The OECD’s Inclusive Framework on base erosion and profit shifting (BEPS) has issued a progress report of its activities in the year to June 2018. The report indicates that significant developments have taken place in BEPS implementation during the past year.
Tax Challenges of the Digital Economy
In March 2018 an interim report was submitted to the G20 Finance Ministers on the tax challenges arising from the digitalisation of the economy, taking stock of the issues and agreeing to work on a consensus-based long-term solution.
Multilateral Instrument Implementing Tax Treaty Related BEPS Measures
The Multilateral Instrument (MLI) covers 82 jurisdictions and more than 1,360 tax agreements. Following ratification by five countries the MLI entered into force on 1 July 2018. The first modifications to bilateral tax treaties will take effect from 1 January 2019. More countries are expected to ratify the MLI during 2018 and it will ultimately lead to changes to more than 2 500 bilateral agreements to implement measures related to BEPS.
Peer Reviews on BEPS Minimum Standards
Peer reviews of the BEPS minimum standards include reviews of preferential tax provisions under Action 5 of BEPS. The Forum on Harmful Tax Practices (FHTP) has reviewed 175 tax provisions against the standard for harmful tax regimes. Of the provisions reviewed 31 have been changed; 81 require legislative changes which are in progress; a further 47 were considered not to pose any BEPS risks in practice; and four were found to have harmful or potentially harmful features. Twelve provisions are still under review.
Peer reviews of tax rulings, also under BEPS action 5, have identified more than 17,000 tax rulings and information exchange on key issues from these rulings is taking place between member countries of the Inclusive Framework.
The first annual peer review report on country by country (CbC) reporting under BEPS action 13 was issued in May 2018. The report examines the implementation of the minimum standard by 95 jurisdictions and looks at their domestic legal and administrative frameworks. The second annual peer review launched in April 2018 covers all members of the Inclusive Framework. The second peer review will focus on the exchange of information under CbC reporting, and implementation of requirements on confidentiality and appropriate use of the information in the reports.
Peer reviews have begun in relation to mutual agreement procedures (MAPs) under BEPS Action 14. Peer reviews have already taken place in relation to 21 jurisdictions and areas for improvement have been identified. There are currently 16 peer reviews in progress and 35 more are planned before the end of December 2019. MAP country profiles have been published for more than 80 countries.
Capacity Building
The Inclusive Framework’s capacity building efforts aim to ensure that developing countries have the tools and resources needed to implement the BEPS recommendations. Implementation of the BEPS package can help developing countries to protect their tax base and make progress in domestic resource mobilisation.
The Platform for Collaboration on Tax (PCT) held its first annual conference in February 2018. The PCT is an initiative by the OECD, IMF, UN and World Bank Group to provide capacity building support for developing countries. Its work program includes further toolkits to implement BEPS-related issues identified as priorities by developing countries.
Future Work
Action 11 deals with measuring and monitoring BEPS. A challenge in assessing the scale and impact of BEPS is the scarcity of relevant data and the limitations of existing data sources. As a step towards addressing this challenge a series of new data collection processes and analytical tools have been developed and are now being put in place.
