Deloitte comments on the OECD’s base erosion and profit shifting action plan
19 July 2013
Bill Dodwell, Head of Tax Policy at Deloitte said: “The OECD’s base erosion and profit shifting action plan is the most significant potential change to international taxation for decades. The Plan aims to limit the potential exploitation of the international tax system, by reducing the scope for non-taxation of income. These changes will undoubtedly lead to increased costs for businesses, but international co-operation with the OECD will be needed to make progress. Ultimate delivery of the plan will depend on continued cooperation and agreement between countries, since the plan will lead to recommendations for changes to national law, the Model Tax Treaty and the OECD Transfer Pricing Guidelines.
“The OECD Plan rejects the idea of fundamental change to the global tax system, such as the adoption of unitary taxation, which has been urged by some NGOs. It also does not alter the balance of tax between source and residence countries, which is a goal of some developing countries, as well as China and India. Its focus is on countering double non-taxation.
“The plan identifies the challenge of taxing the emerging digital economy, but recognises there is currently no consensus. This is problematic and a key hurdle for the OECD to overcome. Businesses should also expect to see more imminent changes in connection with hybrid instruments and entities and the tax deductibility of interest.
“The plan gives an outline of areas for review and potential action, so that working groups can take them forward. The outcomes are not pre-determined, though. A very tight deadline has been imposed: some groups must report by autumn 2014, whilst others are given an extra year.
“Business will need to engage positively with the Plan, recognising the public and political momentum behind change.”
Notes to editors
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