oecd beps international tax rules

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OECD BEPS changes bring international tax rules into the 21st century

6 October 2015: The Organisation for Economic Cooperation and Development (OECD) has this week released final reports on the Base Erosion and Profit Shifting (BEPS) process, which is the most fundamental rewrite of international tax rules in almost a century.

David Watkins, Deloitte Partner, Tax Insights and Policy, commented: “Governments and businesses globally recognise existing international tax rules are in need of modernisation. Existing rules can no longer cope with the globalised, digitised, innovative economy of the 21st century. The changes proposed by the OECD will have major impacts on governments, multinational corporations, their management, boards of directors, professional advisors and tax authorities globally.”

The proposed changes cover a wide spectrum of international tax issues across 15 specific Action Items.

Watkins continued: “Key building blocks in the international tax architecture are being reformed by addressing a number of issues, including company eligibility for tax treaty benefits and establishing whether a company has a taxable presence in another country. Collectively, the international tax system will be made significantly more robust.

“The work so far has been remarkable for the widespread global consensus, not just on the need for change, but on many of the specific changes required in developing the new international tax framework. It has exceeded initial expectations and has been achieved in an incredibly tight timeframe.”

The delivery of these BEPS reports marks the end of the policy formulation phase of BEPS; the real test is in the implementation.

“The next phase, BEPS implementation, is even more critical,” explained Watkins. “Far from sitting on the sidelines, Australia is at the forefront in implementing the BEPS recommendations. The challenge for Australia will be to introduce laws to reflect the new OECD international standards whilst ensuring that, relative to other jurisdictions, Australia’s competitive position is not adversely affected.”

The UK, many European countries, China and even the US have announced changes to tax laws to be part of the first wave of adopters, on at least some of the BEPS measures.

Watkins added: “Global coordination and consistency is needed in the implementation of the new international tax framework. Revenue authorities are also being asked by the OECD to improve their ability to resolve double tax disputes. The risk for business is that it finds itself in the middle of ‘border disputes’ between different tax authorities as the new BEPS measures take effect.”

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