On 26 July 2016 the OECD published on its website the report prepared for the meeting of the G20 finance ministers held on 23 and 24 July 2016. The report contains updates on progress on the implementation of the recommendations of the reports on base erosion and profit shifting (BEPS); exchange of tax information; tax policy and economic growth; and tax and development.

BEPS

The meeting of the Committee of Fiscal Affairs (CFA) in an inclusive format for BEPS issues took place on 30 June – 1 July 2016. The meeting was attended by OECD member and accession countries, G20 member countries and 39 other countries and jurisdictions that have joined the inclusive framework on BEPS and committed themselves to the BEPS package.

The meeting adopted a program of work to establish terms of reference and methodologies for peer reviews of the four BEPS minimum standards by the next meeting in January 2017. The minimum standards relate to countering harmful tax practices; preventing tax treaty abuse; transfer pricing documentation in relation to country by country reporting requirements; and making dispute resolution mechanisms more effective.

The IMF, UN, World Bank and regional tax organizations demonstrated how they can support countries in implementing BEPS measures. The CFA’s technical subsidiary bodies on BEPS issues are to develop monitoring processes; undertake reviews on implementation of the standards; and develop further standards to address BEPS issues.

With regard to BEPS implementation more than fifty countries have taken steps to implement country by country (CbC) reporting. In June 2016 the OECD issued further guidance to support the transitional period as the new requirements are being brought into force by various countries.

The Multilateral Instrument (MLI) on BEPS implementation is being negotiated by 96 countries with the aim of incorporating tax-treaty related BEPS actions into bilateral tax treaties. The next round of negotiations is to be held in September 2016 with the text of the MLI to be initialed by November 2016 at the latest. The MLI will permit countries to achieve the BEPS minimum standard aiming to end treaty shopping and allow them to address issues such as hybrid mismatches; the updated permanent establishment definition; abuse of specific treaty rules; and improved dispute resolution procedures.

Tax Transparency

Progress has been made in implementation of tax transparency standards for exchange of information on request (EOIR) and automatic exchange of information (AEOI). So far 83 countries have signed the multilateral competent authority agreement for AEOI. This would allow bilateral exchange of information to be activated through a process of notifications.

Non-cooperative jurisdictions would be identified by assessing them against three objective criteria. These are implementation of the EOIR standard; implementation of AEOI with first exchanges of information in 2018 at the latest; and participation in the multilateral convention or a sufficiently broad exchange network allowing both EOIR and AEOI. The Global Forum is developing a process to allow jurisdictions receiving a partially compliance or non-compliance rating in 2016 to have progress provisionally recognized by June 2017 pending conclusion of a full peer review under the second round of reviews. A list of jurisdictions based on this approach could be established for the G20 summit in July 2017.

Tax Policy and Economic Growth

The OECD report to the G20 refers to the tax policy symposium of 23 July 2016 that was called to consider the use of tax policy in driving innovation; support inclusive growth; and increase tax certainty. Tax policy design can support economic growth and generate opportunities for all groups within the population. Policy makers also require a greater understanding of sources of tax uncertainty and its effect on investment and productivity. Through analysis of these issues tax policy can be adapted to make a greater contribution to strong, sustainable and balanced economic growth.

Tax and Development

The OECD refers to the report prepared by the Platform for Collaboration on Tax in relation to implementation of capacity building programs. Assistance should be part of a country-led process in a supportive political environment. Development partners should support the development of policy and management skills; improve coordination between government and institutions; improve the tools for diagnosing risks in tax systems and finding solutions; and ensure that the international and regional tax systems are functioning effectively for developing countries. This will help developing countries make appropriate reforms to achieve the Sustainable Development Goals.

The Platform for Collaboration on Tax has also given an update on toolkits it is developing to the meeting of the inclusive framework on BEPS. These include tools to address the lack of access to comparable information for transfer pricing studies; a report on good practices in transparency and governance of tax incentives in low income countries; a report on issues arising from the indirect transfer of assets; toolkits on implementation of transfer pricing documentation requirements and strengthening capacity for effective tax treaty negotiations; rules to address base eroding payments between affiliates of multinational enterprises; a toolkit on developing rules to combat artificial profit shifting through supply chain restructuring; and a toolkit for assessing BEPS risks focusing on high-risk or significant industry sectors.