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OECD Backs US International Tax Reform Efforts

by Ulrika Lomas,, Brussels

17 June 2016

The Organisation for Economic Co-operation and Development has, in its recent economic survey of the United States, welcomed steps taken by the Government to reform the country's international tax system.

The report, presented in Washington by OECD Secretary-General Angel Gurría and Jason Furman, Chairman of the Council of Economic Advisors, states that "moving ahead on tax reform, including international tax reform, will require legislation, but the US administration has been actively engaged in other important changes [that] are occurring in international taxation."

The report points out: "The recent wave of multinational corporations using inversions and interest deductions on intra-group borrowing to reduce their US tax liabilities is driven by the high statutory corporate tax rate, the world-wide taxation with deferral and foreign tax credits, and relatively weak international tax anti-avoidance rules. A number of international tax reform proposals call for lower corporate tax rates and tougher anti-avoidance rules. The President's 2017 Budget proposal would tighten the limitation on corporate interest deductions, impose a minimum tax on foreign source income, restrict hybrid tax structure arrangements designed to create stateless income, and tighten controlled foreign corporation rules. The Treasury in April 2016 introduced new regulations that limit earning stripping and tighten certain restrictions on inversions."

Turning to the US's participation in its base erosion and profit shifting (BEPS) project, the OECD said the US "has committed to the outcomes of the BEPS project, endorsed by the Group of Twenty Leaders in November 2015, which include significant measures to improve the international framework for taxation of cross-border activities and reducing BEPS. The US is already moving forward with the implementation of the BEPS recommendations on country-by-country reporting for the largest multinationals, which will provide important information to tax administrations for risk assessment purposes, and anticipation of this reporting by multinationals has already begun to discourage aggressive tax planning. It has also incorporated the minimum standard on treaty abuse and a mandatory binding arbitration provision into its new Model Tax Convention."

TAGS: compliance | tax | investment | business | double tax agreement (DTA) | tax compliance | tax avoidance | interest | law | budget | Organisation for Economic Co-operation and Development (OECD) | tax credits | Internal Revenue Service (IRS) | enforcement | agreements | multinationals | controlled foreign corporations (CFC) | legislation | tax planning | transfer pricing | tax rates | United States | G20 | tax reform | regulation | Legislative Scrutiny | legislation amendments | trade | Tax | BEPS

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