Senior Tax Writer Thomson Reuters
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Will BEPS Be a ‘Game-Changer’ as OECD’s Pascal Saint-Amans Claims?

Jun 21st 2016
Senior Tax Writer Thomson Reuters
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It has been said on more than one occasion that, in the area of international taxation generally, the OECD/G20 Base Erosion and Profit Shifting (BEPS) project will be a game-changer. Pascal Saint-Amans, director of the OECD Center for Tax Policy and Administration, recently reiterated the claim in an interview with Axel Threlfall, Reuters editor-at-large, at the recent OECD Ministerial Council Meeting in Paris.

Saint-Amans must surely be the most optimistic BEPS proponent in the world, but that should be expected from where he sits. True, there is considerable action as many countries start to implement various parts of BEPS. That is undeniable. But one wonders with the genuine concerns held by many companies about significant aspects of the BEPS package, particularly the potential danger of double taxation and the difficulty in overcoming that, and the BEPS issues still to be resolved, whether the “game-changer” tag is not just a little premature. There is still quite a lot of water to flow under the bridge before the BEPS program is complete and fully implemented, notwithstanding the considerable progress made to date.

Threlfall’s interview with Saint-Amans revealed some interesting comments, for example:

  • Saint-Amans said the OECD didn’t really learn much from the Panama Papers process that it didn’t already know. It confirmed that Panama had not committed to the automatic exchange of information. (It is noted that in early April 2016, Panama announced that it would adopt international tax-reporting standards.
  • Saint-Amans believes that tax “will be a game-changer,” including in the prevention of money laundering and also beneficial ownership disclosures, with the Common Reporting Standard (CRS). He said this will oblige financial institutions and tax intermediaries to check who are the beneficial owners. Tax would therefore be a game-changer in helping to put an end to all forms of opacity, he said.
  • While noting that the United States had agreed to BEPS, Saint-Amans said the United States needed to make domestic tax changes and reform but that Congress is very slow on this at the moment. He said there was a need to broaden the US tax base and to lower its corporate tax rate. Saint-Amans said that just before the Panama Papers leak, the United States had committed to change its transparency disclosures (e.g., Delaware-, Wyoming-, and Nevada-listed companies) by regulatory action (therefore, no need for Congress involvement) before the November election. He said the regulatory changes would oblige disclosure of beneficial owners.
  • Threlfall asked Saint-Amans what companies needed to do to be more proactive on BEPS. Saint-Amans said they basically needed to do three things:
  1. Prepare the Country-by-Country (CbC) Report – and run it by the board and the CEO. He said this would be a very good domestic exercise for the tax director to check if the corporation’s tax planning looked OK.
  2. Dismantle the structures using tax havens for transfer pricing.
  3. Anticipate the changes coming to tax treaties by the end of 2016 (e.g., via the multilateral convention to change bilateral tax treaties). (Work on the Multilateral Instrument [Action 15 on BEPS treaty-related measures] is underway, and it will amend bilateral treaties. Some 96 countries are participating in negotiations on the Instrument. A discussion draft was released on May 31, 2016, and public consultation will be held on July 7. If all 96 countries sign up, this would cover more than 2,000 bilateral tax treaties. That is significant.)

The BEPS project does seem to be picking up pace. Implementation is progressing, even in the European Union (not renowned for its speed of action). But we’re not there yet. Developments such as CbC reporting and adoption of the CRS might not unreasonably be seen in the vein of game-changing, but the magnitude of the intrinsic need for so many countries to make domestic law changes to give effect to BEPS cannot be overstated. As I said, we’re not there yet.

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