The Unit's key function is to determine and disseminate the Commissioner of Inland Revenue's position on various tax issues through the issuing of primarily binding public rulings, interpretation statements and interpretation guidelines. The Unit was established to provide a real focus on, and commitment to, the provision of public rulings and statements, given their important role in clarifying areas of uncertainty and fostering compliance. Sincethe Unit has generated many items on a wide range of taxation issues, ranging from, by way of example, the deductibility of feasibility studies expenditure, to whether an agreement for the sale and purchase of property is an "invoice" for GST purposes. This article explains the types of public advice referred to in this article as "public items" provided by the Unit, who makes up the Unit, how topics are selected and consulted on, the future of the Unit and its role within Inland Revenue.
A comprehensive package of measures has been agreed upon. Countries are committed to this comprehensive package and to its consistent implementation. These measures range from new minimum standards to revision of existing standards, common approaches which will facilitate the convergence of national practices and guidance drawing on best practices.
The expectation is that once implemented, the measures restore taxation in a number of instances where income would otherwise go untaxed. Depending on the planning structure used, one or more of the measures developed will have an impact and ensure that income is taxed at least one time and not more than once.
Rather than closing individual schemes, the measures go to their roots. How will the BEPS measures be implemented? Some of the measures may be immediately applicable such as the revised guidance on transfer pricing. Other measures require changes to bilateral tax treaties, something that can be done via the multilateral instrument under Action Finally, other measures require domestic law implementation.
What is the nature of the BEPS outputs? Are they legally binding? They are soft law legal instruments. They are not legally binding but there is an expectation that they will be implemented accordingly by countries that are part of the consensus.
The past track record in the tax area is rather positive. Minimum standards were agreed in particular to tackle issues in cases where no action by some countries would have created negative spill overs including adverse impacts of competitiveness on other countries.
Recognising the need to level the playing field, all OECD and G20 countries have committed to consistent implementation in the areas of preventing treaty shopping, Country-by-Country Reporting, fighting harmful tax practices and improving dispute resolution. In addition, existing standards have been updated and will be implemented, noting however that not all BEPS participants have endorsed the underlying standards on tax treaties or transfer pricing.
In other areas, such as recommendations on hybrid mismatch arrangements and best practices on interest deductibility, countries have agreed a general tax policy direction.
In these areas, they are expected to converge over time through the implementation of the agreed common approaches, thus enabling further consideration of whether such measures should become minimum standards in the future.
Guidance based on best practices will also support countries intending to act in the areas of mandatory disclosure initiatives or CFC legislation.
Do the BEPS measures increase the risk of double taxation? The aim of the measures is to realign taxation with economic substance and value creation, while preventing double taxation. The BEPS package represents the first substantial renovation of the international tax rules in almost a century.
This renovation is necessary not only to tackle BEPS, but also to ensure the sustainability of a consensus-based system aimed at eliminating double taxation. As new rules always raise interpretation issues, Action 14 on improving dispute resolution is a key part of the BEPS Project.
This should not be the case for groups whose legal and tax structures reflect the underlying economic reality. Will BEPS implementation be monitored?
Monitoring the implementation of the BEPS measures includes targeted monitoring of the minimum standards on treaty shopping and on dispute resolution, the application of the criteria on harmful tax practices, as well as the implementation of the country-by-country reporting requirements.
Will there be other BEPS outputs in the future? G20 and OECD countries will keep working on an equal footing to carry out follow-up work in Technical tax area: General articles Inland Revenue's Public Rulings Unit.
This article first appeared in Taxation Today (Issue 18, May ) and is reproduced here with the permission of the publisher.. I. Introduction. The Public Rulings Unit is a division of the Office of the Chief Tax Counsel ("OCTC"), Inland Revenue.
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Technical tax area: General articles Inland Revenue's Public Rulings Unit. This article first appeared in Taxation Today (Issue 18, May ) and is reproduced here with the permission of the publisher..
I. Introduction. The Public Rulings Unit is a division of the Office of the Chief Tax . amendments ensure relocation payments, overtime meals and other allowances are exempt from income tax and fringe benefit tax when certain criteria are met.