On 23 January 2015 the OECD held a public discussion on action 14 of the base erosion and profit shifting (BEPS) action plan on how to make dispute resolution mechanisms more effective. The Chair of the Focus Group on Dispute Resolution presented to the meeting the aims of action 14 and the discussion draft produced by the OECD in 2014. General comments were also made on behalf of the OECD’s business and industry advisory committee (BIAC).
Discussion on achieving a step change in resolving mutual agreement procedure (MAP) cases looked at promoting the use of arbitration. The OECD Model includes a provision for compulsory arbitration in the MAP article, if the competent authorities cannot reach agreement within two years, but not many tax treaties have incorporated this provision. Increased use of arbitration in treaties could therefore achieve progress in giving taxpayers more certainty that the MAP procedure if used will lead to a resolution of the issues concerned.
The consultation discussed a three pronged approach to improving the dispute resolution process involving declaration, commitment and monitoring. There would need to be political commitments to eliminate taxation that is not in accordance with a double taxation convention. There would be new measures to improve access by taxpayers to the MAP and the procedures involved in this would be made more efficient. A monitoring mechanism would be put in place to make sure that the political commitments were being followed through with practical measures.
The meeting then considered the practical measures that could be taken by tax administrations to bring about a climate in which the competent authorities can implement the mandate given to them by the tax treaty in the MAP article. The options for achieving this put forward in the discussion document were examined.
Another important consideration is to make sure that a taxpayer is able to access the MAP when eligible to do so. The meeting discussed the options put forward in the discussion document to improve access to the MAP, and looked at procedural obstacles that could hold up the efficient resolution of cases.