Commenting on the OECD’s first recommendations to the G20 on its “Base Erosion and Profit Shifting” (“BEPS”) project, Chris Morgan, Head of Tax Policy at KPMG in the UK, said:
“Today marks the next stage in the OECD's BEPS journey. We have seen the publication of seven papers covering the 2014 actions set down in the BEPS action plan with the OECD's recommendations on next steps. The OECD now moves onto the 2015 action items, including consideration of the permanent establishment concept, interest deductibility, CFC regimes and further detailed work on transfer pricing, in particular in relation to risks, capital and intangibles.
“A first read shows that the documents are balanced and seek to address the issues of base erosion and profit shifting, and seeking to defeat double non-taxation; the documents also recognise that taxpayers need certainty and the proposals should not result in double taxation or hinder cross-border trade. It is very welcome that the proposals are in draft so that they can be reviewed and amended, if necessary, as part of the 2015 workstreams to ensure the overall package properly addresses the issues.
“In relation to the 2014 actions arguably the easy work is complete. The challenge is now whether, and to what extent, countries will adopt into local legislation the recommendations that have been made, particularly where the recommendations are, by the OECD’s own admission, not formally finalised. Whilst support at the G20 level is there, it is to be hoped that this translates into co-ordinated and consistent action.
“The OECD notes that the actions will require careful implementation by countries and guidance will be necessary to support such action. Whilst it is stated that countries will be able to start implementing certain of the recommendations now, it is unclear how far they will be able to go in the short term given the interdependency between the 2014 and 2015 actions and the need for the detailed guidance. Whilst it is desirable that there is quick action, both to provide certainty and deal with public concern, there is a risk that hasty unilateral action could put a country at a competitive disadvantage or require significant modification once the package is finalised.”
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Margot Cowhig, KPMG Corporate Communications
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This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.