As Professor Rubinstein pointed out, developing countries are much more reliant on corporate income taxes than more developed economies, and therefore the impact of BEPS is especially relevant. Earlier this week, the Organisation for Economic Co-operation and Development (OECD) released a report on the impact of base erosion and profit shifting (BEPS) on low income countries.
Professor Rubinstein raised a number of the challenges for developing countries in implementing the OECD’s proposed measures to address BEPS. They may lack the necessary legislative measures needed to counter BEPS, and this can be exacerbated by the need for political buy-in as a prerequisite to making the legislative changes and resource commitments required. Developing countries often favour domestic tax incentives for development that may run counter to the international BEPS agenda. Additionally, accessing the relevant information is often especially difficult for developing countries. It can be challenging for developing countries to develop the technical capacity to engage in the process of addressing BEPS.
The specific concerns of Brazil, Professor Rubinstein’s area of particular expertise, are telling. Those concerns include:
- the administrative burden and compliance costs associated with BEPS
- taxpayers rights in tax information exchange procedures
- the role of 'contributions' (de facto taxes) in corporate taxation and withholding at source
Brazil has a rigid constitutional tax framework and time-consuming legislative procedures for reforms, which makes progressing the BEPS agenda difficult.
Ultimately Professor Rubinstein queried whether a perfectly coordinated, supra-national action on BEPS is really attainable, especially given that the proposed timetable is so short. However, international taxation is now in the spotlight and, as Professor Rubinstein emphasises, that can only be a good thing.