The Tax Management Transfer Pricing Report ™ provides news and analysis on U.S. and international governments’ tax policies regarding intercompany transfer pricing.
The OECD effort to rebuild the global tax system should focus on practical work that benefits the international tax community rather than trying to get as many countries as possible around the table, a former Treasury official said.
The OECD’s so-called inclusive framework for implementing the four minimum standards of the international project to fight base erosion and profit shifting has brought in many countries that aren’t members of the OECD, which launched the BEPS project, or even of the Group of 20 nations, which endorsed BEPS outcomes, Robert Stack, a former U.S. deputy assistant Treasury secretary for international tax policy, noted March 27. The G-20’s members account for about 85 percent of the global economy, he said.
The Organization for Economic Cooperation and Development has said making the framework as broad as possible will speed global adoption of BEPS recommendations, and it regularly announces new members, most recently tallying 94. It recently announced that work on taxation of the digital economy, one of the big unfinished to-do items from the BEPS project, will be done under the inclusive framework.
But Stack said success of the OECD project will be based not on how many countries are around the table in the framework, but “whether it can produce work products fit to purpose and that address needs of companies and the international tax community.”
Stack spoke during the first day of the March 27-28 global transfer pricing conference in Paris sponsored by Bloomberg BNA and Baker McKenzie LLP.
The OECD released recommendations from the 15-item BEPS plan, which was intended as a rewrite of existing rules that allow multinationals to drastically reduce their tax bills. The recommendations included major updates to transfer pricing rules to better take intangible assets into account, as well as documentation rules and requirements for the largest multinationals to report on their taxes paid and profits earned in each country of operation.
Stack said the OECD Working Party No. 6’s continued work on other outstanding BEPS items, including profit attribution and profit splits, “is on its way in a difficult environment to right those rules in ways they should be written. I would encourage them to continue down that path.”
He said developing countries and the BEPS Monitoring Group, an advocacy NGO, have pushed to get profit split rules written in a way that makes them a “back door to formulary apportionment.” And he said political pressure and the EU and other countries have spurred them to try to “to use transfer pricing as effectively like anti-abuse rules,” pushing aside the arm’s-length standard that has underpinned OECD transfer pricing for decades.
Stack said the OECD’s inclusive framework complicates matters because smaller developing countries, to which the framework gives a say in the project, face fundamentally different challenges than OECD countries do. And although the OECD and G-20 endorsed all the BEPS recommendations, framework countries only have to commit to implementing the four BEPS minimum standards, country-by-country reporting, countering harmful tax practices, preventing treaty abuse and improving the mutual agreement procedure—the procedure for resolving cases of double taxation between countries.
Consequently, it’s not clear what those countries have actually agreed to. “One thing I do think we should get out of this project is that the countries that are sitting around the table say, ‘that’s what attribution of profit looks like, that’s what profit splits look like, and that’s what we’re agreeing to.’”
And once the agreement is made, “We should take a look around and make sure countries are actually doing what they agreed to do,” he said.
To contact the reporter on this story: Rick Mitchell in Paris at firstname.lastname@example.org
To contact the editor on this story: Penny Sukhraj at email@example.com
Copyright © 2017 Tax Management Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)