OECD Tax Talk #10 - 16 October 2018

Initially, Pascal Saint-Amans briefly summarised the most important events of the last six months. A particularly important milestone for him was the start of the Automatic Exchange of Information (AEOI ) on 30 September 2018, in which more than 100 countries participated. Some countries have been a bit slower than others, but the process is working. He especially mentioned Singapore and Switzerland, which were ready on time for the AEOI. At the next meeting in Uruguay at the end of November 2018, the Global Forum, which monitors the AEOI, will develop framework conditions and methods for how the review process of the AEOI should take place in 2019 and beyond.

Last week in Bali, the team around Pascal Saint-Amans submitted a new work plan for a platform (Platform for Collaboration on Tax) to the G20 finance ministers, which should further promote cooperation in the tax area. According to Pascal, this is important, among other things, to avoid duplication of efforts by organisations such as the OECD, the UN or the World Bank.

Tax Challenges of a Digital Economy (Action Point 1)

At the last Tax Talk #9 in March 2018, the interim report on the topic "Digitisation of the Economy" was presented. As a result, the "Task Force on the Digital Economy" (TFDE) had another meeting in July 2018, at which the countries submitted new proposals to the TFDE:

The next meeting will take place in early December 2018, where the tax challenges of a digital economy will be further discussed. The aim is that the TFDE works out recommendations or guidelines and can then perhaps already present a concrete proposals for a solutions or even an agreement between the countries will at the G20 Finance Ministers' meeting in Japan as early as June 2019.

Action Point 5 on harmful tax practices

Melissa Dejong reported on the state of affairs regarding Action Point 5 (Harmful Tax Practices), which re-presents a minimum standard of the BEPS project. As far as preferential regimes are concerned, great pro-gress can be observed. Almost every day, they receive updates from countries that change their legislation in order to implement the so-called «Nexus Approach». In the case of the spontaneous Exchange of informa-tion on tax rulings, a review process was carried out this year in which about 92 countries were reviewed. This revealed, among other things, that more than 16'000 rulings had been exchanged. The further findings of the review process will be published at the end of the year.

Multilateral Instrument (Action Point 15)

Jeffrey van Hove announced the latest figures regarding the Multilateral Instrument (MLI):
84 countries have signed the treaty to date, 15 of which have ratified it. On 1 July 2018, the Multilateral Treaty entered into force. The MLI has already enabled more than 1,400 double taxation agreements (DTAs) to be supplemented with the BEPS recommendations and harmonised between the two countries concerned. In this context, it is particularly noteworthy that Action Point 6 on the prevention of treaty abuse (minimum standard) has been implemented in all treaties that have been harmonised to date by rewording the preamble accordingly and incorporating the so-called "principal-purpose-test" (PPT) into the treaty. In addition, many countries are also using the opportunity to improve the agreed mutual agreement procedures in terms of Action Item 14 on dispute avoidance and resolution (minimum standard). 28 countries have so far opted for arbitration. Two types of arbitration are provided for in the MLI:

1. Final offer or "baseball" arbitration, in which the countries each submit their resolution of the dispute to the arbitrator, who will then choose one of them.
2. Independent opinion option, in which the arbitrator investigates the facts of the case and the applicable standards and makes the arbitration decision himself.

It is expected that the popularity of such arbitration will increase as countries gain experience and that more and more countries will then introduce arbitration as a dispute resolution instrument in their DTAs. In addition, the first annual peer review report on Action Item 6 is currently being finalised. The aim is to do this by December 2018. Pascal Saint-Amans then emphasised that the countries were making great efforts to implement the prevention of treaty abuse under Action Item 6 and that it could be said today that the phenomenon of "treaty shopping" had come to an end.

Country-by-Country Reporting (Action Point 13)

Achim Pross provided information on the Country-by-Country Reporting (CbCR) under Action Point 13. More than 70 countries have so far introduced the obligation to exchange country-specific reports and more than 1'800 exchange relationships have already been activated. During the first exchange at the end of June 2018, there were some technical problems, but these were eventually solved. But what happens to the exchanged information? Achim reminded that the country-specific reports are intended for risk assessment. That is why the next step, together with the tax authorities and corporations, is to see how this information can best be used and evaluated for risk assessment. A «Risk Assessment Handbook» is to gather the expe-riences of tax authorities and a «CbCR risk assessment template» is to help developing countries to benefit as much as possible from the Information contained in the country-specific reports. A major report reviewing the CbCR is to be published in 2020. Meanwhile, a first collection of peer review Reports was published in May 2018.

Mutual Agreement Procedure (MAP)

Félicie Bonnet came back to Action Point 14 on dispute avoidance and resolution and provided information on the Mutual Agreement Procedure. She gave the following overview of the state of play on the Peer Review reports:

Félicie appealed to tax payers to share their experience with the countries under review, as their team often lacks input from taxpayers. For the seventh group of countries, inputs can still be submitted until mid-December 2018. Furthermore, the second stage, in which the recommendations of the first stage will be followed up, has already been started for the first and second group of countries.

Furthermore, the «2017 MAP statistics» were published last week. This year, for the first time, the collected information was published for each country individually, so that one can see for each country with which other countries they have the most pending or completed mutual agreement procedures. This enhances transparency and also helps her team to minimise double counting of open and closed cases. The good news that can be drawn from the «2017 MAP statistics» is that 60% of the cases closed in 2017 were closed in less than 24 months.

Conclusion

Jeffrey van Hove briefly informed about the new discussion draft on action points 8-10 (transfer pricing), which was published in July 2018, and Achim Pross about an analysis regarding the circumvention of the Common Reporting Standard (CRS). Pascal Saint-Amans then took the final floor and pointed out two webcasts they had recently made: One on trends in tax policy reforms in 2018 ("Tax policy reforms 2018") and the other on taxinspectors("Tax inspectors without borders") who assist developing countries in tax matters. After there were not many questions from the audience, the team around Pascal Saint-Amans said goodbye. The next webinar is planned for January 2019.