The OECD released a new report to the G20 leaders on the progress being made against global base erosion and profit shifting (BEPS). 102 countries have joined the Inclusive Framework. National governments are implementing the four minimum standards. A number of countries are implementing additional BEPS Action recommendations.
Although still early in the implementation process, anecdotal evidence suggests that MNE's profit shifting behaviors are changing and will change more in the future as a result of the BEPS Project. I helped contribute to the section of the report (Part I, Section 3) which describes some of the initial business reactions. The implementation of the BEPS package will make a number of cross-border tax plans previously used either unavailable or no longer financially attractive. This includes "cash boxes", entities holding valuable assets funding intangible assets with little or no economic substance. Such cash boxes will no longer earn high taxable returns in tax havens, so more taxable income will be reported in jurisdictions where the real value is created.
Business surveys indicate global MNEs are focusing on the BEPS Project and its implications for their future tax planning. A Deloitte survey of tax directors found that "55% agree or strongly agree that their business has changed the way they conduct tax planning for cross-border transactions as a result of proposed changes arising form the BEPS project."
For more detailed and current developments, EY tracks BEPS developments by Action and by Country on the BEPS Development Tracker. Stay tuned for more progress as the BEPS implementation, including filing of Country-by-Country Reports by the largest MNEs, starts occurring.
Tom Neubig