Quarter of businesses to miss BEPS deadline
A quarter of companies say they won’t meet the first deadline proposed by the Organisation of Economic Co-operation and Development (OECD) in its base erosion and profit shifting (BEPS) action plan, reports Economia.
Globally, 74 per cent said they will complete their country-by-country analysis by the first due date, December 31, 2017, according to a survey by Thomson Reuters.
Meanwhile, European companies are ahead of the Americas and Asia Pacific in preparation for the BEPS action plan.
The majority of respondents (59 per cent) from European-based companies said they are proactively preparing for BEPS, compared with 48 per cent of companies in the Americas and Asia Pacific.
Almost half of European companies said they spend between two to 15 hours per week on BEPS-related activity, compared with 26 per cent for the Americas and Asia Pacific.
Europe is also leading the way in BEPS activism. Among all respondents, 19 per cent said their companies have submitted comments to the OECD regarding the BEPS discussion drafts, compared to 45 per cent in Europe.
“While many multinationals corporations are diligently preparing for BEPS, some are constrained by limited resources, and others are adopting a potentially dangerous wait-and-see approach,” said Brian Peccarelli, president of the tax and accounting business of Thomson Reuters.
“With the first deadline just over 24 months away, MNCs need to be resolute in their strategy if they are going be fully compliant by 2017.”
Details of the action plan were announced yesterday and the plan is due to be presented before G20 finance ministers in Lima later this week.
Revenue losses from BEPS are estimated to be US$100-240bn (£66-£158bn) a year, or roughly 4-10 per cent of global corporate income tax revenues, according to the OECD.
The OECD wants multinationals to report their tax planning so it can be broken down in to a country-by-country basis, and for more emphasis to be put on the profits created in each country, making it more difficult to shift profits to low-tax jurisdictions.
It also calls for those companies to pay local tax on any profits arising from sales in that country. It cracks down on countries allowing multinationals to set up financial subsidiaries, and sets out reforms to tackle complications arising from the digital economy such as intellectual property rights, patent box and intangible assets.
The new OECD measures received a mixed response but tax partners from PwC, Deloitte and Baker Tilly all broadly welcomed the announcements.
Several countries, including the UK, Australia, Spain, Mexico, the Netherlands, Poland, South Korea, Singapore and China have already proposed new corporate tax and transfer pricing rules before the plan is officially delivered.
Most said transfer pricing requirements, specifically documentation and country-by-country reporting, are their greatest concern among all BEPS actions.
Additionally, two-thirds of respondents reported that their IT systems do not integrate with their transfer pricing policies, an issue that could leave them exposed and will need to be addressed in the post-BEPS landscape.
Furthermore, half said their companies do not have a central database of important intercompany agreements and tax rulings required to comply with the new transfer-pricing documentation requirements.