accountants and business advisers
05 Jul 2018
Taxation is at the core of countries’ sovereignty, but practice has shown that the interaction of domestic tax rules can lead to gaps and frictions. As a result, existing tax rules have revealed numerous weaknesses. This in combination with the ongoing financial crisis has led to the concern that, in the changing international tax environment, the applicable international tax standards which were applied by the respective jurisdictions were insufficient …
The Organisation for Economic Co-operation and Development (“OECD”) is an inter-governmental economic organisation with 35 member countries. The OECD was founded in 1961, with 18 members, to stimulate economic progress and world trade. It’s a forum of countries who have declared a commitment to democracy and the market economy, providing a platform to compare policy experiences, seeking answers to common problems, identify good practices and coordinate domestic and international policies of its members. As of 2017, the OECD member states collectively comprised 62.2% of global nominal GDP (US$49.6 trillion). OECD is an official United Nations observer.
That is why, back in 2012, the G20 Finance Ministers called on the OECD to develop an action plan whose goal is to make fundamental changes to the current mechanism in order to:
Specifically, this resulted in the so-called OECD BEPS Action Plan with 15 action points and corresponding timelines.
What is BEPS?
BEPS is short for “Base Erosion and Profit Shifting” and thus clearly refers to tax planning strategies used by multinational companies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity. In summary: “base erosion” refers to techniques to lower (or erode) the taxable basis whereas “profit shifting” aims at transactions whereby taxable income is transferred from a high – tax jurisdiction to a low – tax jurisdiction. Put differently, BEPS concerns strategies which aim to move profits to where they are taxed at lower rates and expenses to where they are relieved at higher rates.
Indeed, experience showed that there is a tendency to associate more profit with legal constructs and intangible rights and obligations, thus reducing the share of profits associated with substantive operations involving the interaction of people with one another. In essence, while these corporate tax planning strategies may be technically legal and rely on carefully planned interactions of a variety of tax rules and principles, the overall effect of this type of tax planning is to erode the corporate tax base of many countries in a manner that is not intended by domestic policy. Needless to say, this gave rise to significant frustration for many local Governments …
Against the light of such concerns at international tax level, numerous think tank events of the OECD have resulted in the OECD BEPS Action Plan containing 15 actions points, including:
What is the position of Thailand compared to other countries?
So, what about Thailand’s position compared to the rest of the world?
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