Last week, the OECD released its Action Plan on Base Erosion and Profit Shifting, which is intended to form the basis of a multilateral approach to these issues. The Plan is comprehensive, raising 15 action items across four broad categories:
- responding to structural changes to the global economy
- aggressive planning and inappropriate access to Treaties
- transfer pricing (where there is the potential for significant change)
- international co-operation/dispute resolution.
Given its role with the G20, Australia will play a leading role in this very important discussion, which has been confirmed in an undertaking to co-operate with the UK in its G8 leadership role. In addition to a global perspective, Australia must also act with an eye on our domestic position as a capital importing country with an open economy and an already robust corporate tax system. There will be a balance between leading the way and putting Australia at a disadvantage in attracting capital investment.
In responding to the Action Plan, Australian companies should firstly stress-test their existing structures and supply chains against the action plans. Australian companies should also actively participate in Treasury and ATO processes to ensure that any measures do not put Australian companies or trade at a disadvantage against international peers.