The final BEPS package for the reform of the international tax system to tackle tax avoidance is sold by the OECD as a comprehensive package made up 13 reports covering 15 actions to be translated into different obligations, including minimum standards. For instance, a specific minimum standard is to bring to an end the widespread practice of treaty shopping.
CESI President Romain Wolff: “BEPS provisions not ambitious enough”
However, several aspects of the BEPS plan are probably too weak to make a real positive impact. For example, although country-by-country reporting (CBCR) has been agreed on by all OECD countries and is expected to begin in 2016, the information to be provided by companies under the plan’s CBCR scheme only applies to multinationals having a turnover of more than €750 million. This effectively limits CBCR to only 10-15% of the multinationals. According to the OECD, such a limitation is necessary to prevent tax administrations from drowning in information floods. For CESI, a trade union confederation representing several national tax administration trade unions, such as point of view cannot be supported. CESI President Romain Wolff said: “As already expressed in CESI’s formal response to the recent consultation by the European Commission on CBCR, we believe that it is important to extend the CBCR obligation to all sectors and to all major companies by lowering the threshold of €750 million of turnover of multinationals. If tax workers feel overwhelmed by the information, this is, as noted by CESI previously too, due to heavy budget cuts in tax administrations and a resulting structural lack of resources available to ensure an effective tax collection.
Moreover, the BEPS plan foresees that CBCR-related information will only be made available to tax authorities. According to the OECD, information should not be made public because the tax administrations need quality information which might be jeopardised by full transparency in CBCR. Again, CESI does not agree with the OECD. CESI President Romain Wolff says: “CESI is in favour of an automatic, public CBCR mechanism. This would greatly support tax administration workers with their investigation work and make them more independent from cooperation with other national tax administrations. In addition, after the recent tax scandals, the public disclosure of information as part of an essential and necessary democratic control mechanism can have an important deterrent effect on multinationals trying to engage in dubious tax practices.”
The EU and its member states must show a real commitment to fight tax fraud and evasion
In sum, CESI believes the BEPS plan could have been more ambitious and hopes that the EU will now take the lead on the subject matter and call to go beyond the proposed BEPS plan. In this context, CESI also believes that the agreement reached today by the EU’s Council of Ministers on a directive requiring the EU member states to automatically exchange information on cross-border tax rulings, as well as advance pricing arrangements, could have been more resolute. The text agreed on by the ministers is significantly weaker than what had been initially proposed by the European Commission. CESI reiterates its call towards the EU member states to finally show a real political commitment to effectively fight tax fraud and tax evasion.