Selected BEPS Action Plan : countering harmful tax practices more effectively, taking into account transparency and substance, how is it likely to change the international tax landscape

Abstract

The lack of coherence of corporate taxation at the international level, along with the proliferation of preferential regimes across the globe, led to a revamp of previous efforts. The OECD’s BEPS project attempts to address gaps in tax rules governing cross-border activity and the occurrence of harmful tax practices through Action 5. This thesis, studies the latest approach adopted to counter harmful tax practices in order to determine whether and to what extent it will change the international tax landscape. The countermeasures proposed in Action 5 to combat harmful tax practices more effectively consist of two sets of standards based on the concepts of substance and transparency. These standards are designed to complement domestic tax laws and existing treaty rules and in so doing to establish international coherence of corporate income taxation. The standards based on substance impose a new activity-based requirement for the extension of preferential treatment by a jurisdiction to a corporate taxpayer intended to align value creation activity with income and its taxation. The standard based on transparency, imposes an obligation on jurisdictions that grant tax rulings to exchange information with any affected jurisdiction in case of certain categories of rulings that raise base erosion and profit shifting concerns. The OECD aims to attain a level playing field in international corporate taxation through its commitment to engage non-OECD members on the basis of the framework proposed by Action 5. This thesis will delve into the efforts of the OECD and the change these efforts are likely to bring in the international tax landscape.