On 19 July 2013, OECD presented a 15 point plan to the G20 on BEPS. This article summarizes its key messages.

1. Summary
• On 19 July, OECD presented a 15 point plan to the G20 on BEPS
• At its heart, the action plan looks at how to align taxation with the substance that creates the economic
value to a multinational company
• The growth of the digital economy has opened up opportunities for multinationals to greatly minimise their
tax burden
• A combination of measures will be reviewed to increase transparency of information provided to tax
authorities and disclosure of aggressive avoidance schemes
• The timetable is ambitious with a 12-18 month timeline proposed for the first actions
• The key impact for most Countries is likely to be around changes to transparency and disclosure require-
ments
Base Erosion and Profit Shifting (BEPS)
Organisation for Economic Cooperation and Development (OECD) Action Plan
Informations Management & Consulting

2. On 19 July, the Organisation for Economic Co-operation and Development (“OECD”) presented their action plan
for multilateral co-operation to address Base Erosion and Profit Shifting (“BEPS”) to the G20 Finance Ministers. In
simple words, the OECD is planning to update and co-ordinate national tax laws so they align with the economies
and trading activity that now exist.
At its heart, the action plan on BEPS seeks to ensure alignment between taxation and the relevant substance that
creates economic value. Globalisation, combined with increasingly complex operating models alongside the growth
of the digital economy, has opened up opportunities for companies to greatly minimise their tax burden. The action
plan looks to launch a global collaborative effort to modernise the international tax system and identifies 15 key ar-
eas where the OECD propose changes to the way multinationals are taxed.
OECD has commented that the international tax rules currently in place were designed to ensure that businesses did
not pay taxes in 2 countries on the same realised profit. These rules are now being used by multinational companies
to reduce their tax liabilities across the globe.
As a result, OECD has presented a 15 point plan to update the international tax framework that has been in place
for many decades. The 15 points can be grouped as follows:
Consideration is to be given to the challenges of where business is undertaken and concluded, what constitutes a
fixed place of business in a particular jurisdiction and how any profit allocation should be calculated.
Review of the Challenges of taxing the digital economy
To look at neutralising effects of hybrid instruments where the instrument achieves a mismatch and takes advantage
of a double deduction.
Specific mismatch/ tax asymmetry
The principles around interest deductibility and tax legislation used in different countries to bring profits arising in “low
tax” jurisdictions in to charge will be reviewed.
Legislative rewrite
Remove the potential to realise benefits from transactions by amending the current model and introducing an-
ti-abuse provisions. Specific attention will focus on what constitutes a taxable presence in a country (permanent
establishment) and how any income is allocated to that taxable presence.
Anti-avoidance
Work will be undertaken to look at situations where profits can be shifted by means of allocation of intangibles, cap-
ital and risks among group members, as well as transactions that take place between connected entities that would
rarely be seen occurring between third parties. The OECD will focus on limiting areas where profit shifting can occur
by looking to strengthen transfer pricing rules.
Transfer pricing
The OECD will look at what sharing of data, methodologies and documentation can take place to ensure all relevant
governments have information on global allocation of income, economic activity and taxes paid in the various juris-
dictions by multinational companies.
The work arising from the BEPS report is likely to result in greater sophistication from tax authorities in assessing
global tax risk. One impact that could arise from the BEPS work may be to further align substance to profit – poten-
tially leading to a shift in activity from low tax jurisdictions to where there is greater economic substance.
A time frame of 12-18 months for completion of the first actions with the remainder being addressed by the end of
2016 has been proposed by the OECD.
Disclosure and transparency
Introduction
OECD action plan

3. Impact at country level
For many Countries these news will not have a material impact from a legislation point of view, but only from a trans-
parency and disclosure perspective to ensure that associated transfer pricing rules are appropriate.
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Impact at business level
When an organisation has an international footprint, the potential to “shift” profits to other jurisdictions becomes
realistic and therefore it is for this type of organisations that the impact is going to be biggest. Transparency as well
as rationalisation of business models will be increasingly necessary for a large number of firms to ensure that all
necessary requirements are met.