OECD Tax Reform Recommendations

Strategic Communications

September 24, 2014

On Tuesday 16 September 2014 the international community stepped up the fight against tax avoidance as the OECD presented detailed recommendations for changes in global tax laws. The proposed changes are included within the first seven deliverables from the OECD’s Base Erosion and Profit Shifting (BEPS) Project. The process of agreeing recommendations has involved members of the G20, the OECD and developing countries.

Therefore, it is not surprising that the recommendations are receiving huge attention around the world. Large multinational companies will be impacted by the foreseen changes and have been actively involved in the consultation process. FTI Consulting provides an overview of the recommendations and considers the broader picture and the political implications in some of the key economies.

The OECD has delivered clear and specific materials in relation to:

  • Neutralising the effects of hybrid mismatches
  • Transfer pricing documentation and Country-by-Country reporting
  • Preventing treaty abuse; and
  • Transfer pricing aspects of intangibles.

The remaining reports provide valuable updates and insights. Particularly important is the conclusion that a multilateral instrument (to have the same effect as a simultaneous renegotiation of multiple bi-lateral treaties) is both feasible and desirable. The mandate for negotiating that instrument will now move forward.

The conclusion of the report on the digital economy (Action 1), that it is not possible to “ring-fence” the digital economy comes as no surprise. The specific facets that exacerbate the BEPS risks will be addressed in delivering other Action Plan items. The VAT focus is noteworthy given the EU influence on this tax.

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