On 15 November 2018 the OECD published a progress report in relation to the work by the Inclusive framework on base erosion and profit shifting (BEPS) on assessing preferential tax regimes.

The Inclusive Framework is implementing the monitoring process for the minimum standards under BEPS as well as the review mechanisms for other parts of the BEPS package, in addition to issuing toolkits to assist developing countries in BEPS implementation.

The report on preferential tax regimes has been issued as part of the ongoing implementation of Action 5 of BEPS. The Forum on Harmful Tax Practices (FHTP) carries out the assessments. BEPS Action 5 concluded that the work on harmful tax practices should be revived and improved with a focus on increasing transparency, including compulsory spontaneous exchange on rulings related to preferential regimes, and on requiring substantial activity for preferential regimes.

The report examines 53 preferential tax regimes and notes those cases where countries have already carried out their commitments in relation to their preferential regimes and those that have undertaken to proceed with changes. The assessments by the Inclusive Framework aim to show that the jurisdictions offer tax breaks only in relation to substantive activities and only if there is no risk of harmful tax competition.

The report notes that there are 18 preferential regimes in relation to which jurisdictions have carried out their commitment to make legislative changes to repeal or amend the regime. These regimes are offered by Andorra, Curaçao, Hong Kong (China), Mauritius, San Marino and Spain. Four new or replacement regimes have been specifically designed to meet BEPS Action 5 standard in Lithuania, Mauritius and San Marino.

Some countries have made new commitments to make legislative changes to amend or repeal a further 10 preferential tax regimes currently offered. These preferential regimes are located in Aruba, Australia, Maldives, Mongolia, Montserrat, the Philippines and Saint Lucia.

An additional 17 preferential regimes have been brought into the FHTP review process. Those regimes are in Aruba, Brunei Darussalam, Curaçao, Gabon, Greece, Jordan, Kazakhstan, Malaysia, Panama, Paraguay, Saint Kitts and Nevis and the United States.

The FHTP has decided that four regimes are either out of scope, not yet operational or already repealed or without harmful features. These regimes were offered by Aruba, Kenya and Paraguay.