Concerns grow over BEPS

Companies are increasingly worried about the impact of planned changes to the international tax regime as proposals from the Organisation for Economic Cooperation and Development (OECD) would mean a big shift in accounting behaviour for many firms.

The base erosion and profit shifting (BEPS) project is aimed at closing corporate tax loopholes around the world. At an EY event the firm polled more than 100 companies, finding that 43 per cent are very concerned about the potential changes from the BEPS project. A further 15 per cent say they are extremely worried.

The country-by-country reporting procedures were also cited by attendees as a big worry, the Irish Independent reported. “There was a wide consensus in the room that the cost of compliance will increase for business from these changes,” an EY spokeswoman said.

BEPS calls for a review of the existing transfer pricing documentation rules and the development of a template for country-by-country reporting of income, taxes and economic activity for tax administrations. In January this year the OECD published a discussion draft containing revised guidance on transfer pricing documentation and country-by-country reporting.

Concerns over the BEPS project are not new, but the pace of reform is starting to seriously worry firms. In its 2013 Global Transfer Pricing Survey, EY found a growing desire among tax administrations in rapid-growth markets to challenge transactions. It also noted that the OECD's BEPS project is "likely to have substantial influence on transfer pricing rules".

EY said in the report introduction: "Companies are struggling to manage a transfer pricing life cycle that has become more compressed than ever before. They are seeking to manage new players and new pressures in new places with fewer resources. And they are facing tax administrations that collect and share data like never before."

As such, said the authors, it should come as no surprise that "controversy and double taxation is on the rise". Its latest findings suggest the controversial reforms are only becoming more problematic.