In a submission on the Discussion Draft on Preventing The Granting of Treaty Benefits in Inappropriate Circumstances, issued by the OECD on 14 March 2014, Pitcher Partners said the draft will not provide the correct balance between compliance costs and revenue risks for SME taxpayers.
“In particular, forcing SMEs to have to work through detailed limitation of benefits rules that larger taxpayers (such as publicly traded companies) will generally be able to easily satisfy without too much analysis, makes little sense in our view and should not be adopted as a policy by the OECD,” the submission states.
“It is crucial in our view that the process to decide upon and develop any limitation of benefits rule should not be done at a high level; it needs to be practically focused, based on ‘real life’ case studies and it must specifically consider the compliance costs for SME taxpayers.”
OECD’s BEPSs Action 6 (Prevent Treaty Abuse) describes the work to be undertaken in modifying existing domestic and international tax rules to more closely align the allocation of income with the economic activity that generates that income.
According to an OECD statement, the proposed changes seek to:
A. Develop model treaty provisions and recommendations regarding the design of domestic rules to prevent the granting of treaty benefits in inappropriate circumstances.
B. Clarify that tax treaties are not intended to be used to generate double non-taxation.
C. Identify the tax policy considerations that, in general, countries should consider before deciding to enter into a tax treaty with another country.