On 14 to 16 December 2016 the OECD’s Inclusive Framework held a regional meeting for Eastern Europe and Central Asia. The meeting was held to discuss the measures recommended by the OECD project on base erosion and profit shifting (BEPS) including the peer review process for minimum standards. Input was invited from participants on the toolkits being drafted to deal with specific BEPS issues and to understand the needs and priorities in relation to capacity building.
With regard to the planned peer reviews of the implementation of minimum standards the participants emphasized the need for flexibility. They noted that the multilateral instrument for including tax treaty-related BEPS recommendations into bilateral treaties would allow those measures to be implemented efficiently into the treaties.
The participants in the regional meeting also noted the importance of the BEPS recommendations on country by country (CbC) reporting. Reforms are already underway in a number of the countries to implement the measures relating to transfer pricing documentation. Implementation of these measures will permit them to better combat aggressive tax planning, treaty abuse, avoidance of permanent establishment status and issues relating to transfer pricing.
A number of participants noted that the main problem in implementation of BEPS measures relates to personnel and IT resources of tax administrations. Also the need to change legal and administrative systems is a problem for quick implementation of BEPS reforms.
On the subject of capacity building countries noted that they need support to implement BEPS and will need extended deadlines for implementation of the minimum standards. The participants noted the importance of training programs on issues such as transfer pricing and aggressive tax planning. The limited tax administration capacity needs to be directed towards priority areas such as the shadow economy. Exchange of information will be important to tax administrations in detecting hybrid mismatch arrangements and in exchanging CbC reports.
Business representatives raised concerns about appropriate use of the information obtained by tax administrations through CbC reports. They also expressed concerns about the possible retroactive application of BEPS measures. However the business participants welcomed the OECD initiative on tax certainty as they regarded predictability of the legal environment as important.