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We’re excited to announce that the full transcript for our November 19th OECD BEPS webinar is now available.

To access and download the full transcript, click HERE.

Below are some of the main highlights of our hour-long event.

How are different countries approaching BEPS?

Heather Self (HS): “The OECD BEPS project has got huge political support in the UK and that means the UK really wants to lead the way and show that it’s doing everything that the OECD wants. That’s actually causing some concern from companies that the UK will gold plate the BEPS initiatives and be the good guys who tighten up all their rules and lose competitive advantage. On the other hand, in some areas there might be an advantage to being first movers. For example, on the anti-abuse provisions of the Treaty. Whoever is the first country to agree on what the measures should be and if it’s different from the US LOB provisions, then you might be able to set the standards for others to follow.”

Michael Heckel (MH): “In Germany, the law regarding transfer pricing is very strict, even before the BEPS project started. So the German administration is of the opinion that a lot of the BEPS results are already in our German tax law.”

Ted Brooks (TB): “The US has been a little bit suspicious of a lot of these initiatives and initially is opposed to country-by-country (CbC) reporting and sort of the other things. We, of course, already have the LOB clause in most of our treaties except a couple of outliers. It’ll be interesting to see how the US deals with this.”

Stephen Alleway (SA): “I think the main challenge of BEPS to Switzerland is that it presents to move quickly from any sort of poacher jurisdiction to a game-keeping jurisdiction. I think the indirect effect in Switzerland will be a very large move to a much lower regular tax rate and a stripping away of a lot of these privileged sorts of statuses (privileged companies, holding companies, mixed company, domiciliary companies, etc.,) in tax planning methods, which have been very much in the sights of the OECD in other jurisdictions.”

How is your company or country looking at the OECD initiatives, especially the country-by-country (CbC) reporting?

Divya Ramaswamy (DR): “The hard work in terms of compliance and implementation is mainly around Action 13, definitely around CbC reporting. Out of all the sort of reactions from many countries, CbC is one area where everybody has jumped on the legislation bandwagon and we already have some ten countries that have either got draft or final legislation out there. Countries are seeing that as a key area to get tax share pie and everybody’s moving very quickly.”

“In terms of technology, a number of clients out there need something and that’s a split between—depending on the complexity—a different technology, existing systems or spreadsheets. But there’s definitely a decision to be made and for that you need to do some research right now when you do your test runs to see what the most efficient way of doing this is.”

SA: “Companies who are affected by CbC reporting should be doing dry runs at the moment. There’s been a lot of noise over the last six months about the template itself and filling in the templates. There’s been a lot of discussion about supporting companies to prepare the template and then populate it with data. Getting data from different systems has been seen to be a big challenge. Also, Table 3, which I think is often forgotten by taxpayers and we’ve had some meetings where we’ve gone in, mentioned Table 3 and seen a blank face. People have said, ‘Well, that’s just a blank box, isn’t it? We don’t have to fill that in.’”

HS: “Most UK companies have started their dry runs. We’re talking to people and they’re saying, “Yes, it’s complicated.” But, actually, it’s an information gathering exercise. What we’re then seeing is the next stage where tax people are saying, “I didn’t realize my margins we’re so different in China compared to the US, compared to France.” So, actually, it’s providing a lot of data to the tax departments and they now have to go back and make sure they understand the reasons why they’re getting such different margins in different places.”

In terms of tax planning, how might BEPS change things for multinational companies?

HS: “I think we’re already seeing some large companies looking at their tax planning and starting to take actions to move away from some of the most aggressive structures. For instance, Amazon now has taxable branches in Europe, rather than arguing that all their activities are carried on in Luxembourg.”

“One of the things that is concerning companies in the UK is that the UK’s anti-avoidance rules are now getting so complex that companies are starting to think, ‘Well, it’s all very well getting a low tax rate, but if I’ve got to spend all my life arguing about how much tax I’ve got to pay, are there simpler places to go?’”

TB: “I think you’ll see companies looking more to reduce their tax rates via the internal tax rates of certain countries. Certainly we’ve seen in the United States “inversion transactions,” where US companies are trying to move to European jurisdictions like Ireland, the UK or Switzerland.”

SA: “I think that for Switzerland the future is to do away with these special sorts of regimes that they’ve had in the past and present themselves as a much more overall low tax economy that is competitive and has all the other sorts of advantages for business.”

What do you think companies are going to do from a best practices perspective with gathering information and putting it into their tax returns?

Benedetto de Francesco (BDF): “There is an administrative and organizational problem because many countries have different regulations with respect to accounting rules and systems. The very important point is to coordinate between different regulations and different accounting rules. I don’t know if it is possible to find, let’s say, a middle point of coordination for the accounting systems around the world for companies that have 15 or 20 footprints in different countries.”

DR: “I think we’ve seen two different approaches. We’ve seen a lot of clients talk about moving in the shape of a center or at least centralizing documentation just because it helps with better consistency and control. But that’s not the answer for everybody because it is a massive job. So, even if you’re going with a decentralized approach, there are a lot of inconsistencies. I definitely think central management, a central overview and having control of your processes is very important when you’re using the sort of decentralized approach of different entities going with different service providers and doing documentation.”

In terms of dispute resolution, what kind of arbitration agreements are we going to see, where is it going to be, how are we going to choose this kind of panel?

SA: “I think that’s an area that will develop as we see the wave of disputes coming through. I think we’re probably some way off of having a binding, mandatory resolution of disputes as an arbitrary of last resort if you like to solve some of these issues. But we’ve seen even between relatively friendly jurisdictions, for example the UK and US, some tax disputes that have just not been resolved in the past. I see that that’s an area that will develop over time.”

HS: “The UK is quite a long way down the road in its thinking on this. We already have procedures for being able to use mediation and collaborative working to try to resolve disputes. There’s a lot that can be done before disputes go into the mutual agreement procedures and before you end up with arbitration.”

“Some practical suggestions that came out of a workshop I attended with a number of large companies, some advisors and people from HM Revenue & Customs and from the UK Treasury was that maybe we should be encouraging tax authorities to do more joint audits. If two or three countries want to look at the CbC reports and look at the transfer pricing, let the tax authorities do that in a coordinated way and agree between themselves. Most companies don’t mind where they pay tax so long as they’re only paying it once within reason.”

Closing remarks – “This is a revolution, not an evolution, in international tax”

SA: “The two words that come to my mind are complexity and subjectivity. I think there’s a lot of complexity in the guidance that’s been issued. I also think a lot of it is more subjective than it was before if that’s possible.”

BDF: “The BEPS committee and the OECD have done a very meticulous job, but they should make another effort to slim everything down and to try to make their guidelines clearer and less subjective.”

HS: “The sheer volume and pace of change is going to be very difficult to deal with and I think that means that for tax directors it’s going to be difficult to keep up with it. It’s going to be even more difficult to plan long-term projects to look ahead and really understand where the risks are going to be. To me, risk management has just become very much more difficult, and I think this is a revolution, not an evolution in international tax.”

TB: “I think the OECD may have gone a bit far and created incredibly burdensome sets of guidelines for tax payers that need some slimming down and probably a longer implementation timeline. My personal opinion is they’ve used a sledgehammer to knock in a thumbtack.”