A few days ago, in a meeting of G20 Ministers of Finance and Governors of Central Banks in Moscow, the OECD presented the Action Plan on Base Erosion and Profit Shifting (wth “Action Plan”).
Action Plan aims to assist governments to address concerns arising from low taxation or non-taxation associated to tax planning. The Action Plan includes measures to amend domestic legislation, tax treaties and transfer pricing rules, as well as the relationship between tax authorities and taxpayers.
The Action Plan is founded on four pillars:
- To establish international coherence of corporate income taxation, with emphasis on: i) addressing the tax challenges of the digital economy; ii) neutralize the effects of hybrid mismatch arrangements, iii) strengthening CFC rules; and iv) limiting base erosion through interest deductions and other financial payments.
- To restore the full effects and benefits of international standards. This policy is intended to: i) counter improper practices; ii) prevent treaty abuse; and iii) prevent artificial avoidance;
- To ensure transparency: This policy aims to: i) require taxpayers to disclose their aggressive tax planning arrangements; and ii) re-examine transfer pricing documentation; and
- To agree on policies of tax rules, mainly by amending the OECD’s Model Tax Convention on Income and on Capital.
It is clear that the Action Plan represents an ambitious and unprecedented effort by the OECD. Certainly, the one of the OECD´s top priorities is to combat traditional structures of international tax planning. It will be a challenge to unify all the OCDE´s members in order to adopt the tax criteria and actions plans pointed out.