Getting to grips with the BEPS Action Plan

What does the OECD's planned overhaul of the international tax system mean?

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 plane looks to address instances where different tax rules interacting together leads to double non-taxation or less than single taxation. It will also address arrangements where companies' profits are shifted away from the jurisdictions where the creation of profits take place. Some of the OECDs objectives to combat this may be valid. They include the elimination of loopholes that allow profits to ‘disappear’ for tax purposes and ensuring the tax system keeps pace with the shift towards an increasingly borderless digital economy. However,  the scope has broadened to such an extent that the Action Plan will touch almost every area 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:

• what risks could the proposed changes present for our business?
• how long could it be before changes are enacted on the ground?
• what are the key considerations that we will have to address?