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The Australian Parliament on August 16 passed a legislation to give the force of law to the OECD’s Multilateral Convention to implement tax treaty-related measures to tackle base erosion and profit shifting (BEPS).
The BEPS Convention, negotiated by over 100 countries and jurisdictions, updates the existing network of bilateral tax treaties and reduces opportunities for tax avoidance by multinational enterprises (MNEs).
The BEPS Convention will modify existing bilateral tax treaties to swiftly implement the tax treaty measures developed in the course of the BEPS project. Treaty measures that are included in the BEPS Convention include those on hybrid mismatch arrangements, treaty abuse, and permanent establishment.
The BEPS Convention also strengthens provisions to resolve treaty disputes, including through mandatory binding arbitration, which has been taken up by over 25 countries, including Australia.
The BEPS Convention would allow countries, including Australia, to adjust their existing tax treaties with other participating countries swiftly to adapt to the OECD’s new treaty provisions.
Minister for Revenue and Financial Services, Kelly O’Dwyer, said: “The implementation of the BEPS Convention in Australia adds to the Government’s strong action to date, which has resulted in around AUD7bn in liabilities being raised against large corporations and MNEs. Once Australia and its relevant treaty partners have completed their ratification procedures, the BEPS Convention will help ensure the majority of Australia’s bilateral tax treaties contain international best practice rules that address MNE tax avoidance.”