BEPS Takes Center Stage At US OECD Tax Conference
Hundreds of policymakers, business executives, and senior tax officials met at the OECD International Tax Conference to discuss the recommendations proposed under the base erosion and profit shifting (BEPS) project and their impact on trade and investment.
The conference, which was held in Washington DC on June 6-7, 2016, was jointly organized by the United States Council for International Businesses (USCIB), the OECD, and the Business and Industry Advisory Committee (BIAC) to the OECD.
The conference began with opening remarks from Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration, who told the audience that the world needs tax policies that lead to inclusive growth, which will in turn create tax certainty. “Ahead of us we have a more relaxed debate,” Saint-Amans said. “BEPS is going to be implemented, but we can do it in a balanced manner with a forward-looking agenda geared toward inclusive growth.”
Delivering his keynote address, US Internal Revenue Service Commissioner John Koskinen attributed the breakneck changes that have occurred in global tax policy to the “willingness of governments everywhere to come together and work collaboratively on common goals.” He supported the goal of the BEPS project to eliminate incidences of tax avoidance, and also reiterated that actions taken to improve tax compliance must not impede global commerce.
From the perspective of a tax administration, addressing BEPS requires an efficient and secure framework for automatically exchanging information, Koskinen explained, as well as effective measures to resolve disputes related to tax treaties in a timely manner. On country-by-country (CbC) reporting, Koskinen said that the US has been receptive to the business community’s concerns, adding that while the new reporting system went into effect on January 1, 2016, the US CbC regulations will only apply to tax years starting from July 1, 2016, meaning that under the OECD’s requirements the first reports will be due several months before they will be due under US regulations.
“I want to assure everyone that we understand the concerns expressed by the business community about the difficulties that this gap period poses for US-based companies,” Koskinen said. “We are considering alternative methods for receiving submissions for the gap period, which could include some system of voluntary reporting. We are coordinating with other countries to try and make sure that voluntary filing will work.”
Next, panelists discussed the policies that countries should adopt to help reduce tax uncertainty. Will Morris, Chairman of the BIAC Committee on Taxation and Fiscal Affairs, shared the findings of a survey, which revealed that the top five tax uncertainty factors for businesses are unpredictable or inconsistent treatment by a tax authority, retroactive changes to legislation, frequent changes to the statutory tax system, complexity of the tax code, and a poor understanding of the tax code by tax authorities. Morris explained that these factors have a serious negative impact on a business’s decision to invest. Panelists suggested faster audits and a timely resolution of cross-border disputes as ways to increase certainty.
Panelists also highlighted the importance of building trust. Pam Olson, US Deputy Tax Leader and Washington National Tax Services Leader at PwC, noted that there needs to be more dialogue between businesses and governments on taxation, which would go a long way towards increasing tax certainty. Robert Stack, Deputy Assistant Secretary for International Tax Affairs at the US Treasury, agreed and said that “trust among governments is critical” as well. Stack said that unilateral tax measures by countries would undermine global trust in the BEPS project.
During the second day of the conference, participants explored in detail several outstanding items and unfinished initiatives that need to be addressed in order for BEPS implementation to proceed, including permanent establishments, transfer pricing, interest deductibility, and the OECD’s effort to create a multilateral instrument to enable countries to swiftly amend their bilateral tax treaties to implement treaty-related BEPS recommendations.