1. OECD BEPS and Tax Reform
Tax Coalition Issues Forum
April 28, 2017

2. Today’s presenters
Cathy Schultz NFTC Mary Bennett Baker McKenzie Janet Boyd Dow Chemical Co.
Barbara Mantegani Mantegani Tax PLLC Amy O’Donnell Roberti Proctor & Gamble

3. Origin of OECD/G20 BEPS Project
Growing concern expressed in wake of financial crisis regarding base erosion and profit shifting by MNEs
Increased attention of civil society and media to corporate tax affairs
Spreading perception that MNEs dodge taxes all around the world and in particular in developing countries
Political pressure to take action
G20 meetings of June and November 2012 focused on BEPS issue and requested OECD action

4. The BEPS timeline February 2013:
Initial BEPS diagnostic report by OECD
July 2013:
Publication of 15-point BEPS Action Plan
2013 – mid-2014:
Discussion drafts and public consultations
September 2014:
Interim reports on 7 Action Items
Late 2014 – mid-2015:
Discussion drafts and public consultations
October 2015:
Presentation of final BEPS Reports to G20

5. Basic objectives of BEPS Project
Three main principles:
Preventing double non-taxation due to the gaps that exist between countries’ tax rules
Aligning taxation with substance
Improving transparency

6. Participating BEPS Countries

7. Some key BEPS provisions
Action 7: Preventing artificial avoidance of PE’s
Action 2: Hybrid mismatches
Actions 8-10: Transfer pricing outcomes in line with value creation
Action 4: Limiting interest deductions
Action 13: Transfer pricing documentation / CbC reporting
Action 5: Preferential regimes / rulings exchange
Action 6: Preventing treaty abuse

8. Some work still underway
Further analysis of options
1: Digital Economy
Transfer pricing of financial transactions
4: Limit Interest Deductions
Analysis of attribution of profits
7: PE avoidance
Guidance on profit splits
8-10: Transfer pricing
MAP monitoring mechanism
14: Improving dispute resolution
Multilateral Convention to implement treaty recommendations
15: Multilateral instrument

9. Corporate structures under pressure
“Cash box” structures / tax haven cost sharing participants
Cost-plus sales and marketing compensation
Contract manufacturing / IP box
Contractual allocation of residual profit
Finance structures
Remote selling

10. Taxpayers’ PE planning considerations
Declare a PE?
Convert to Reseller?
Convert to Branch?
Do nothing?

11. Analyzing risk
Multiple factors impact decision to wait or proceed with changes
How aggressive is existing structure?
What are risks? Alternatives?
Where are risks?
How large are risks?
Appetite for risk/reputational damage
Cost of change—including business impact

12. Reporting Across Jurisdictions
Centralize the process
Provide consistent story globally
Collaborate with investor relations/communications departments on messaging

13. What else to keep an eye on?
The OECD’s “Inclusive Framework”
Final guidance on PE profit attribution, profit splits
Transfer pricing of financial transactions
EU Anti-Tax Avoidance Directive implementation
Country unilateral actions (e.g., ATO positions on offshore PEs, MAAL; Indian equalization levy, etc.)
Public CbC reporting proposals (e.g., EU / UK developments)

14. OECD BEPS and Tax Reform
Thank you!