OECD Tax Talk #8 - 15 December 2017

This eighth Tax Talk takes place in a currently very dynamic tax environment, Pascal Saint-Amans began his introduction, referring to the Paradise Papers, the EU list published at the beginning of December and the US tax reform, which could be pushed through before the end of 2017. "If you thought BEPS was fast, look at US tax reform now," Saint-Amans quipped. Although some points are still uncertain, he thinks the US tax reform is a positive step in the right direction.

With regard to the report on Action Point 5 (Harmful Tax Practices), which had classified France and Italy as "harmful", Pascal Saint-Amans pointed out that France undertakes to amend ist IP Regime within the EU by the end of 2018. Another report, published in December 2017, identified 10'000 tax rulings to be exchanged of which 6'500 have already been exchanged. Pascal Saint-Amans also referred to the new interactive world map on their Website which shows where each country stands with regard to the BEPS project.

Country-by-country reporting, is currently undergoing Major efforts to minimise unnecessary local submissions. In addition, 1'300 further exchange relationships are to be cleared next week.

Revenue Statistics

Michelle Harding informed about the Revenue Statistics 2017, which were published on 23 November 2017. The following graphics were particularly interesting:

The chart groups OECD countries into three groups depending on whether a country generates its tax revenues mainly from income taxes, social security contributions or taxes on goods and services.

This chart shows the development of four types of tax structures since the financial crisis in OECD countries.

Digital Economy

David Bradbury announced that the meeting of all stakeholders, which took place in Berkeley (San Francisco, USA) on 1 November 2017, was a resounding success. More than 100 representatives took part and over 2'500 people followed the meeting via webcast. Amongst other things, the OECD requested empirical studies on the new business models emerging in the digital economy in the course of the consultation process. In addition, long-term solutions should be preferred over short-term measures. The working group responsible will meet again in March and the first interim report is to be published in April, as previously announced.

Multilateral Instrument (MLI)

Sophie Chatel announced that the update of the OECD Model Tax Convention on Income and on Capital, which was approved by the OECD Council in November, would be available as a pdf the following week.

Regarding the «Multilateral Instrument», two countries have so far ratified the MLI (Austria and the Isle of Man). Therefore, a further three countries are missing to allow the MLI to enter into force. Sophie Chatel said that the states are currently working hard to enable ratification and that she suspects several countries, e.g. Poland, to soon be ready for ratification.

Mutual Agreement Procedures (MAP)

Sandra Knaepen informed about the review process regarding Action Item 14 (Dispute resolution). The report on the second group of countries was published today (15 December 2017). As the results show, all countries except Liechtenstein still have to make significant changes to their double taxation agreements. Moreover, it is very difficult for the countries to meet the deadline of 24 months. However, many countries have reorganised or hired additional staff to better achieve this goal. The report on the third group of countries has also already been completed and confirmed and should be published in early 2018. For the report on the fourth group of countries, inputs can still be submitted until 22 December 2017.

In the meantime, the 2016 MAP statistics have also been published. As one can see, there is now much more acces to MAP. According to Pascal Saint-Amans, owing to the fact that it prevailed as a minimum standard, so that it was prioritised by legislators and politicians.

Mandatory Disclosure Rules

Because of the Panama and Paradise Papers, John Peterson's contribution was particularly relevant and sought after. He referred to a consultation document that the OECD published on 11 December 2017 on the subject of "Common Reporting Standard (CRS) Avoidance Arrangements and Offshore Structures". The aim is to develop disclosure requirements and seek solutions to prevent the circumvention of CRS reporting through avoidance agreements and offshore structures. Input and feedback was welcome until 15 January 2018.

Conclusion

Pascal Saint-Amans closed the eighth Tax Talk by announcing that two more countries had joined the Inclusive Framework, bringing its membership to 110. It was clear that the pieces were coming together and he was very pleased to see how well the cooperation between the countries was working at this technical level. Now we have to see how the US tax reform is implemented. But one thing is clear: "2018 will be extremely busy for you and for us".
The team around Pascal Saint-Amans will be back in January or February.