Leaky BEPS – has the media become the message?

The word on everyone’s lips this year in the tax world is BEPS (base erosion and profit shifting). We’ve been hearing more and more about the OECD BEPS action plan as each of the 15 actions in the plan is revealed. In September of this year, the OECD released reports on the first 7 of the 15 actions. We can now see the direction in which the OECD is heading.

The world is changing at lightning speed, no one can argue with that. The OECD’s actions on BEPS are about taking an international tax system that was designed in a now-antiquated context of brick and mortar and bringing it into our 21st century of e-commerce and instantaneous cross-border financial operations.
The OECD has made a series of recommendations in the BEPS reports.  There has been a huge effort by the OECD and all the stakeholders to craft these reports which contain a great deal of very technical information, leading to recommendations.  It was hard, often thankless work and all the parties involved should be commended on their efforts. There is still a great deal of work to do as the deliverables on the next actions are prepared and the implementation process is engaged.

Some of the recommendations are politically sensitive and administratively complex to implement. Will the entire action plan get implemented by all the States participating?  We doubt it.  Will the international tax system as we know it undergo significant change? Without a doubt.

Although the BEPS action plan is still work in progress, we cannot afford to bury our heads in the sand. Specific measures against BEPS will be taken and now is the time to be proactive. We recommend taking a look at existing structures and considering how they might be affected in various BEPS outcomes.

It is interesting to finish this Blog entry in the context of the high-profile media coverage over the last days of leaks of Luxembourg tax documents.

It is an interesting case of the media becoming the message. The leaked documents show, again, that multinational companies and investors use international platforms, some in Luxembourg, to organize their business. The documents also show again, that international businesses can organize their affairs in a tax-efficient manner in a way that is perfectly legal. These were the issues that led to the BEPS action plan being launched. They are not Luxembourg-specific issues however.  The international tax system as is has been forged by governments, acting through the OECD. Multinational businesses have followed this system and built business models adapted to it. Weaknesses in the international tax system can’t be fixed in Luxembourg, no more than they can be fixed by the multinationals.  A media consortium has worked together to raise the profile of the issue, but the message hasn’t changed. When the political and media dust settles the hard work of the BEPS action plan will continue.

As a closing note, on State Aid, I just saw that my specialist colleagues in Brussels won a major case on behalf of Spanish multinationals against the EU commission in relation to a State Aid case around the Spanish Holding company régime. The Spanish regime was available to all taxpayers and therefore the EU commission couldn’t establish selectivity…


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