SA expected to continue its support of OECD Action Plan to address BEPS, says PwC Tax
28 October 2014
Posted by: Authors: Lindi Magana and Sanchia Temkin
Authors: Lindi Magana and Sanchia Temkin (PwC South Africa)
In June 2012, the G20 leaders explicitly referred to "the need to prevent base erosion and profit shifting” ("BEPS”) in their meeting’s final declaration. In February 2013 the Organisation for Economic Cooperation and Development (OECD) issued a progress report ahead of that month’s G20 meeting and in July 2013 released its comprehensive Action Plan to address BEPS, containing 15 separate actions and work streams. The BEPS project marks the most significant change to international tax in decades and the fact that the first set of 7 deliverables have been issued by the OECD on time, as promised, in September 2014, is reflective of the global political consensus that is driving the momentum for change in the way international transactions are taxed. The proposals are expected to have a substantial effect on multinational companies, whether through greater compliance demands or through significant changes in the way in which they are taxed across their global value chain.
The OECD’s recommendations for changing the international tax rules are wide-ranging under its first stage of work. Seven of the 15 areas of the BEPS Action Plan are covered by this first stage. The items deal with the following issues: digitisation of the economy; hybrid mismatches; treaty abuse; country-by-country reporting and transfer pricing documentation; transfer pricing and intangibles; harmful tax practices; and the use of a multi-lateral instrument.
The Group of 20 Finance Ministers recently welcomed the progress made by the OECD on the BEPS Action Plan and endorsed their support for the project, as well as a number of other measures aimed at combating cross-border tax avoidance and evasion, following the September 20-21 meetings held in Cairns, Australia. The G20 also extended support to developing countries by undertaking to assist them to preserve and grow their revenue bases and deepening engagement with them on BEPS issues.
South Africa has actively contributed to the work of the OECD on the BEPS project and it is against this backdrop that we anticipate South Africa, as a member of the G20, will once again formally declare its support for the work done by the OECD, and it is expected that Finance Minister Nhlanhla Nene will endorse this commitment when he tables the medium-term budget policy statement, next week Wednesday, 22 October.
This article first appeared on pwc.co.za.