A big topic in finance, and more specifically tax, is base erosion and profit shifting (BEPS). The BEPS project is a way to readjust the taxation of profits with the location of economic activities. The goal is to eliminate incidences of tax avoidance around the world once BEPS is implemented. The OECD, G20, and the United States are currently working together to recommend and propose policies to take place under BEPS.
Currently the international business world is in need of tax policies that lead to inclusive growth. With more than 40 countries working together on the project, BEPS can be fulfilled in a sensible manner with a forward-looking agenda geared toward this inclusive growth. The international tax system needs to be repaired; over time, gaps have started to grow between national tax systems and international tax rules. With the increased occurrence of aggressive corporate tax planning a global revenue loss of up to $240 billion has resulted.
Many of the topics currently in discussion between the countries will hopefully help bring together the world’s economy and put an end to double non-taxation as well as reducing double taxation. These topics include permanent establishments, transfer pricing, interest deductibility, and the OECD’s effort to enable countries to quickly amend bilateral tax treaties and instead implement BEPS recommended treaties. Efforts around these topics will allow countries who used to have higher corporate tax rates to be more competitive for jobs and investments.
If you are working in finance, or more specifically tax, you will be the one driving the value. BEPS puts value at the heart of the tax model, with people at its core. The people who are operating business models, working in strategic management of the tax and head office, or have a role in projecting and promoting corporate image and brand, will be the once adding a great deal of value once BEPS is implemented.
Big changes are coming on the tax front. Leave a comment below if you have something interesting to share about BEPS or other tax changes in international business.