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OECD, IMF Reports On Providing Businesses With Tax Certainty

Monday, March 20, 2017

The OECD and the International Monetary Fund have submitted to the Group of Twenty (G-20) nations a report on improving tax certainty for businesses.

The report follows a global survey of more than 700 large, multinational businesses and a survey of 25 advanced nation tax administrations. The report highlights several reasons for heightened concerns about tax uncertainty, including updates to the international tax rules proposed in the base erosion and profit shifting (BEPS) recommendations.

The report highlights that, in the context of international taxation, inconsistencies or conflicts between tax authorities on their interpretations of international tax standards (such as on transfer pricing) is one the most important sources of tax uncertainty. Additionally, the report identifies issues associated with dispute resolution mechanisms as an important driver of tax uncertainty as well as inconsistent implementation of the BEPS recommendations.

The report outlines numerous solutions to enhance tax certainty in international tax matters, including through:

  • Dispute prevention and early issue resolution programs, such as cooperative compliance programs and advance pricing agreements, as well as simultaneous and joint audits where appropriate;
  • Robust and effective international dispute resolution procedures, such as the mutual agreement procedure, including fully implementing the minimum standard under BEPS Action 14, and the use of arbitration, where countries elect to do so;
  • Updating tax treaties through the the BEPS Multilateral Convention; and
  • Making further progress towards simplified and effective withholding tax collection and treaty relief procedures.

The report also calls for cooperation and coordination on the development and implementation of coherent international standards and guidance.

The report states: "At a time when good progress has been made in fighting aggressive tax avoidance through increased transparency and the BEPS project, it is also important to focus on tax certainty. In this context, the importance of providing greater tax certainty to taxpayers to support trade, investment, and economic growth has become a shared priority of governments and businesses."

The report was submitted to the G-20 Finance Ministers and Central Bank Governors at their meeting held on March 18, 2017, in Baden Baden, Germany.