Faster resolution eyed for double-taxation disputes
TOKYO — Disputes over cross-border double taxation can take a decade to resolve, putting a heavy burden on multinational corporations, but this would be shortened to around two years under new rules being crafted by the OECD and the Group of 20 major economies.
Corporations can seek to resolve such disputes through talks between tax authorities in their home and host countries — a process that usually takes around three years but occasionally requires about 10 years when emerging nations are involved.
The Organization for Economic Cooperation and Development will draw up rules shortly to allow bilateral talks to reach a resolution in two years or so, with G-20 leaders expected to adopt them during their summit in November.
Hoping to make the new rules more effective, Japan, the U.S. and Europe are proposing that cases that cannot be resolved in two years be forwarded to an arbitration body made up of third-party nations and experts. Brazil, India and other emerging nations oppose this idea, maintaining that third-party arbitration is a violation of a country’s right to tax.
The OECD and G-20 have been working to create an action plan to curb tax avoidance by global corporations. They hope that the new rules on double-taxation disputes will aid in this effort.
Cross-border tax disputes are increasing as globalization marches on. The number of bilateral talks prompted by complaints from Japanese companies reached 200 in fiscal 2013, up 60% from a decade earlier. Unresolved cases are stacking up, with the tally sitting at around 400.
