A report by the OECD prepared for the meeting of the G20 Finance Ministers on 26 and 27 February 2016 summarizes the developments on the project on base erosion and profit shifting (BEPS) and other international tax initiatives.

The report notes that the implementation of the BEPS package of measures has begun and many countries have already passed legislation or regulations requiring country by country (CbC) reports as recommended in the BEPS report. Thirty two countries have signed the multilateral competent authority agreement that provides the legal mechanism for the automatic exchange of CbC reports. More countries are expected to sign during 2016 resulting in the filing of CbC reports in 2017 and the exchange of these reports in 2017 or 2018.

The OECD report notes that updates to transfer pricing rules are also being implemented and formalization of Actions 8 to 10 will be available soon through an OECD recommendation that will be open to all countries.

The ad hoc group on the multilateral instrument met on 15 and 16 February 2016 and a draft instrument is expected to be agreed by the end of 2016. The multilateral instrument would give effect to the BEPS measures relating to tax treaties. Currently there are 95 countries participating in this.

The announcement in January 2016 by the European Commission of the Anti Tax Avoidance Package was another step towards implementation of BEPS. The package includes proposed directives that would ensure implementation of the CBC reporting requirements as well as measures related to interest deductibility, hybrid mismatches and controlled foreign companies. The European Commission also proposed measures related to the BEPS recommendations on preventing tax treaty abuse and updating the concept of permanent establishment.

Inclusive Framework

The inclusive framework for BEPS implementation will include all interested countries and jurisdictions on an equal footing with OECD and G20 countries in standard setting and monitoring of BEPS implementation. Jurisdictions that decide not to commit to implementation but are regarded as relevant for ensuring a level playing field in combating BEPS issues would be subject to review.

The mandate of the inclusive framework (that will extend initially until 2020) will focus on implementation of the four BEPS minimum standards on harmful tax practices, tax treaty abuse, CbC reporting and improvements in cross-border dispute resolution. There will be monitoring of the work relating to tax challenges in the digital economy and measurement of the impact of BEPS. Countries will be supported in the implementation of BEPS by means of practically-focused toolkits addressing priority BEPS issues as identified by developing countries.

Other international organizations and regional tax organizations will continue to participate as observers to support the development of guidance on implementation addressing the needs of developing countries and ensuring their effective participation in the framework.

Following approval by the G20 it is expected that the first meeting in relation to the framework would be held in June 2016.

The report notes that tax administrations are cooperating through the OECD’s Forum on Tax Administration and they will share best practice on BEPS implementation such as efficient cross border dispute resolution. There is also practical cooperation against aggressive tax planning arranged through the Joint International Tax Shelter Information Centre (JITSIC).

Tax Transparency

The Global Forum on Transparency and Exchange of Information for Tax Purposes has131 member jurisdictions all committed to the exchange of tax information on request. The Forum is making progress through its in-depth peer review monitoring process and its support of capacity building. Recently the Forum has focused on automatic exchange of financial account information.

The OECD’s global common reporting standard (CRS) for automatic exchange of information is a step forward in deterring and detecting tax evasion. So far 96 jurisdictions have committed to exchanging information under the common reporting standard by 2017 and 2018. Spurred by the imminent implementation of this measure taxpayers are moving to bring their offshore tax affairs into compliance and there have been a series of voluntary disclosure programs.

More work is required to ensure that the committed jurisdictions have the right legal framework and processes to exchange information effectively. The Multilateral Convention on Mutual Administrative Assistance in Tax Matters now has 94 participating jurisdictions.

The OECD provides continuing support on exchange of information by providing additional guidance on the common reporting standard, providing tools such as the CRS Handbook and CRS Portal and the administration of the notification process bringing into effect the Multilateral Competent Authority Agreement among the signatories.