1. The IMPLEMENTATION OF THE BEPS package
The IMPLEMENTATION OF THE BEPS package
IFA Asia-Pacific Regional Tax Conference
12-13 May 2016, Seoul, Republic of Korea
David Bradbury
Head of the Tax Policy and Statistics Division
OECD’s Centre for Tax Policy and Administration

2. Implementation of the BEPS package
Background
Measuring and Monitoring BEPS
Inclusive Framework
Next Steps

3. Background to the BEPS Project
Tax sovereignty, tax treaties and globalisation
Double non-taxation & stateless income
Digitalisation & growth of intangibles
Crisis, fiscal consolidation & parliamentary inquiries
Breakdown of international consensus
Need for global action

4. Global action required
September 2013: G20 Leaders endorsed ambitious and comprehensive BEPS Action Plan with 15 Actions
October 2015: 13 reports delivered just 2 years later
New or reinforced international standards and concrete measures to help countries tackle BEPS
Unparalleled effort - OECD/G20 countries working together on an equal footing with many developing countries

5. Objectives of the BEPS Project
Where profits are reported for tax purposes
Where the economic activity generating the profits occurs
Towards a greater alignment
Restore confidence in the system
Build a global consensus

6. What did the final BEPS package include?
Detailed report on measuring and monitoring BEPS
4 minimum standards
Reinforced international standards on tax treaties and transfer pricing
Common approaches and best practices for domestic law measures
Analytical reports with recommendations (digital economy and the multilateral instrument)

7. 15 Actions around 3 main pillars
Coher ence
Hybrid Mismatch Arrangements (2)
Harmful Tax Practices (5)
Interest Deductions (4)
CFC Rules (3)
Substance
Preventing Tax Treaty Abuse (6)
Avoidance of PE Status (7)
Transfer Pricing Aspects of Intangibles (8)
Transfer Pricing
Risk and Capital (9)
Transfer Pricing High Risk Transactions (10)
Transparency & Certainty
Measuring and Monitoring BEPS (11)
Disclosure Rules (12)
Transfer Pricing Documentation (13)
Dispute Resolution (14)
Digital Economy (1)
Multilateral Instrument (15)

8. Implementation of the BEPS package
Background
Measuring and Monitoring BEPS
Inclusive Framework
Next Steps

9. What do we know about the scale and impact of BEPS?
More than 100 empirical studies report evidence of BEPS
New OECD research finds that global net annual revenue loss of 4-10% of CIT - USD billion - at 2014 levels
As a percentage of tax revenues, this is expected to be higher in developing countries given their greater reliance on corporate tax revenues
BEPS creates many economic distortions
Effective Tax Rates of large MNEs are lower than similar domestic firms
Higher profit rate affiliates located in countries with lower statutory tax rates
Favours intangible investments, companies locating debt in high-tax countries and distorts the location of FDI
Creates negative tax spillovers across countries
Anti-avoidance rules are effective in preventing BEPS in individual countries, but coordinated measures could be more effective

10. The global scale of BEPS
OECD BEPS revenue estimate compared to GDP in selected countries (2014)
Add source

11. Concentration of net FDI to GDP
Foreign direct investment is increasingly concentrated

12. High profits of low-taxed affiliates
Higher-profit affiliates tend to have lower Effective Tax Rates
The highest percentage of income earned by low-taxed affiliates with higher profit rates

13. ETRs - large MNEs v large non-MNEs

14. Royalty receipts v R&D expenditure
Royalty receipts to R&D ratio is increasingly concentrated

15. Profit shifting through interest
Interest is concentrated in locations with above average statutory tax rates

16. Incentives to engage in BEPS
While average statutory CIT rates have been declining in the OECD, tax rate differentials between countries have been increasing

17. Implementation of the BEPS package
Background
Measuring and Monitoring BEPS
Inclusive Framework
Next Steps

18. Implementation3 Implementation, implementation, implementation…
“… We, therefore strongly urge the timely implementation of the project and encourage all countries and jurisdictions, including developing ones, to participate. To monitor the implementation of the BEPS project globally, we call on the OECD to develop an inclusive framework by early 2016 with the involvement of interested non-G20 countries and jurisdictions which commit to implement the BEPS project, including developing economies, on an equal footing …”
G20 Leaders – Antalya November 2015

19. Objectives of the framework
4 minimum standards
Essential to level the playing field
To ensure the effective and consistent implementation of the BEPS package
Especially important for any future standard setting in relation to new items or BEPS Actions where convergence towards common approaches and best practices occurs
To enable all countries to participate in the standard setting process for BEPS related issues

20. Membership of the inclusive framework
Aside from BEPS Associates, the implementation process will also involve ‘jurisdictions of relevance’
Open to interested countries and jurisdictions
Members must commit to the comprehensive BEPS Package and its consistent implementation
Will join the Committee on Fiscal Affairs as BEPS Associates
Will fully participate in the consensus based decision making of CFA and subsidiary bodies on BEPS issues and contribute to determining its governance, structure and programme of work
Members will participate on an equal footing
Reduced fee might be applied for some developing countries
Members will pay an annual BEPS Associates’ fee

21. The framework’s programme of work
Harmful tax practices (Action 5), treaty abuse (Action 6), country by country reporting (Action 13) and improving mutual agreement procedure (Action 14)
Reviewing the implementation of the four minimum standards
Standard setting for remaining BEPS issues
Monitoring of the digital economy (Action 1) and measurement and monitoring of BEPS and BEPS countermeasures (Action 11)
Ongoing monitoring and data gathering aspects of implementation
Feeds into the toolkit work and could potentially impact the remaining BEPS standard setting work
Implementation support, guidance and toolkits

22. Toolkits for low-capacity developing countries
To assist non-OECD/G20 countries implementing the BEPS measures and address their specific concerns. G20 mandate asks for toolkits to be developed by the OECD, in cooperation with the IMF, the WBG, the UN and regional organisations.
1. Report on Tax Incentives
November 2015
2. Toolkit on Transfer Pricing Comparability
Incl. supplementary work on mineral pricing
October 2016
3. Report on Indirect Transfers of Assets
June 2016
4. Toolkit on Transfer Pricing Documentation
5. Toolkit on Tax Treaty Negotiations
December 2016
6. Toolkit on Base Eroding Payments
June 2017
7. Toolkit on Supply Chain Management
March 2018
8. Toolkit on BEPS risk assessment

23. International organisations
Platform for Collaboration on International Tax Matters
IMF
OECD
WBG UN
The Platform will produce the toolkits
Most of the toolkits aim to translate BEPS Actions into user friendly guidance for low-capacity countries
Some address international tax issues not included in the BEPS Project (i.e. indirect transfers)
Development of toolkits will be informed by the Inclusive Framework
The platform may identify international tax issues and bring them to the attention of the Inclusive Framework

24. Implementation of the BEPS package
Background
Measuring and Monitoring BEPS
Inclusive Framework
Next Steps

25. Implementation of the BEPS package
Inaugural meeting of the Inclusive Framework
Kyoto, Japan: 30 June – 1 July 2016
At this meeting of senior level representatives of the members of the Inclusive Framework will take key decisions on governance, structure and the work programme of the framework.

26. David.Bradbury@oecd.org || www.oecd.org/tax
Contact details
David Bradbury
Head of the Tax Policy and Statistics Division Centre for Tax Policy and Administration
2, rue André Pascal Paris Cedex 16 Tel: – Fax:
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