by Julie Martin
At the G20’s behest, the OECD has identified objective criteria for determining if a country is “non-cooperative” tax jurisdiction with respect to tax transparency, Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration, said during a July 12 OECD webinar. OECD officials also discussed plans to release further tax and transfer pricing guidance.
Saint-Amans said that under the OECD’s proposed scheme, to be presented to the G20 for its consideration at an upcoming meeting, developing countries that do not have financial centers would be never be considered non-cooperative. Other countries would avoid the label if they meet two of the following three criteria:
- The country receives a rating by the Global Forum on Transparency and Exchange of Information for Tax Purposes of “largely compliant” or better regarding implementation of the exchange of information on request standard.
- The country makes a commitment to adopt the automatic exchange of financial account information standard, agreeing to implement the common reporting standard and to begin exchanges by at least 2018.
- The country signs the Multilateral Convention on Mutual Administrative Assistance in Tax Matters or has a sufficiently broad exchange network providing for exchange of information on request and automatic exchange of information.
Saint-Amans said that notwithstanding those criteria, if a country is rated as non-compliant at phase 1, it will be considered non-cooperative.
He also said that the OECD will recommend that the list of non-compliant countries not be published until July 2017 to give countries time to take corrective measures.
Last April, G20 ministers said in a communique that defensive measures will be considered against non-cooperative jurisdictions if progress as assessed by the Global Forum is not made.
Saint-Amans said that the G20 finance ministers will meet in Chengdo, China, on July 22–23 to discuss how to create tax policy that promotes growth but also reduces inequality. The OECD is working with the IMF and G20 to develop innovative proposals in this area, he said.
The ministers will also discuss how to increase tax certainty to promote growth, trade, and investment, Saint-Amans said. This new agenda can be undertaken now that tax administrations have better tools to address tax avoidance, the OECD official said.
He said the goal is to develop deliverables in 2017. “We are quite excited about this,” Saint-Amans said.
OECD tax and transfer pricing guidance
Turning to planned OECD tax guidance, Saint Amans said that a discussion draft on interest deductions in the banking and insurance sectors will be released on July 28 and a draft on branch mismatch arrangements will be issued during the week of August 8.
The final round of of negotiation on the multilateral instrument to implement the OECD/G20 base erosion profit shifting (BEPS) plan agreements will take place in September. Saint Amans said he expected the text would be adopted by November, so the document would be open for signature by the end of 2016.
“We are confident this is feasible and that this will happen,” Saint-Amans said. He added that 96 countries are currently part of the negotiation and more could join. So far, more than 2000 bilateral instruments would be amended by the multilateral instrument, he said.
Melinda Brown, Transfer Pricing Adviser at the OECD, said that potentially significant guidance on the transfer pricing aspects of financial transaction is in the works. The OECD is currently determining the scope of the guidance but the work is expected continue into 2017, she said. The guidance will address the economically relevant characteristics necessary to determine arm’s length conditions for financial transactions, she said.
Brown said that coming transfer pricing guidance on hard-to-value intangibles will focus on how and when the hard-to-value intangibles approach should apply. The drafters are still considering what format the guidance should take, namely, whether the guidance should be presented as policy considerations or options or in some other format, she said.
Further transfer pricing guidance under development will seek to provide a forum where countries can announce whether they intend to apply the OECD’s low-value-adding intra group services approach and, if so, when that would occur, Brown said.
Julie Martin
Julie Martin is the founder of MNE Tax. She edits the publication and regularly contributes articles on new developments in cross-border business taxation.
Julie has worked as a tax journalist and editor for more than 13 years. Prior to that, she worked as an in-house tax attorney in New York. She also holds an LLM in taxation from New York University School of Law.
Julie can be reached at [email protected].
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