A combination of increased media attention on tax avoidance and the need to shore up Governmental tax receipts in difficult economic conditions has led to the tax arrangements of multi-nationals being put in the spotlight. The press and the activities of NGOs and charities have, in particular, raised the issue of tax avoidance in the public consciousness and the political arena.
Much of the debate, often addressing very complex issues, has been conducted in an unfortunately simplistic manner, eliding the difference between avoidance and evasion and painting legitimate, long-standing arrangements as aggressive avoidance, for example. However, in the furore over tax avoidance, one area in relation to which all could find common ground was the need to modernise the international tax rules.
Many of the rules which determine the tax treatment of cross-border situations pre-date the current digital economy. For example, it is now possible for businesses to sell goods and services into economies with no physical presence in a way that could not be conceived when the rules dealing with permanent establishments were first formulated. As a result, it can be difficult to apply these rules to the modern business context.
As a result of the growing pressure in the tax avoidance debate and at the request of the Governments of the G20, the OECD produced a report into base erosion and profit shifting (BEPS) in February 2013. This report received strong support from the G20 leaders and accordingly was followed in July 2013 by the OECD Action Plan, which set out 15 specific actions to be taken forward by the OECD.
In September 2015, the OECD published its final reports on these action points. They cover a wide-range of international tax issues, including: taxation of the digital economy; use of hybrid instruments and entities; modernising transfer pricing rules, especially with regard to intangibles; double tax treaty abuse; permanent establishment rules; CFC rules; base erosion via interest deduction; and country-by-country reporting.
Following the publication of the final reports, the focus now moves to the issue of implementation of the various agreed actions in the participating jurisdictions.
A consensus solution for the tax challenges of the digital economy: OECD report
Publication of the EU's tax black list
Taxation of the digital economy: further developments
Taxation of the digital economy
The OECD’s BEPS Action Plan
ATAD II: hybrid mismatches with third countries
AG opines on scope of anti-Directive shopping rules
Treaty relief and non-CIV funds discussion draft
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