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OECD provides update on base erosion and profit shifting

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At the annual OECD conference in Washington DC earlier this month, developments with respect to the OECD’s project on base erosion and profit shifting (BEPS) were discussed. According to Ernst & Young, the key issues discussed during the conference included the following points:

  • The BEPS project is focused on addressing instances of what the OECD refers to as ‘double non-taxation.’ The project is not intended to be a broader re-examination of basic principles of international tax; the focus is to be on proposing changes where there are real deficiencies that can be addressed. Additionally, the project is not just about the actions of companies with respect to their tax positions; it is about the actions of countries with respect to their tax policies.
  • The objective is to develop one standard to provide consistent results and avoid double taxation, although that does not necessarily mean a single set of rules.
  • Regarding the application of the permanent establishment concept to the digital economy, some OECD member countries believe it is not necessary or appropriate to develop an entirely new set of rules for new technologies and the new economy. Other member countries believe adjustments may be needed to ensure a level playing field between digital and physical transactions.
  • The focus of transfer pricing issues should be on areas where refinements could be made to address the most difficult questions, and not on a wholesale reconsideration of core transfer pricing principles. Additionally, reporting of country-based tax information to tax authorities should be done in a way that is not overly burdensome to taxpayers.

The conference noted both the complexity of the matters under consideration, as well as the wide disparity in views among the countries involved on these complex issues.