What began as an April Fools prank, has quickly evolved into a worldwide phenomenon. If you do not know what I am referring to, back in 2014 Google pranked us all with an experiment into augmented reality with Pokémon appearing in their maps app.
Fast forward two years, this experiment has grown into an application that has taken the world by storm and as I watch my colleague next to me trying to catch one in the office, I can’t help but draw a comparison to another global phenomenon which has also taken the world by storm, albeit amongst ‘interested’ tax professionals and that is Base Erosion and Profit Shifting (BEPS).
Like Pokémon, BEPS has “evolved” from its inception at the G20 leaders summit in 2012; released of OECD’s public consultation and draft discussion papers; publication and presentation of BEPS final reports; endorsement by the G20 countries; formalisation of the automatic exchange of information arrangement (83 countries has signed the Multilateral Competent Authority Agreement); and the interpretation and implementation of the action items by both OECD and non-OECD countries.
What came as an unexpected "curve ball" was the leaked Panama Papers that indirectly intensified the “BEPS evolution” during its final stage (country implementation). To date, there are more than 100 countries adopting BEPS Actions as a collective effort to curb the unhealthy international tax avoidance practices.
Similar to Pokémon GO which introduced ‘special editions’ for different countries; we are seeing that BEPS Action Plans, though came with the OECD proposed guidelines, are adopted by countries with their own interpretations and implementation processes.
In Australia, the Government has amended its tax laws, last December, to introduce the Multinational Anti-Avoidance Law and implement BEPS Action 13. During the same month, the Australian Taxation office (ATO) released Law Companion Guidance LCG 2015/3 which provided guidance on the application of the new legislation and described the OECD's new transfer pricing documentation standards (BEPS Action 13), specifically on the Australian adoption of Country-by-Country report and Master File report templates.
Further guidance on BEPS Action 13 Local File was released end of June this year, providing taxpayers Local File design for their first lodgment as early as July 2017. It is worth noting that the Australian Local File design differs from the OECD Guidelines, with much emphasis on collecting detailed information on international related party dealings and the relevant agreements in an electronic form.
“Gotta Catch ‘Em All”
Based on the Thomson Reuters and TPWeek’s 2016 Global BEPS Survey, two thirds of respondents indicated they are proactively taking steps to come in line with the OECD BEPS recommendations, an increase of 12% from last year’s result. In addition, 86% of respondents noted more time will be dedicated in the coming year to preparing for the BEPS Action items, whilst only 18% of respondents said that additional resources were provided to help with the preparation.
With most multinationals stepped into their first financial year under the new BEPS transfer pricing documentation regime, where are you at in "catching your BEPS monster"?
Taming your “BEPS Monster”
Compared to last year’s Global BEPS Survey, we are seeing more evidence of activities around transfer pricing documentation, with more than 70% of respondents expressed their concern resulting from BEPS Action 13 being audit exposure and reconciliation. In addition, common challenges observed during our participation in BEPS reporting process trial runs include:
- the ability to quickly extract, collect and align organisational, financial, functional and transaction data for global reporting purposes;
- the availability and transparency of relevant reports, documents, agreements and other supporting information kept within the group;
- the consistency and infallibleness of the “global story” told in various reports filed under the new BEPS regime; and
- the readiness and timeliness in complying with not just one, but multiple local jurisdictions’ requirements that differ from one to another.
Feedback suggests that multinationals are facing genuine challenges to do more with the same amount of resources, budget and consulting support. In other words, efficiency is key in getting prepared for BEPS before the time runs out, and this could be a “monstrous” job for some.
At Thomson Reuters, we have been formulating your answer to the BEPS challenge concurrently as the OECD has progressed their plan. We are supporting multinationals of all sizes with our comprehensive, intelligent and easy-to-use BEPS and transfer pricing solutions, which are end to end resources from providing the latest on BEPS and Transfer Pricing news to data gathering, financial and economic analysis, reporting and electronic lodgment that is specific to local country requirements.
Speak to us today to find out how we can work together to tame your “BEPS Monster” or view our latest paper that explores the recent developments in international taxation law and poses additional questions to industry and academic experts about what transparency is likely to mean in a post BEPS world.