Announcement of the final BEPS action plan

I attended the 4pm webcast and particularly Raffaele Russo's comments lead me to believe countries will no longer be able to have effective tax incentives in order to create a competitive investment climate. Shifting activities from one country to another, evidently done transparently, will probably be blocked using one of the 15 actions. Wonder whether countries will implement measures once they discover this inroad into their sovereignty. US Congress has already seen this and sent two letter to Treasury.

Chinese premier Zhou Enlai famously said in 1972 that it was “too early” to assess the implications of the French revolution. When the full impact of the final BEPS package is capable of assessment remains to be seen. Theo offers an interesting perspective on the ability of countries to determine their own tax policies. As tax practitioners we tend to evaluate reforms by reference to previous tax laws but seldom from the perspective of other areas of law. The question of harmful tax competition and practices is a central theme of the BEPS project. I wonder if it could usefully be judged by reference to common principles of competition law. Two key principles underpin completion law in most countries: The prohibition of agreements between undertakings, decisions by associations of undertakings and concerted practices which have as their object or effect the prevention, restriction or distortion of competition (e.g. Article 101(1) TFEU); The prohibition of abuse by one or more undertakings of a dominant position (e.g. Article 102TFEU). Should states be judged by these principles?

Jonathan, I think you raise an interesting point that brings up a whole lot of issues. 1. Is the competition law between states not regulated by the WTO (of which I wi confess I I know nothing)? 2. With regard to the U.S. tolerance of Irish Dutch sandwiches, should BEPS not have been a WTO issue all along? 3. If what I think Theo is hinting comes to pass and U.S. MNE's continue to be allowed to grow outside the U.S. at single digit tax rates, should this become a WTO issue? 4. Tax subsidy cases (EU vs US) before the WTO are not new. Remember the U.S. Foreign production companies vs EU actions on bananas (or was it pork?) tit for tat sagas from the 90's? 5. Finally, and actually most importantly, what is the EU doing to support its businesses in their international growth, the way the U.S. is supporting theirs? The recent Capital Markets Union paper seems like a step in the right direction, but we need more than that. What do you think?

In various interviews Marlies de Ruiter has said that (rapid) consensus on BEPS could be obtained because the cake to share and tax will be bigger (no longer taxable income in tax havens). This looks a simplified picture of a carrot in a complex world. Fear measures enacted locally will indeed look at "what's in it for me" and not the altruistic "what's in it for the world". If the latter would have been true, the complex proposals would not have been necessary. Now we will have double tax, more tax conflicts and intra-country disputes and after a few years frustrated politicians who did not receive the carrot promised to them by OECD and MinFin staff. Being politicians they'll probably spend the money promised before receiving it. This will compound the frustration. The reaction to business at that time will no doubt be something to watch with interest.