Robert Stack, Treasury deputy assistant secretary (International Tax Affairs), predicts that the department will face a difficult year in 2015 as it begins to tackle several of the tougher issues listed in the Organisation for Economic Co-operation and Development’s (OECD) Base Erosion and Profit Shifting (BEPS) Action Plan that were not handled in 2014. Such issues include, the artificial avoidance of permanent establishment (PE) status, on which Stack told practitioners to expect a discussion draft in November or December 2014.
In 2013, the OECD issued a BEPS action plan that identified 15 areas to address by 2015. The OECD recently released seven reports and proposals, leaving eight areas to address for 2015. The areas to be addressed include controlled foreign companies, interest deductions, and the disclosure of aggressive tax planning arrangements.
Stack also noted that some countries have requested additional attention to country-by-country reporting, something that the first phase of the BEPS Project did begin to address. “One of the things [developing] countries asked for was to revisit “country-by-country” [reporting of income, taxes and economic activity for tax administrations] by 2020,” Stack said during an October 3 luncheon hosted by Buchanan Ingersoll & Rooney PC in Washington, D.C. “That seemed reasonable because the question is, “Is it working?”” Stack listed certain countries that had expressed concerns relating to the use of tax information going forward. “That’s why we are also wanting to build in some kind of policing effort,” he said.
The U.S. was attempting to broaden criteria for country-by-country reporting, Stack stated. “Just yesterday, we had an internal discussion about whether there was a way to link countries that want to improve their tax administration and make some commitments to tax administration, mutual agreement procedure (MAP), and arbitration, to the country-by-country reporting,” he said. However, he questioned how much leverage the U.S. had in this area.
Having acknowledged the work to come, Stack cited significant progress made in the BEPS area toward obtaining greater consensus in important areas, such as treaty abuse, hybrid arrangements, transfer pricing documentation, harmful tax practices and intellectual property regimes. “We’re very happy where we are in BEPS,” Stack said. “The U.S. cares a lot about BEPS because of the stripping in our own base, because as we go around the world if there is no consensus in these rules we are going to wind up paying foreign tax credits that we shouldn’t be paying. And multinationals are going to be in disputes everywhere to the extent that these things are not—to some degree—better harmonized than they are.”