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2015/FMP/WKSP1/021 Session: 6

Base Erosion and Profit Shifting Project and Developing Economies

Submitted by: OECD

Workshop on Fiscal Management Through Transparency and Reforms

Bagac, Philippines9-10 June 2015

APEC WORKSHOP

SESSION 6 (PART 1)

BEPS PROJECT AND

DEVELOPING COUNTRIES

APEC Workshop 9-10 June 2015

THE BEPS ACTION PLAN

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The BEPS Project so far

Feb 2013

• Diagnosis: “Addressing Base Erosion and Profit Shifting”

July 2013

• 15 Actions: “Action Plan on Base Erosion and Profit Shifting”

Sep 2014

• First Set of Deliverables: 3 Reports (Digital Economy, Multilateral Instrument) and 4 Instruments (Hybrids, Treaty Abuse, TP Intangibles, TP Documentation and CBC Template)

Sep 2015

• Second Set of Deliverables: Action 3 (CFC rules), Action 4 (Interest), Action 5 (HTP), Action 7 (PE Avoidance), Action 8-10 (TP), Action 11 (Economic Analyses), Action 12 (MDR), Action 14 (MAP)

October 2015

• Completion and Final Deliverables: Completion of BEPS Project and delivery of all supplemental reports to the G20 Finance Ministers

15 actions and 3 pillars

Coherence

Hybrid Mismatch Arrangements (2)

Harmful TaxPractices (5)

InterestDeductions (4)

CFC Rules (3)

Substance

Preventing Tax Treaty Abuse (6)

Avoidance ofPE Status (7)

TP Aspects of Intangibles (8)

TP/Risk andCapital (9)

TP/High RiskTransactions (10)

Transparency

Methodologies and Data Analysis (11)

DisclosureRules (12)

TP Documentation (13)

DisputeResolution (14)

Digital Economy (1)

Multilateral Instrument (15)

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• Discussion draft released in December 2014

• Revised draft report will be circulated for the next Focus Group meeting in June 2015

• Key developments:– General principles underlying a best practice approach

– Fixed ratio rule based on EBITDA

– Group ratio carve-out based on interest/EBITDA ratios

– Option to allow carry forward

– Outline of targeted rules that may be used to support the general rules and address remaining BEPS risks

– Best practice approach to groups in specific sectors: banking, insurance, funds, infrastructure and highly capitalised sectors

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Interest deductions

Action 4

• Report published in September 2014

• A revised discussion draft was issued in May 2015

• Key developments: the implementation of the minimum standard– How should the minimum standard be reflected in

OECD instruments and the MTC?

– Should countries be required to modify existing treaties in order to implement the standard?

– Should there be some form of monitoring of compliance with the minimum standard?

Treaty abuse

Action 6

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• Latest discussion draft released in May 2015

• Key developments:

– One proposal on PE avoidance strategies

identified

– Focus on commissionaire arrangements and

specific activity exemptions (changes considered

to Art 5(5) and Art 5(4) of the OECD MTC)

– Profit attribution to be further developed after

December 2015

Avoidance of PE status

Action 7

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• Report released in September 2014

• Guidance for the implementation of the CbCreporting issued in February 2015

• Key developments:

– Timing of preparation and filing of the CbC report

– MNE groups that are required to file the CbC report

– The necessary conditions underpinning the obtaining and the use of the CbC report by administrations

– Framework for government-to-government mechanisms to exchange CbC reports

Country-by-country Reporting

Action 13

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ENGAGING WITH PARTNER ECONOMIES

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10

Strategy for a strengthened dialogue

BEPS Project – Engagement

with partner economies

New Structured Dialogue Process

• Direct Participation in CFA and WorkingParties

• 14 countries including Bangladesh, Philippinesand Viet Nam)

• 2 Regional Tax Organisations - ATAF and CIAT

• Regional Network Meetings in spring and fall2015

• Asia-Pacific

• Latin America

• French speaking countries

• Africa

• Eurasia

• Ad hoc consultations and survey on toolkits (incollaboration with IMF, WBG, UN and regional taxorganisations).

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1. Need to balance investment opportunities with domestic resource mobilisation

2. Need to ensure a level playing field between MNEs and domestic businesses

3. Need to engage all stakeholders in looking for solution to counter BEPS

4. Importance of developing capacity in Partner economies in order to implement BEPS.

5. Need to have access to better and useful tools to implement BEPS measures effectively.

6. Toolkits need to be practical and effective.

7. Dialogue on BEPS presents a resource challenge for many of the countries.

What was said at the Regional Meetings

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• Next Regional Network Meetings October - November

2015

• Asia- Pacific Region

– Collaboration with SGATAR

– Technical Committee on BEPS

• Toolkits: practical input from the Region

– 2015: Tax Incentives; TP comparability;

– 2016: Indirect transfer of assets; TP documentation;

Treaty negotiation

– 2017: Base eroding payments; profit shifting through

supply chains; assessing BEPS risks

Next steps

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• BEPS fatigue and the new ‘normal’?

• Implementation (1): instruments, legislation, and

guidelines

• Implementation (2): capacity building (toolkits,

multilateral experience sharing and bilateral technical

assistance)

• The next challenges: information, effective application,

resourcing

• Building a global tax community: Continuation /scaling

up partner countries’ engagement post BEPS?

• Role of Asia Pacific Region?

The Crystal Ball: A post BEPS world

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Questions

richard.parry@oecd.org

• Visit the BEPS & developing countries webpage:

http://www.oecd.org/tax/developing-countries-and-beps.htm

• Read the BEPS reports: http://www.oecd.org/tax/beps-

reports.htm

More information

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