All European Governments have supported the OECD BEPS plan from the start in 2013: there is both a desire to act (and be seen to act) against the perceived tax avoidance in international tax structuring, and a very real need for increased tax revenues. The BEPS project has been welcomed as ticking both of these boxes.
What we now see across the European region is an overall commitment to implement the BEPS recommendations, but a varied picture on how this may be achieved. The challenge that faces countries on an individual level is how to balance appropriate and effective implementation of the proposals with the long established use of tax policy as a tool for creating and maintaining a competitive tax environment for businesses.
Indeed, even now as we just start to enter the implementation phase, we are already witnessing quite different approaches between European Member States. Some governments have already made changes to their tax codes in anticipation of coming recommendations (and this includes the UK with the introduction of the Diverted Profits Tax regime). Others are waiting for more information to emerge from deliberations at the OECD. The European Commission and the European Council are now calling for a more coherent EU approach to BEPS implementation either in the form of legal harmonisation or political co-ordination.
For our clients operating across Europe this means a period of uncertainty and change. Businesses will need to respond flexibly to adapt to the varying requirements imposed and the different processes for implementing policy change.
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