Understand the facts and myths about Base Erosion and Profit Shifting PART 1

Learning CentreUnderstand the facts and myths about Base Erosion and Profit Shifting PART 1

Understand the facts and myths about Base Erosion and Profit Shifting PART 1 

Myth: The BEPS Project will have no significant impact.

FACT: Tax policy has always been the sovereign right of individual countries. However, more coordinated efforts are clearly needed since the BEPS Action Plan has been adopted. Proposed changes to the Transfer Pricing Guidelines will be immediately applicable, while the changes to the Model Tax Convention and decisions on harmful tax practices will be implemented via a multilateral instrument that is to be negotiated in the coming year. The recommendations on best practices for domestic law measures are expected to be implemented in national legislation, according to the applicable constitutional requirements. The intense interest from stakeholders demonstrates the potential reach of the BEPS Project, not only on tax practices but business aspects of multinational companies and international tax and transfer pricing.  

Myth: BEPS will result in unmanageable reporting burdens for multinational companies.

FACT: The BEPS Project is standardizing a number of reporting requirements so as to reduce the compliance costs for businesses that operate across borders. For instance, widespread adoption of internationally agreed standards for tax waste management would prevent firms from having to prepare tax calculations and disclosures to comply with the different tax requirements for each country in which they operate. Countries concerned with the OECD’s BEPS would have transfer pricing documentation and country-by-country reporting will provide a simplified and consistent approach, avoiding the duplication that would otherwise result from each country creating its own reporting standards. Moreover, if all countries concerned with BEPS would have used a single pooling, it would result in a reduction of effective tax rates. Addressing this concern unilaterally would have been chaotic, resulting in huge compliance costs for businesses.