OECD to Release Enhanced Data for Double-Taxation Cases

Trust Bloomberg Tax's Premier International Tax offering for the news and guidance to navigate the complex tax treaty networks and business regulations.

By Sony Kassam

The OECD will be releasing countries’ mutual agreement procedure statistics on a country-by-country basis in 2018—a step up from the aggregated 2016 data released earlier this month, an official said.

“You’re going to be able to see U.S. versus County X versus Country Y,” Achim Pross, head of the Organization for Economic Cooperation and Development’s International Cooperation and Tax Administration division said Nov. 30. The refined data will be more granular for understanding a country’s case load inventory and how it’s moving, he said.

Mutual agreement procedure (MAP) cases seek to resolve double-taxation disputes between countries.

“And transparency in that space is tremendously important in driving a lot of change in the thinking and the approach of a lot of tax administrations around the world,” Pross said during a panel at an annual international tax conference sponsored by George Washington University Law School, the Internal Revenue Service, and Treasury.

‘Most Important’

Action 14 of the OECD’s 15-item action plan to combat base erosion and profit shifting (BEPS) is devoted to improving the dispute-resolution process. The action, released in the October 2015 BEPS report, requires countries to adopt the OECD’s framework for reporting on cross-border tax disputes.

Members of the Inclusive Framework—the nations signing on to the BEPS project—reported their 2016 statistics under the new collaborative approach, the results of which were published Nov. 27.

Action 14 is “probably the single most important action item” to companies involved in the BEPS process, William Sample, vice president of tax at Microsoft Corp., said during the panel.

Administrating Policy

“All companies regardless of their industries agree that dispute resolution needs to be improved,” Sample said. “In order for administrative processes to succeed, the tax officials involved in the administrative processes need to focus on administrating their laws and policies, not on using the processes to change or create policy.”

In the era before BEPS, tax officials in certain countries used MAP as an avenue to create governmental policies, Sample said, which doesn’t help MAP work. Further, some administrations were offering minimum assessments if a taxpayer agreed not to file a mutual agreement procedure and a maximum assessment if the taxpayer filed one.

Predictable Outcomes

The instrument used to resolve double taxation disputes doesn’t necessarily matter as much as the predictability of a jurisdiction’s position, Anna Theeuwes, president of the EMEA chapter at Tax Executives Institute, said during the panel.

“We have a number of companies that you would expect to do MAP that actually don’t do MAP,” Theeuwes, also a tax policy manager at Shell International B.V., said.

The reason, she said, is that the chief financial officers of those companies are unable to spend time, money and resources to get a MAP when they’re unsure about the range of outcomes.

“Improving predictability of what rules are going to be applied is going to be very important,” Theeuwes said. But what’s even more important to businesses is improving dispute prevention, she said.

Countries such as the U.K. and the Netherlands had much lower MAP inventory than the U.S. and Germany.

Members of the ETI’s EMEA chapter—Europe, the Middle East and Africa— seemed to “have very positive experiences with very good prevention efforts,” Theeuwes said.

Changing Process

The mutual agreement procedure continues to change, Pross said, as the OECD’s peer review process for different batches of countries’ MAP processes is underway. The peer reviews are part of the OECD’s initiative to measure and monitor how countries resolve disputes with tax treaty partners.

“If we work together, I think we can change MAP for the better, and make it great again,” Pross said as the audience erupted in laughter.

To contact the reporter on this story: Sony Kassam in Washington at skassam1@bloombergtax.com

To contact the editor responsible for this story: Kevin A. Bell at kbell@bloombergtax.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request International Tax