On 14 December 2021 the OECD published a report entitled: Harmful Tax Practices – 2020 Peer Review Reports on the Exchange of Information on Tax Rulings.
The standard under Action 5 of the OECD/G20 action plan on base erosion and profit shifting (BEPS) is one of the four BEPS minimum standards. Jurisdictions joining the Inclusive Framework on BEPS are committed to implementing the minimum standards and are subject to peer reviews to assess their level of compliance with the standards.
The transparency framework for compulsory spontaneous exchange of information on certain tax rulings is one part of the minimum standard. Terms of reference and a methodology have been agreed under which the peer reviews are conducted.
In the peer reviews on implementation of the transparency framework the jurisdictions are assessed against the terms of reference. The focus is on the information gathering process; the exchange of information; confidentiality of the information received; the statistics on exchanges on rulings; and the level of transparency on some aspects of intellectual property regimes.
Under the transparency framework spontaneous exchange of information is required on rulings related to some preferential regimes; unilateral advance pricing arrangements (APAs) or other unilateral rulings on cross-border transfer pricing; rulings resulting in a downward adjustment of profits; rulings on permanent establishments; and related party conduit rulings. The exchanges of tax rulings are carried out under international exchange of information agreements.
The availability of timely and targeted information about such rulings aims to better equip tax authorities to quickly identify risk areas.
The fifth annual peer review of the transparency framework covers 131 member countries of the OECD’s Inclusive Framework. Of those jurisdictions, 31 are unable (legally, or in practice) to issue the types of ruling that are within the scope of the transparency framework, and there is no separate peer review report for those countries.
The annual report contains reviews that cover the relevant measures taken by the jurisdictions to implement their transparency framework during the calendar year 2020. The sources of information for the reviews are the data from each jurisdiction; input from other countries that engaged in exchanges of information with them under the transparency framework; and information supplied by the Forum on Harmful Tax Practices (FHTP).
At 31 December 2020, a cumulative total of almost 22,000 tax rulings falling within the scope of the transparency framework had been issued by the jurisdictions under review, including some past rulings issued since 2010. In 2020 more than 1,700 tax rulings within scope of the transparency framework were issued by the jurisdictions reviewed. Over 41,000 exchanges of information had taken place by 31 December 2020,
Of the 131 jurisdictions covered in the review, 95 jurisdictions were found to have met all the terms of reference and did not therefore require any recommendations. Of the remaining jurisdictions, ten received only one recommendation. In all, a total of 66 recommendations for improvement were made for the year under review.
