July 19, 2013
The Organisation for Economic Co-operation and Development (OECD) has released its Action Plan on Base Erosion and Profit Shifting, which contains 15 specific recommendations for international tax reform. The OECD expects the Action Plan to be largely completed within two years and will invite the participation of G20 countries that are not OECD members. If followed, these recommendations will have a broad impact on international business activities around the world, including with respect to hybrid entities and instruments, anti-deferral rules, deductibility of financing expenses, harmful preferential tax practices, tax treaty abuse, taxation of digital commerce, transfer pricing, aggressive tax planning disclosure, and the collection and use of global tax information.
The Action Plan comes in response to growing international concern regarding base erosion and profit shifting (BEPS). BEPS generally refers to tax-planning strategies that exploit differences in domestic tax rules and international standards that shift profits to jurisdictions with favourable tax treatment where there may be little or no economic activity. The OECD initiated the BEPS project in 2012 to examine tax rules that permit taxable profits to be shifted away from locations where business activities take place. The BEPS project has gathered momentum recently in many countries through increased political and media attention to international tax matters.
The full Action Plan is available here.
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