The intensifying spotlight on how transfer pricing is undertaken and a flurry of new national legislation and disclosure requirements in countries around the world means tax management within multinational enterprises has never been more challenging. 'Getting to grips with the Base Erosion and Profit Shifting (BEPS) Action Plan' is the latest report from our series exploring the Organisation for Economic Co-operation and Developments (OECDs) planned overhaul of the international tax system, what it means for businesses and how they can prepare.
The BEPS Action Plan aims to tackle situations where different tax rules interact, leading to double non-taxation or less than single taxation. It will also address arrangements where companies shift profits away from the jurisdictions where they are generated. Some of the OECD’s objectives, such as eliminating loopholes that allow profits to "disappear" for tax purposes and adapting the tax system to an increasingly borderless digital economy, may be valid. However, the scope has expanded to the point where the Action Plan will affect nearly every aspect of international taxation.
Many multinational enterprises (MNEs), especially fast-growing ones, have yet to evaluate the potential impact of the Action Plan proposals on their business. But they are the ones who will feel the biggest burden. So it’s vital to understand the implications and seek to avert any proposals that could have a damaging effect.
The ambitions of the BEPS Action Plan go much further than closing tax loopholes and will affect tax management and wider organisational structures within all MNEs. As a business the key questions you need to answer are:
