The International Tax Planning Association (ITPA) meeting in Monte Carlo was held from 11-13 October 2015.
Speakers from around the world addressed a range of topics covering numerous jurisdictions including Monaco, Russia, and the United States. Discussions covered various types of US trusts with foreign assets, new anti-avoidance legislation and disclosure requirements in Russia with regards to foreign assets and entities, and the principle of economic substance.
The BEPS project was mentioned, concerning future transparency and reallocation of profits in line with the economic substance of various activities. It was stated that many IP structures are going to be affected and will require changing to meet new minimum international standards in international taxation rules.
OECD releases full Base Erosion and Profit Shifting (BEPS) action plan to G20 Finance Ministers 8 October 2015
The Organization for Economic Co-operation and Development is in the final stages of the reform of international tax rules in the ongoing fight to combat international tax evasion and profit-shifting.
The project is called the ‘OECD/G20 Base Erosion and Profit Shifting (BEPS) Project’. It is designed to empower governments with the means to address gaps in current international tax rules which allow profit-shifting to low or no tax jurisdictions.
The action plan was presented to a group of G20 Finance Ministers in Lima, Peru on 8 October 2015. After the G20 annual summit in Turkey on 15 and 16 November 2015 the action plan will be rolled out. The focus of the project will then turn to “designing and putting in place an inclusive framework for monitoring BEPS and supporting the implementation of the measures, with all interested countries and jurisdictions invited to participate on an equal footing”, according to the OECD.
Three fundamental hallmarks of the plan include:
1. The introduction of coherence in the domestic rules which affect cross-border activities.
2. Reinforcement of substantial requirements in the existing international standards to ensure alignment of taxation with the location of economic activity and value creation.
3. Improvement of transparency and certainty for businesses and governments.
Fifteen actions have been pinpointed as essential to combat international tax avoidance. These are:
Action 1 – Address the tax challenges of the digital economy.
Action 2 – Neutralize the effects of hybrid mismatch arrangements.
Action 3 – Strengthen controlled foreign corporation rules.
Action 4 – Limit base erosion via interest deductions and other financial payments.
Action 5 – Counter harmful tax practices more effectively, taking into account transparency and substance.
Action 6 – Prevent tax treaty abuse.
Action 7 – Prevent the artificial avoidance of permanent establishment status.
Actions 8-10 – Assure that transfer pricing outcomes are in line with value creation.
Action 11 – Measure and monitor BEPS.
Action 12 – Require taxpayers to disclose their aggressive tax planning arrangements.
Action 13 – Re-examine transfer pricing documentation.
Action 14 – Make dispute resolution mechanisms more effective.
Action 15 – Develop a multilateral instrument.
New Zealand’s Minister of Finance, the Hon Bill English, and the Minister of Revenue, the Hon Todd McClay have responded favourably, in a joint statement issued on 6 October 2015. Validating the work of the OECD in its BEPS programme, the Ministers stated that the programme being rolled out into the above action plan will provide a sound framework for review of New Zealand’s domestic and international tax legislation.
However, no decisions have been made, Mr English stating that “We need to always consider the effect that tax policy has on the productive sector of the economy. Decisions have to be made as to what extent the OECD recommendations are applicable to New Zealand, and the best way to implement them, giving thought to matters such as compliance costs. This will be high on the agenda for the government for the coming months”.