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Multinational enterprises (MNEs) are “changing their behavior” as a direct result of recent tax measures taken to tackle base erosion and profit shifting (BEPS), the OECD has told the Group of Twenty (G-20) Finance Ministers.
In its report released on July 22, 2018, for the G-20 Finance Ministers meeting in Buenos Aires, Argentina, the OECD noted that “a significant number of MNEs have already reported taking pro-active steps aimed at aligning their tax structures with their real economic activity.”
“Transparency has been improved and rules have been changed to realign the location of profits with the place where value is created,” the report notes. “The time where MNEs could use tax planning based on a lack of transparency, a lack of substance, or the exploitation of cross-border loopholes is over.”
According to the OECD, more than 80 countries have signed the BEPS Multilateral Instrument to implement tax treaty-related measures identified in the BEPS project. The BEPS Multilateral Instrument entered into force this month, following ratification by five countries, with the first modifications having effect as from January 1, 2019.
With regard to BEPS Action 5, 175 regimes have been reviewed by members of the Inclusive Framework on BEPS and more than 130 regimes have already been amended or abolished, or are in the process of being amended or abolished, the report states.
Country-by-country reporting, requiring large MNEs to provide tax information to tax administrations as proposed under BEPS Action 13, has also begun.
The report, however, notes that “more needs to be done, and is being done, in particular to address the challenges of the digitalization of the economy.”
“There is much more work to do. Crucially, the leadership and collegiality of the G-20 will be essential in solving one the most urgent issues in the international tax agenda,” the report states.