25% of Companies Expected to Miss BEPS Deadline, Survey Finds
A recent Thomson Reuters survey report reveals that European companies are outpacing all others in developing their Base Erosion and Profit Shifting (BEPS) action plans by Dec. 31, 2017 – the deadline set by the Organization for Economic Cooperation and Development (OECD). But most respondents voiced several concerns about BEPS plan requirements.
In a survey of 180 tax professionals from 35 countries and 20 industries, most respondents said transfer pricing requirements, particularly documentation and country-by-country reporting, are their biggest hurdle. But most (74 percent) said they will complete their country-by-country analysis by the deadline.
About 25 percent of the tax executives surveyed said their companies wouldn’t be done on time.
Most of the respondents also said their IT systems don’t integrate with their transfer pricing policies. And half said their companies don’t have a central database of important intercompany agreements and tax rulings necessary for compliance with the new transfer pricing documentation requirements.
The OECD on Oct. 5 issued its final recommendations on the BEPS initiative, which seeks to put a halt to schemes, such as tax inversions or migrating intangibles to lower-tax jurisdictions, that companies use to avoid taxation or to reduce their tax burden in their home country.
One of the action items recommended by the OECD aims to transform transfer pricing documentation, forcing multinational corporations to reconsider how transfer pricing details are reported to local tax authorities, as well as worldwide with country-by-country reporting, according to Thomson Reuters.
“While many multinational corporations are diligently preparing for BEPS, some are constrained by limited resources, and others are adopting a potentially dangerous wait-and-see approach,” Brian
Peccarelli, president of the Tax & Accounting business of Thomson Reuters, said in a prepared statement. “With the first deadline just over 24 months away, [the corporations] need to be resolute in their strategy if they are going be fully compliant by 2017.”
But even before the final recommendations were issued, 59 percent of European companies were working on their BEPS plans, compared to 48 percent of companies elsewhere, according to the survey. The European companies also were working harder on their plans, with 47 percent reporting they spend two to 15 hours a week, compared to 26 percent of companies elsewhere.
Europe also is the worldwide leader in submitting comments to the OECD about drafts of BEPS issued for discussion. While 19 percent of all survey respondents had submitted comments, 45 percent in Europe had.
The survey also revealed other far-reaching effects of the measure. Countries in Europe and Asia-Pacific – including the United Kingdom, Mexico, the Netherlands, Spain, Poland, South Korea, Australia, Singapore, and China – had proposed new corporate tax and transfer pricing rules based on the BEPS action plan requirements before they were official released.
The difference of reactions among companies in various regions worldwide may be attributed to more BEPS activity in Europe compared to the United States, according to the survey report. In fact, there’s been little legislative talk about the OECD’s recommendations.
However, during a speech in Lima, Peru, on Oct. 9, Treasury Secretary Jacob Lew said the United States is “already engaged in the process of BEPS implementation, including country-by-country reporting by large multinational firms, and will continue to work to advance this important agenda.”
“As we turn to this work of implementation and monitoring, we must ensure that we are building fair and efficient tax administration regimes around the world to implement the new rules and ensure that tax administration is not inhibiting foreign direct investment and global growth,” he added.