"most likely to have the swiftest and most direct impact on multinational groups"
A week after the OECD released reports covering 7 of a total of 15 actions to be covered in their BEPS initiative, KPMG Luxembourg gathered together 250 financial professionals at the Chamber of Commerce to debate the content and impact of the new BEPS reports.
KPMG Tax Partner Louis Thomas and Director of Tax Knowledge Flora Castellani gave their analysis of the 700 newly released pages. Louis Thomas singled out three particular reports - Hybrid Mismatches, Treaty abuse and Country-by-Country Reporting – as “those most likely to have the swiftest and most direct impact on multinational groups operating through Luxembourg.” He went on to explain the potential consequences of the actions outlined in the “Transfer pricing documentation and Country-by-Country Reporting” report:
There will be a range of reports which together will explain your organization and its value creation to tax authorities – transactions, income tax, profit and much more will be included. The consequence is that every group will need to review their policies to be able to justify why their allocation of profit makes sense and is consistent. The existence of such reports will inevitably lead to more frequent tax audits, as authorities will be armed with new knowledge, letting them know exactly in which basket they should shoot.
KPMG Luxembourg’s director of Tax Knowledge, Flora Castellani, wrapped up the conference by voicing concerns over the future implementation of the BEPS reports:
The issue with BEPS is to know: will we have a level playing field. What is important – for the OECD too – is that the reports’ recommendations are implemented in the highest number of countries. Otherwise, we won’t be solving a problem. We’ll just be moving it.
OECD reports on the remaining 8 actions are set to be released in 2015. Questions still remain about a realistic timeline for the implementation of the actions, however all 44 countries involved agree that they will implement BEPS.
Moderator Sébastien Labbé (KPMG Head of Tax), university professor Tracy Kaye, KPMG Senior US Tax Partner Fred Gander and Tax Manager for Union Investment Anne Wolsfeld, debriefed on the impact of BEPS in practice, and in particular on the improbability of a swift reaction from the US authorities, when it comes to adapting their local legislation to this new trend.