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Sept. 22 — The European Commission shouldn't try to create its own transfer pricing standards in investigating whether companies received favorable tax treatment from governments in the European Union, the OECD's top tax official said.
Pascal Saint-Amans, head of the Organization for Economic Cooperation and Development's Center for Tax Policy and Administration (CTPA), said Sept. 22 that businesses need certainty about their tax treatment.
“To put it in other words, for the future what we need is one standard on transfer pricing,” he said. “I think it has been clarified by the commission and will be further clarified that the commission does not create its own standards on transfer pricing but just implements the OECD transfer pricing guidelines.”
The commission has faced strong U.S. criticism over its month-old decision ordering Ireland to recover 13 billion euros ($14.6 billion) from Apple Inc. for what it said was illegal state aid (168 ITM, 8/30/16).
In the case of Apple and other global companies, EU Competition Commissioner Margrethe Vestager has asserted that some EU governments gave selected companies unfair competitive advantages through tax breaks. The commission side-stepped the arm's-length standard in its final Apple decision, although it had gone into depth on the matter in its preliminary finding in the case (172 ITM, 9/6/16).
Saint-Amans said the OECD has been watching these cases closely and has made clear in its talks with the commission that state aid cases “shouldn't deal with the future.” Sticking to the OECD's transfer pricing standard is “a very important thing in terms of securing transactions, and securing the way forward in providing tax certainty for business,” he said.
He commented during a CTPA webinar update on OECD tax policy work which—among other things—addressed the Group of 20 countries' increasing interest in pro-growth tax policies and tax certainty for business. He said the organization's aim is to balance its measures against corporate tax avoidance under the international program against base erosion and profit shifting, with measures to avoid double taxation.
That requires good cooperation among governments, and “we have a program for that, we have deliverables,” while Germany has indicated it plans to make tax certainty a priority for its G-20 presidency, which starts in December, he said.
At a G-20-OECD tax symposium in Chengdu, China, this summer, finance ministers said tackling tax uncertainty is an important step toward boosting trade and investment and creating jobs in their jurisdictions, and they asked OECD to help, according to David Bradbury, head of the CTPA's tax policy and statistics division.
“One of the most important elements” of the OECD's work is a plan to launch a business survey in early October, with a response deadline of December, for taxpayers and businesses to identify key sources of tax uncertainty, as well as measures that have improved tax certainty, Bradbury said.
Jesse Eggert, senior advisor on the BEPS project, said the ad hoc group of about 95 countries and jurisdictions negotiating a multilateral instrument to implement key treaty measures from the BEPS project has progressed well. In a meeting last week, the group “was able to reach agreement in principle on the core text of that instrument,” although some fine-tuning remains, he said.
That includes making sure the document is consistent, as clear as possible, and works technically, and making sure the two official versions in English and French are verified against each other.
Eggert said the ad hoc group decided the instrument itself should cover countries' adherence to minimum BEPS standards, so the possibility of opting out of those standards is limited. But the overall document takes a “pretty flexible approach. It was decided early on that it would be no good to come up with an instrument that implemented all of the BEPS measures in a way that no country was actually able to sign on to, due to particular policy concerns.”
Consequently, there are opt-in provisions, the best example being the one on mandatory binding arbitration for MAP cases, developed by a subgroup that included about 30 countries.
There also are alternative provisions that allow multiple solutions, including to some treaty problems “that allow countries to follow their tax policy preferences,” and it will be possible to opt out of some provisions, to allow countries to deal with some issues through bilateral treaties, he said.
Eggert said he expects the ad hoc group to formally adopt the instrument at its final meeting in November.
Saint-Amans noted that publication of the treaty text, which has never been made public, is a “sensitive issue.”
“But we will publish the text before it's signed, meaning as soon as it's initialed, at the November meeting,” adding that “there will be no surprises.”
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Video of the webinar is at http://video.oecd.org/3023/or/Webcast-OECD-Tax-Talks.html.
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