The BEPS Project - International Tax Reform

October 14th 2015

In a surprisingly efficient collaboration, governments are hammering the final nails into the coffin of tax avoidance. The final BEPS (Base Erosion and Profit Sharing) Project report was submitted for review on Monday, October 5, 2015, and decisions were announced three days later.

G20 finance ministers met on Thursday, October 8, in Lima, Peru to discuss the final draft of the BEPS project. To read the final report, please click here - http://www.oecd.org/ctp/beps-explanatory-statement-2015.pdf.

The OECD (Organization for Economic Corporation and Development), in partnership with the G20 spearheaded the BEPS project, a two-year program formed to address international tax avoidance. With 60 countries representing almost 90% of the world economy, this has been the most aggressive and united stance taken against multinationals with questionable tax practices.

Big name companies have been under scrutiny for their tax planning strategies. Some giants like Google, Amazon and Starbucks have been hauled into court on charges of tax evasion but many have simply walked out.

So why this aggressive push to staunch the creativity in global tax planning? Simple: Loss of revenue. An investigative study has found that various countries were losing approximately $240Billion (€213Billion) each year in tax revenue.

One of the biggest criticisms to the proposals is one that is pervasive in law making: complexity. Detractors say that the complexity of the laws will only lead to ambiguity and to inevitable loopholes.  

The final report addressed many ongoing issues with international corporate taxation including:

  • Taxing in the digital age
  • Limiting the power of hybrids
  • Redefining the meaning of Permanent Establishment;  
  • Implementing a new set of rules for Controlled Foreign Companies and
  • Addressing how to minimize treaty loopholes made possible by inconsistent global treaty practice.

Klueger & Stein, LLP works with many clients with international interests and will continue to inform our clients on any changes that may affect them.