PwC Australia managing partner, tax and legal, Tom Seymour said the BEPS project marks the most significant change to international tax in modern times and the OECD’s announcements will have a big impact on many businesses.
While he said the scale and scope of change in the recommendations surpasses what many people had anticipated, the impact on businesses will depend partly on how the rules are implemented by tax authorities across the world.
“More disputes between businesses and tax authorities are inevitable as the rules get amended, particularly where tax authorities previously blessed the arrangements in question. The OECD's work to improve dispute resolution will be a crucial next phase of the BEPS project to ensure a smooth transition.”
“If tax authorities take an iron fist there's a risk standard trading structures could be affected, regardless of whether there's any tax avoidance motive,” he said.
Paul Drum, head of policy at CPA Australia told AccountantsDaily he expects Australia to wholeheartedly adopt the recommendations given its vocal support of addressing this issue.
“The Australia taxation office and Australia in general has led the way on many of the things they are talking about in toughening up the rules on cross-border transactions.”
Whilst Mr Drum said he expects some countries to be reluctant to adopt the recommendations, he said pressure from nations such as Australia could actually force them to do so.
“I would expect that for countries who don’t adopt the standard there is going to be pressure from other countries.”
“For the countries who aren’t coming to the table and demonstrating through action that they’re going to be a part of this, there are potential sanctions and rules that will be imposed by other countries to say that if you deal with that country we are going to treat you a particular way,” he said.
Given he expects Australia to adopt the recommendations in full Mr Drum said he does expect some businesses to face additional compliance costs.
“To the extent that we adopt the rules, yes we expect there is going to be costs,” he said.
“One of the costs is that some entities may have to pay more tax, some may have to pay tax for the first time and some of them will need to tighten their systems and record-keeping to ensure they can actually collate the information that will be required,” said Mr Drum.