On 15 April 2021 the OECD released peer review assessments under Action 14 of the project on base erosion and profit shifting (BEPS) which aims to make dispute resolution mechanisms more effective. These stage two monitoring reports relate to Australia, Ireland, Israel, Japan, Malta, Mexico, New Zealand and Portugal and assess the progress made by those countries in implementation of the recommendations included in their stage one peer review reports, taking into consideration developments occurring between 1 January 2018 and 31 August 2019.

Countries that are members of the OECD’s Inclusive Framework on BEPS are committed to conforming to the minimum standard on Action 14 and are subject to peer reviews to review implementation of measures to achieve this.

All eight jurisdictions have signed the multilateral instrument (MLI) to implement tax treaty related recommendations of (BEPS) into their bilateral tax treaties, and seven of them have ratified the MLI, allowing them to update many of their tax treaties to bring them into line with BEPS recommendations. Some have also opened bilateral negotiations to amend some of their tax treaties.

All these jurisdictions apart from Malta have increased the number of personnel in their competent authority function or have improved their organisation to enable them to deal with MAP cases in a more timely and efficient manner. All the jurisdictions have issued MAP guidance or updated their existing guidance.

Australia, Ireland, Japan, Malta, New Zealand and Portugal have put in place a documented bilateral notification and consultation process to be followed when their competent authority considers that an objection presented to them is no justified.

The OECD has published all the stage 1 peer review reports and the first four batches of stage 2 peer review reports. Many of the countries assessed at stage 1 are continuing the work of addressing the deficiencies identified in their peer review reports. Further batches of stage 2 peer review reports on BEPS Action 14 will be published as the schedule of peer reviews is carried out.

Review of minimum standard under BEPS Action 14

The OECD is currently reviewing the minimum standard under Action 14 with a view to strengthening the standard. A consultation document was issued in November 2020; and following the receipt of comments from interested parties a virtual public consultation meeting was held in February 2021. Possible changes to the standard could include a requirement to introduce a bilateral APA program; a requirement to strengthen the legal framework to ensure implementation of MAP agreements; requirements in relation to multi-year MAP implementation where there are recurring issues; and the implementation of MAP arbitration requirements. Additional data could be required for the statistical reporting.

Another suggested improvement would be to expand access to training for tax audit personnel on international tax issues. This could promote greater efficiency in tax audits and reduce the number of tax adjustments that can lead to expensive MAP processes. Where a tax administration is short of resources the training could be obtained through an international organisation such as the OECD.