Understanding the OECD tax plan to address 'base erosion and profit shifting' – BEPS

Briefing 14-04-2016

Action to fight corporate tax avoidance has been deemed necessary in the OECD forum, where further impetus has been given via the G20/OECD 'Base erosion and profit shifting' action plan (known as BEPS), initiated in 2013. Applied in a substantially changed context, existing tax rules set up a century ago are not only outdated but have also been shown to have flaws that create opportunities for BEPS practices and thus need to be dealt with. The BEPS action plan has 15 actions covering elements used in corporate tax-avoidance practices and aggressive tax-planning schemes. The 15 BEPS final reports were prepared over two years, involving OECD and G20 countries. The reports were finalised in autumn 2015 and endorsed by G20 leaders at their summit in Antalya, Turkey, in November 2015. They cover common forms of BEPS practices. The reports are generally seen as a step in the fight against corporate tax avoidance. The action against BEPS is designed to be flexible as a consequence of its adoption by consensus. Recommendations made in BEPS reports range from minimum standards to guidelines, and also putting in place an instrument to modify the provisions of tax treaties related to BEPS practices. Implementation is under way, and the follow-up and future of work to tackle BEPS is organised so as to provide a more inclusive framework able to involve more countries. EU rules already cover some of the BEPS actions. And the January 2016 'anti-tax avoidance package' introduces further measures, including a proposed directive providing for country-by-country reporting and another setting out anti-abuse measures against common forms of aggressive tax planning.