Global Tax Alert | 11 August 2014

OECD seeks input on collecting and analyzing data on BEPS

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Executive summary

On 4 August 2014, the Organisation for Economic Co-operation and Development (OECD) published a paper seeking input on Action 11 of the OECD’s Action Plan on Base Erosion and Profit Shifting (BEPS) issued on 19 July 2013. The paper, BEPS Action 11: Establish methodologies to collect and analyse data on BEPS and the actions to address it, describes input the OECD requests, including suggestions for possible indicators of the scale and economic impact of BEPS, potential methodologies for estimating the scale and impact of BEPS, available data and methodologies to develop economic analysis of the impact and effectiveness of actions to address BEPS, and new types of data to be collected to monitor the effectiveness of the actions to address BEPS on an ongoing basis. Comments are requested to be submitted by 19 September 2014.

Detailed discussion

Action 11 of the BEPS Action Plan, which has a target date for output of September 2015, involves establishing methodologies to collect and analyze data on BEPS and the actions to address it. The paper notes that the analyses and tasks to be included fall within four categories:

  • Recommend indicators of the scale and economic impact of BEPS, including identifying and assessing a range of existing data sources.
  • Develop an economic analysis of the scale and impact of BEPS (including spillover effects across countries), including developing methodologies based on both aggregate and micro level data.
  • Develop an economic analysis of the effectiveness and impact of actions indicated in the BEPS Action Plan.
  • Recommend tools to monitor and evaluate the effectiveness and economic impact of the actions taken to address BEPS on an ongoing basis, including identifying and assessing new types of data needed.

The paper indicates that the OECD has considered some existing empirical studies, including analyses that were described in the OECD’s initial report on BEPS issued on 12 February 2013, but that these studies are limited and many cover only a single country or focus only on a particular tax strategy. The OECD also has begun to consider data, indicators, and economic methodologies for monitoring and evaluating actions taken to address BEPS. With respect to the potential need for new data to be collected, the paper notes the need to take into account confidentiality and to minimize administrative and compliance costs for both taxpayers and tax administrations. The paper further notes that for this work, “firm-specific approaches” have advantages over aggregate approaches of “separating BEPS behaviours from real economic activity.”

The OECD’s request for input focuses on suggestions or recommendations regarding four areas:

  • Indicators of the scale and economic impact of BEPS that are based on available data and that could be used as tools to provide general magnitudes or ranges to be tracked to show trends over time for individual countries or globally.
  • Methodologies for estimating the scale and impact of particular BEPS behaviors, individually or in aggregate and by country or globally. Also suggestions regarding the use of different types of effective tax rate measures and suggestions regarding assessment of BEPS-related spillover effects occurring across countries.
  • Any available data and methodologies for analyzing the effects of BEPS counter-measures.
  • New types of data, including data from taxpayers, to be collected in order to monitor the effectiveness of BEPS counter-measures and to improve the economic analysis of BEPS.

The paper also invites any other comments related to Action 11. Input in response to this paper should be submitted by 19 September 2014 and will be posted on the OECD website (unless otherwise requested).

Implications

This is the first document the OECD has released with respect to Action 11 of the Action Plan. The OECD’s initial report on BEPS, released on 12 February 2013, indicated that existing studies did not conclusively determine how much BEPS actually occurs, but asserted that there was abundant circumstantial evidence suggesting that BEPS behaviors are widespread. Action 11 is aimed at developing such analyses, as well as tools to evaluate and monitor the impact of BEPS counter-measures developed under other elements of the Action Plan. This paper seeks input from interested parties as the OECD begins this work. Of particular note is the OECD’s request for any recommendations for new types of data that taxpayers should provide to tax administrators for purposes of future monitoring of BEPS and BEPS counter-measures. This may be an indication of another potential use for the information to be provided in the country-by-country reporting template being developed under Action 13. It may also be an indication that further additional reporting requirements for taxpayers could be recommended by the OECD as part of the BEPS project. Companies should monitor developments with respect to Action 11.

For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP, International Tax Services, Washington, DC
  • Barbara Angus
    +1 202 327 5824
    barbara.angus@ey.com
  • Yuelin Lee
    +1 202 327 6378
    yuelin.lee@ey.com

EYG no. CM4653