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The OECD's work continues on bringing changes to international rules for the taxation of income of multinational enterprises. A new action plan to address the erosion of the tax base of a country and to deal with profit sharing principles was introduced shortly after the G20 meeting in Moscow on July 19, 2013. For those who have been looking for large scale changes to or a restructuring of the international system for taxation, you are likely to be disappointed. The action plan includes selected changes to existing international rules and some recommendations for countries to change their domestic tax rules, but no plans involving fundamental change to the system.
Where is the system for international taxation headed? With the new action plan released by the OECD in July 2013 that deals with tax base erosion and profit sharing principles, it is time to take stock of where we are going on the international tax front. It is clear that the OECD is not following some of the calls out of the G20 for fundamental changes to the system of international tax system, in choosing to make incremental amendments to international tax principles and suggesting modifications to domestic tax rules. The OECD continues to pursue changes to the international tax rules in the areas of the tax treatment of hybrid instruments and entities, interest deductibility as a form of base erosion, the achieving of tax treaty benefits in inappropriate circumstances, avoidance transactions involving permanent establishment status and transfer pricing to name a few. What we will see coming from these efforts which are expected to be achieved over the next 18 months, are a series of recommendations to countries to change their rules for taxing income, changes to the OECD model treaty and changes to the OECD transfer pricing guidelines. Needless to say, we have a long way to go!!
As national governments scramble to shore up tax revenues and battle deficits around the world, the G8 and G20 calls for the introduction of a global, automatic tax information exchange system, continues to pick up some momentum. The Moscow meetings of the G20 in July 2013 endorsed the OECD action plan which advocated a truly global model for automatic information exchange among national tax authorities. Countries including poorer ones are being encouraged to join the Multilateral convention on mutual administrative assistance in tax matters which will adopt a similar standard already in place in the UK and certain other countries such as France, Germany, Italy and Spain. Recently, Luxembourg, a traditional jurisdiction which has upheld banking secrecy laws and provided many opportunities for "tax planning", has announced it is signing on in 2015.
Related Topics:OECD; BEPS; International Tax
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