(International Investment) -- In what the Organisation for Economic Co-operation and Development described as a “major step forward in international tax co-operation”, six countries including Panama have signed up to the organisation’s so-called BEPS treaty, one of its key tax avoidance measures.
On Wednesday, ministers and other top officials from Barbados, Côte d’Ivoire, Jamaica, Malaysia, Panama and Tunisia gathered in Paris to sign the Base Erosion and Profit Shifting (BEPS) Multilateral Convention, bringing the total number of signatories to 78.
The convention is described by the OECD as an updating of the existing global network of bilateral tax treaties, and “reduces opportunities for tax avoidance by multinational enterprises” by making it harder for multi-national companies to avoid tax through the strategic use of cross-border shifting of profits.
In addition to the six countries that signed the agreement , Algeria, Kazakhstan, Oman and Swaziland have expressed their intent to sign the convention, “and a number of other jurisdictions are actively working towards signature by June 2018”, the OECD said.
Thus far, four jurisdictions – Austria, the Isle of Man, Jersey and Poland – have ratified the convention, which will enter into force three months after a fifth jurisdiction deposits its instrument of ratification, according to the OECD.
The BEPS convention is described by the OECD as the first multilateral treaty of its kind, and has been set up to allow jurisdictions to integrate results from the OECD/G20 BEPS Project into their existing networks of bilateral tax treaties.
To see and download an updated list of Signatories and Parties to the Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent Base Erosion and Profit Shifting, click here.
The US is not yet a signatory
In June, as reported, senior officials and ministers from 68 countries and jurisdictions signed the initial BEPS agreement. Then, as now, the US was not among either the signatories, nor those that have formally acknowledged that they also plan to adopt it.
However, as noted in June, the US has been a participant in the BEPS project, and OECD officials have said in the past that the US already has extremely strong anti-abuse provisions and arbitration procedures in its existing tax treaties, suggesting its participation in this particular round of BEPS work might not be needed.
The Paris-based OECD was founded in 1948 as the OEEC (Organisation for European Economic Co-operation) to oversee the implementation of the Marshall Plan, a post-World War II initiative aimed at helping Europe to recover and rebuilt, with the help of the US. In 1961 it was revamped, re-named the OECD and membership was opened up to non-European states as well.
As reported, the European Council on Tuesday removed eight jurisdictions from its so-called “tax haven blacklist” – including both Panama and Barbados, which were among the BEPS signatories yesterday – following what it said were “commitments made at a high political level to remedy EU concerns” from the countries in question.
The other six countries were Grenada, the Republic of Korea, Macao, Mongolia, Tunisia and the United Arab Emirates.
Panama’s inclusion on both these lists is considered significant because of its role as the jurisdiction in which the 2016 “Panama Papers” exposé, based on leaked documents from a Panamanian law firm, Mossack Fonseca, took place.