• Service: Tax
  • Type: Press release
  • Date: 7/19/2013

OECD Action Plan on Base Erosion and Profit Shifting is a “Significant development in global collaboration to modernize the international tax system” says KPMG International 

  • Action plan could signal a potential “seismic shift” in the landscape and comes at the right time for an impartial review of long-standing international tax norms, says KPMG
  • But significant challenges lie ahead, KPMG warns

Today’s Action Plan on Base Erosion and Profit Shifting from the OECD presented to the G20 Finance Ministers at their meeting in Moscow represents a significant development in global collaboration to modernise the international tax system  In the current environment, a review of international tax rules to identify areas for improvement and achieve some consensus on necessary changes is certainly appropriate. The scale of this report and its ambitions for change represent a potential seismic shift in the international tax landscape.


Commenting on the Action Plan on Base Erosion and Profit Shifting published by the OECD today, Greg Wiebe, Global Head of Tax at KPMG International, said:


“Bringing today’s proposals to fruition within the 24 month timetable presents an enormous challenge. There is undoubtedly an urgent need to work quickly as uncertainty helps no one, but modernising over 75 years of international tax laws in just two years time without jeopardising the aspects of the current system that operate as intended and are fit for purpose will not be straightforward.”

Specific areas addressed by the OECD in its Action Plan on Base Erosion and Profit Shifting (“Action Plan”)

Today’s Action Plan focuses on a number of key areas including the digital economy, intangibles, hybrid mismatch arrangements, harmful preferential regimes, aggressive tax planning, and greater transparency and disclosure.

  • The “digital economy” in its broadest sense presents difficult and complex issues and we welcome the planned holistic approach to understanding the business models in this sector before making specific proposals.
  • The call for action to address what the report refers to as “hybrid mismatches” was anticipated and is likely to have a significant impact on multinational companies. This is also likely to be one of the most ambitious areas of the plan as it will require changes to domestic law and extensive coordination among countries.   
  • The Action Plan also calls for revamping the work on what it describes as “harmful tax practices” adopted by certain jurisdictions.  In this regard, we believe providing clarity and establishing consensus around the criteria for identifying these practices versus acceptable tax competition would be welcome. 
  • The Action Plan calls for improving mechanisms for “dispute resolution”.  We encourage the widespread adoption of mandatory arbitration and recommend the OECD go further in opening up access to the Mutual Agreement Procedure (MAP) to facilitate earlier and swifter resolution of disputes. 

Areas for On-Going Dialogue

KPMG points out that there are some areas of today’s report which raise concerns and present practical difficulties for implementation:

  • In its earlier report issued in February, the OECD indicated it did not intend to depart from the arm’s length principle in transfer pricing.  However, today’s Action Plan suggests that consideration is now being given to measures which go beyond the arm’s length principle. KPMG said a departure from this universally established standard raises serious concerns.  
  • The Action Plan proposes changes to domestic legislation to require greater “disclosure” to global tax authorities of certain “aggressive transactions”.  Providing clear definitions and establishing consensus as to which transactions this will apply will be essential to the effectiveness of this proposal.
  • The Action Plan calls for enhanced “documentation requirements”.  Manal Corwin, Tax Principal with KPMG LLP, said, “The proposals around “re-examining transfer pricing” documentation appear to be moving towards a version of country- by-country reporting to tax authorities.  If this is what is intended, it will be important to ensure that the practical considerations and costs to the taxpayer are fully assessed and appropriately taken into account relative to the benefits such reporting would serve in addressing BEPS.”
  • A number of the proposals will require “domestic law changes” that may be in conflict with EU rules (such as, limitations on the deductibility of interest expense, CFC rules and treaty anti-abuse rules).  KPMG notes that in the past, resolving these conflicts has presented significant challenges.  It is not clear whether the potential benefits of a coordinated action plan will provide sufficient incentives to overcome these challenges.
  • The Action Plan proposes what it calls “adoption of a multilateral convention” among participating governments to implement a number of the proposed actions.  KPMG notes that this will present some considerable challenges, but it may be the only realistic mechanism for effecting change within the proposed time frames.

Dialogue with a range of stakeholders is crucial

Today’s report proposes significant changes to the international tax landscape in a very short period of time.  It is thus very encouraging that the OECD is emphasising the importance of consulting with a range of non-governmental stakeholders in moving forward.  Ms. Corwin said, “We believe this is critical and we look forward to engaging constructively with the OECD during the consultation process.”



For more information, please contact:


Tania O'Brien

Head of Marketing & Communications, Global Tax,
KPMG International

+1 416 777 8491


About KPMG International


KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 156 countries and have 152,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

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