The webcast gave an update on the OECD’s international tax work.
The OECD held the latest in its series of Tax Talks webcasts on 17 October 2017, giving an update on the status of its current international tax projects. The webcast covered topics including the recently released report on BEPS Action 5 and the upcoming report on taxing the digital economy, as well as the ongoing projects to implement automatic exchange of information (AEOI) and country by country (CbC) reporting. The OECD’s ongoing efforts to increase global tax compliance and tax certainty were also discussed.
Highlights from the webinar include:
The OECD expects to issue its report on tax digitalisation in April 2018, following public consultation. The report is focused on long term solutions to the issues of how digitalisation has changed business and value creation, and how to fairly tax the digital economy without harming it, including taxation based on significant economic presence (a ‘virtual PE’ concept), withholding tax on digital transactions, or a digitalisation levy.
The OECD acknowledges the short term solutions being proposed around the world (such as turnover taxes) and will consider what effects these might have.
BEPS Action 5 progress report
The recent progress report on preferential tax regimes released reviewed 164 regimes, with 99 requiring action (of which 93 have already been actioned), 56 regimes not posing a BEPS risk, and 9 still under review.
The report also notes that many IP regimes around the world are now compliant with the ‘nexus approach’, with almost all new International Forum member IP regimes abolished or amended. The OECD will now focus on implementing the substantial activities principle for non-IP and IP regimes, as well as further monitoring and support, with another progress report to be published in 2018-19.
Tax compliance and certainty
48 tax administration heads attended the latest Forum on Tax Administration meeting, to discuss key topics including the ongoing implementation of BEPS and AEOI, improving tax compliance through work on the shadow economy, and the digitalisation of tax administration.
The OECD is also currently developing its pilot International Compliance Assurance Program, a voluntary multilateral risk assessment and assurance programme for ‘not high risk’ MNE groups designed to enhance international tax certainty on issues such as transfer pricing, permanent establishments etc. The process includes a two part risk assessment expected to take no more than 12 months, and 11 countries are taking part in the pilot programme, with MNE groups already identified and invited to participate.
Tax treaties and the MLI
The 2017 update to the Model Tax Convention is due to be submitted to the OECD Council soon for approval.
The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI) now covers 71 jurisdictions with 1136 matched agreements. 1126 further treaties with non-MLI signatories are awaiting agreements. The MLI will enter into force after ratification by five signatories, which is expected by the end of 2017. The MLI will then enter into force three months later.
BEPS Action 14 peer reviews
Batches 1 and 2 of the peer reviews are now finished, with Batch 3 in progress and Batch 4 to start in December 2017. The review of the findings so far shows that access to mutual agreement proceedings (MAP) is generally being granted in eligible cases and implemented on time, although some agreements need to be updated and timescales are proving to be a challenge.
CbC reporting peer reviews
The first phase of peer reviews is due to conclude by March 2018, with the scope of the reviews widening each year until 2019-20 where all areas of the CbC reporting regime will be covered.
Going forward, the OECD will be focusing on ensuring exchange agreements are in place around the world, as well as supporting tax authorities in appropriate use of CbC reporting data.
49 jurisdictions began automatically exchanging information on 30 September under the Common Reporting Standard, with 53 further to start in September 2018. The peer review process for AEOI will start in 2020.
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