Strategizing International Tax Best Practices – by Keith Brockman

Posts tagged ‘harmful tax practices’

The Davis Tax Committee: BEPS Report

The Davis Tax Committee has released its First Interim Report on Base Erosion & Profit Shifting (BEPS), including an introductory document and comprehensive analyses of the following BEPS Action Items:

  • 1, Digital Economy
  • 2, Hybrid Mismatches
  • 5, Harmful Tax Practices
  • 6, Treaty Abuse
  • 8, Transfer pricing re: intangibles
  • 13, Transfer pricing documentation
  • 15, Multilateral instrument
  • Summary of recommendations

The Committee’s objective is to assess South Africa’s tax policy framework and its role in supporting the objectives of inclusive growth, employment, development and fiscal sustainability.  Links to the Media Statement, Davis Tax Committee’s website and Report are provided for reference:

Click to access 20141223%20Davis%20Tax%20Committee%20Media%20Statement%20-%20Release%20of%20BEPS%20Report%20for%20Public%20Comment.pdf

Comments by all interested parties should be submitted by 31 March 2015.

The documents are a valuable reference in comprehending each of the OECD BEPS Action Items of the Report, not only the viewpoint of S. Africa.  Most importantly, it outlines the tax policies for continued foreign direct investment balanced against BEPS and General Anti-Avoidance Rule (GAAR) initiatives, while providing tax transparency and certainty with a balanced, sustainable tax policy going forward.

BEPS Action Plan 5: Harmful tax practices & transparency focus

Loyens & Loeff provides a comprehensive and concise summary of the focus for the OECD BEPS Action 5, Countering Harmful Tax Practices.  One of the priorities for this action is to improve transparency, with the EU Directive on Cooperation as a possible tool to carry out this objective.  The Council Directive on administrative cooperation is highlighted to draw attention to its possible role in the OECD BEPS drama.  An excerpt from their summary, and a link to their article, are provided for reference:

“Another priority under Action 5 is to improve transparency, including compulsory spontaneous exchange on rulings related to preferential regimes. To that extent the FHTP has put together a framework that describes in which situations, which information on which rulings should be exchanged between which countries. The Report mentions that the information exchange may take place on the basis of existing legal instruments, such as bilateral information exchange instruments, the Convention on Mutual Administrative Assistance in Tax Matters and the EU Directive on cooperation in the field of taxation. However, it remains unclear on what legal basis countries would have the obligation to exchange this specific information and how confidentiality can be guaranteed. Furthermore, it can be expected that such obligation may conflict with domestic legal requirements. The Report is also silent on how this should be handled.”

http://www.loyensloeff.com/nl-NL/Documents/Action%205%20–%20Countering%20Harmful%20Tax%20Practices%20More%20Effectively.pdf?_cldee=ZXZlbnRzQGxveWVuc2xvZWZmLmNvbQ%3D%3D&urlid=5

Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation, is applicable as of 1 January 2013 and is repealing the Directive 77/799/EES and lays down clearer and more precise rules governing administrative cooperation, in order to establish a wider scope of administrative cooperation between Member States.

The opportunity for OECD to successfully carry out is Action Plans relies on a legal instrument that provides automatic and timely implementation by the relevant countries.  A forthcoming multilateral instrument may also be a possible tool to accomplish its objective.  It is critical to monitor the implementation of this objective, as countries may comply completely, partially or not at all.  Therein lies the complexity.

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