Countries dragging their feet over implementing BEPS

06 April 2016

The European Union is showing the rest of the world the way when it comes to implementing the OECD’s 15 Base Erosion and Profit Shifting (BEPS) recommendations, according to research from EY, reports Economia.

Indeed, the European Commission’s attempts to bring consistency to tax reform across member states “appears to be driving the first major response to BEPS”.

Most countries though – including some EU member states – are holding back from introducing national tax legislation in the hope that others will go first and set the pace. This, says Chris Sanger, EY’s global tax policy leader, is because of “the sheer number of variables reflected in the final BEPS recommendations and the complexity inherent in coordinating between domestic tax systems globally”.

In addition, the situation in the EU is complicated by the number of different projects relating to tax reform.

“Europe’s drive for increased harmonisation is increasingly placing it at the centre of BEPS implementation,” Sanger explains.

“However, the numerous initiatives led by different EU bodies could create an uncoordinated approach. It will, therefore, be more critical than ever that business closely monitors what has been recommended and implemented in order to manage increasing levels of complexity.”

The research, contained in EY’s 2016 Outlook for Global Tax Policy, reveals that the majority of the 38 tax jurisdictions surveyed have yet to tackle BEPS implementation. If anything, they are easing, rather than adding to, the corporate tax burden.

EY says that 34 per cent of jurisdictions are forecast to lower the burden in 2016 (compared to just 16 per cent in 2015). A further 45 per cent are making no changes at all.

Of the 14 jurisdictions that are making or are likely to make legislative changes to address the BEPS requirements on hybrid mismatches (Action 2), 12 are EU member states.

There is increasing activity around greater tax transparency and disclosure (Action 13), with 69 per cent of jurisdictions quoting this as their first or second implementation priority.

Eighteen jurisdictions are also considering transfer pricing reform, a move that will result in an increased tax burden this year.

Brazil and Singapore head the list of jurisdictions that are making the largest number of burden-increasing changes to tax policy (in Brazil’s case, nine), while China and Malaysia are both making five changes that will have the opposite effect and ease the tax burden.

The 38 jurisdictions surveyed include: Australia, Belgium, Brazil, Canada, China, Cyprus, Czech Republic, Denmark, Finland, France, Germany, Hong Kong, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan, Luxembourg, Malaysia, Mexico, Netherlands, New Zealand, Norway, the Philippines, Poland, Russia, Singapore, Slovakia, South Africa, Spain, Switzerland, Taiwan, Thailand, the UK, the US and Vietnam.



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