About | Deliverables | Implementation | CFA | Developing countries | Key areas of work
Base erosion and profit shifting (BEPS) is a global problem which requires global solutions. BEPS refers to tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid. BEPS is of major significance for developing countries due to their heavy reliance on corporate income tax, particularly from multinational enterprises (MNEs).
In an increasingly interconnected world, national tax laws have not always kept pace with global corporations, fluid movement of capital, and the rise of the digital economy, leaving gaps that can be exploited to generate double non-taxation. This undermines the fairness and integrity of tax systems. Fifteen specific actions are being developed in the context of the OECD/G20 BEPS Project to equip governments with the domestic and international instruments needed to address this challenge. The first set of measures and reports were released in September 2014. Combined with the work to be completed in 2015, they will give countries the tools they need to ensure that profits are taxed where economic activities generating the profits are performed and where value is created, while at the same time give business greater certainty by reducing disputes over the application of international tax rules, and standardising requirements. For the first time ever in tax matters, non-OECD/G20 countries are involved on an equal footing.
For more detailed information, read our Frequently Asked Questions.
The OECD work is based on a BEPS Action Plan endorsed by the G20 in July 2013, which identified 15 key areas to be addressed by 2015; with 7 actions to be delivered in September 2014. The September 2014 BEPS outputs were delivered in an interim form and, while agreed, were not finalised as they may be impacted by some of the decisions to be taken with respect to the 2015 Deliverables with which they interact. These 2014 outputs will be consolidated with the remaining 2015 deliverables to ensure a coherent package which will be delivered to the G20 Finance Ministers in October 2015, together with a plan for the follow-up work and a timetable for their implementation.
2014 Deliverables (Released in September 2014)
- Action 1: Address the Tax Challenges of the Digital Economy
- Action 2: Neutralise the Effects of Hybrid Mismatch Arrangements
- Action 5: Counter Harmful Tax Practices More Effectively, Taking Into Account Transparency and Substance
- Action 6: Prevent Treaty Abuse
- Action 8: Assure that Transfer Pricing Outcomes are in Line with Value Creation/Intangibles
- Action 13: Re-examine Transfer Pricing Documentation
- Action 15: Develop a Multilateral Instrument
- Action 3: Strengthen CFC Rules
- Action 4: Limit Base Erosion via Interest Deductions and Other Financial Payments
- Action 7: Prevent the Artificial Avoidance of PE Status
- Action 9: Assure that Transfer Pricing Outcomes are in Line with Value Creation/Risks and Capital
- Action 10: Assure that Transfer Pricing Outcomes are in Line with Value Creation/Other High-Risk Transactions
- Action 11: Establish Methodologies to Collect and Analyse Data on BEPS and the Actions to Address It
- Action 12: Require Taxpayers to Disclose their Aggressive Tax Planning Arrangements
- Action 14: Make Dispute Resolution Mechanisms More Effective
In February 2015, OECD and G20 countries agreed three key elements that will enable implementation of the BEPS Project:
- a mandate to launch negotiations on a multilateral instrument to streamline implementation of tax treaty-related BEPS measures (Action 15);
- an implementation package for country-by-country reporting in 2016 and a related government-to-government exchange mechanism to start in 2017 (Action 13);
- criteria to assess whether preferential treatment regimes for intellectual property (patent boxes) are harmful or not (Action 5).
» Read the press release
The role of the OECD Committee on Fiscal Affairs
The technical work on BEPS is being undertaken by the OECD Committee on Fiscal Affairs (CFA) through its subsidiary bodies, namely:
- Working Party 1 (Tax Conventions and Related Questions), in relation to part of action 2 (Neutralise the Effects of Hybrid Mismatch Arrangements), action 6 (Prevent Treaty Abuse), action 7 (Prevent the Artificial Avoidance of PE Status), and action 14 (Make Dispute Resolution Mechanisms More Effective);
- Working Party 2 (Tax Policy Analysis and Tax Statistics), in relation to action 11 (Establish Methodologies to Collect and Analyse Data on BEPS);
- Working Party 6 (Taxation of Multinational Enterprises), in relation to part of action 4 (Limit Base Erosion via Interest Deductions and Other Financial Payments), actions 8 (Assure that Transfer Pricing Outcomes are in Line With Value Creation / Intangibles), 9 (Assure that Transfer Pricing Outcomes are in Line With Value Creation / Risks and Capital), 10 (Assure that Transfer Pricing Outcomes are in Line With Value Creation / Other High-Risk Transactions), and 13 (Re-examine Transfer Pricing Documentation);
- Working Party 11 (Aggressive Tax Planning), established by the CFA to carry out the work in relation to part of action 2 (Neutralise the Effects of Hybrid Mismatch Arrangements), action 3 (Strengthen CFC rules), part of action 4 (Limit Base Erosion via Interest Deductions and Other Financial Payments), and action 12 (Require Taxpayers to Disclose their Aggressive Tax Planning Arrangements).
- Forum on Harmful Tax Practices (FHTP), in relation to action 5 (Counter Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance); and
- Task Force on Digital Economy (TFDE), established by the CFA to carry out the work in relation action 1 (Address the Tax Challenges of the Digital Economy).
The BEPS Project and developing countries
Taxation plays a central role in promoting sustainable development, and developing countries face significant challenges in developing their tax capacities and mobilising domestic resources. Engagement of developing countries in the international tax agenda, including on BEPS, is therefore important, in particular to ensure they receive appropriate support to address the specific challenges they face.
Engagement has been extensive since the beginning of the BEPS Project. Over 80 developing countries and other non-OECD/non-G20 economies have been participating and discussing the challenges of BEPS through
- various regional meetings in partnership with regional organisations, and
- numerous thematic global fora.
» Read more
Key areas of work
There are number of key areas of work on which the OECD Committee on Fiscal Affairs, through its subsidiary bodies, is currently focusing on. These include: