Long journey ahead for OECD's tax plan

ON Oct 5, the Organisation for Economic Co-operation and Development (OECD) announced new tax proposals under its Base Erosion and Profit Shifting (BEPS) Action Plan, which seeks to make sure that profits are taxed where the economic activity occurs. In some ways, the final OECD reports are a little bit of an anti-climax. Why is that? In the first place, the OECD admits it still has a lot of work to do and secondly, BEPS is really just starting.

The reports are not the end. Rather, it is now up to various countries to implement actual laws to give effect to the OECD recommendations which, considering the political process which underlies BEPS, are not as definitive as many people might think. In my view, there is a long way to go before BEPS can be said to have been implemented successfully.

Some aspects of BEPS are well-developed. Many countries, including Singapore, have implemented or will soon implement enhanced transfer pricing rules requiring taxpayers to implement arms-length pricing and to maintain significant documentation to support that pricing. It also seems certain that larger multinational corporations (MNCs) will need to provide further information to tax authorities, in what is the so-called country-by-country reporting.