plan has received a good deal of attention. With a list of deliverables that conclude in December 2015, work on the Action Plan continues with the active participation of tax experts and authorities from all member states.
European governments have all expressed their commitment to end BEPS and are eager to help shape and refine the plan. In fact, some governments have already made changes to their tax codes in anticipation of coming recommendations. Others are waiting for more information to emerge from deliberations at the OECD.
Either way, change – some say historic change – is coming. From greater requirements for transparency and more stringent transfer pricing policies to justifying substance, the impacts will be felt by every country and every multinational company.
While it is true that every country wishes to curb BEPS, countries are also keen to use tax policy as a source of competitive advantage over other jurisdictions, meaning that no two reformed regimes will look alike. A survey of our leading tax authorities in Europe is thus at the crux of this paper, which examines, among other things:
The survey responses are enlightening. Some countries are forging ahead at full speed while others are taking a more cautious approach. Given this uncertainty, what should a multinational corporation do now? How can it maintain tax efficiency without running afoul of tax authorities in this new reality? These and other difficult questions are addressed throughout this paper. Although it is too early to decide all the answers, we certainly know enough to help tax directors prepare for a future that is sure to be very different from the present.