Countries negotiating the OECD/G-20 base erosion profit shifting (BEPS) guidance have advanced a proposal to require countries that seek access to country-by-country reporting data to first to agree to enhanced dispute resolution, a US Treasury official said on Sept 17.
Speaking during a Deloitte webinar, Robert Stack, US Treasury Deputy Assistant Secretary (International Tax Affairs), said that the US is concerned that countries will use data provided in country-by-country reports, such the location of employees, to apply a formula approach to allocating income, rather than use the information as a risk assessment tool.
This concern, Stack said, “leads to the question [of whether] we want other countries to agree to things like arbitration enhanced dispute resolution in order to ‘get in the club,’ of getting the country-by-country information.” Stack said that the proposal is still being debated.
Stack also noted that the BEPS guidance on country-by-country reporting, released Sept. 16, specifies that before 2020 the transfer pricing documentation standards and country-by-country reporting standards will be reviewed by the countries participating in the BEPS project. He said the provision was added because some countries were concerned that the reporting required in the country-by-country template would prove insufficient for risk assessment. Stack said that US officials agreed to the 2020 reassessment because this would provide a mechanism to hold countries accountable in case information reported in the country-by-country template is used for purposes other than risk assessment.
Stack said the US is “delighted” with the progress made on the BEPS project, and is totally engaged and trying to play a leadership role. He asked the tax community to take a critical look at the BEPS deliverables as the focus is on creating very high quality technical documents. “These documents can live way beyond us and set the tone for later on,” Stack said.
For the text of the BEPS guidance, see Transfer Pricing Documentation and Country-by-Country Reporting (Action 13).
