On 22nd November, a public consultation was held in Paris by the OCED (the Organization for Economic Cooperation and Development), in which a plan on reforming the global tax system was proposed. More dispute resolution mechanisms are desired for increasing the certainty of outcomes in international tax disputes.
Tax is a dynamic matter worldwide. For the global tax system to move forward, the OECD is seeking a new dispute resolution mechanism that would include more options for multinationals to solve disagreements between them and governments. The currently available mandatory binding arbitration is in place to ensure the dispute resolution between taxpayers and tax authorities to resolve issues in a given period of time. Having a mandatory arbitration mechanism is to prevent any undue delay. Any new options to be in place should have an equivalent effect as of the mandatory arbitration, said by the deputy director at the OECD’s Centre for Tax Policy and Administration.
The proposed reforms on dispute resolution are a follow up work under Action 14 of the BEPS Action Plan (Action Plan on Base Erosion and Profit Shifting) in 14 countries: Aruba, Bahrain, Barbados, Gibraltar, Greenland, Kazakhstan, Oman, Qatar, Saint Kitts and Nevis, Thailand, Trinidad and Tobago, the United Arab Emirates, and Vietnam. The attitudes from companies and some countries differ widely. Most companies consider reforms on enlarging possibilities in dispute resolution a desirable way to go in global tax system. Oppositions are mostly from development countries due to a concern of infringed sovereignty.
At this moment, the Mutual Agreement Procedure (MAP) peer review is in process. Taxpayers’ perspectives and opinions are being gathered for the above 14 countries. This process will be finished by 16th December 2019.
Are you interested in knowing what will come afterwards? Then stay tuned for updates in our further articles. If you have any questions concerning the OECD tax regulation or if your organization is to be affected, please contact us for assistance.
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