13 May 2016 Current Affairs: Six countries, namely India, China, Israel, New Zealand, Canada and Iceland, signed a Multilateral Competent Authority agreement for the automatic exchange to boost transparency by multinational enterprises (MNEs). The signing ceremony took place in Beijing on 12 May 2016.With this, the total number of signatories came up to 39.
Highlights : The pact allows all signatories to bilaterally and automatically exchange Country-by-Country Reports ("CbC MCAA") with each other, as contemplated by Action 13 of the BEPS Action Plan. It will help ensure that tax administrations obtain a complete understanding of how MNEs structure their operations, while also ensuring that the confidentiality of such information is safeguarded.The OECD/G20 BEPS Project set out 15 key actions to reform the international tax framework and ensure that profits are reported where economic activities are carried out and value created.BEPS is of major significance for developing countries due to their heavy reliance on corporate income tax, particularly from MNEs.Country-by-country reporting will require MNEs to provide aggregate information annually, in each jurisdiction where they do business, relating to the global allocation of income and taxes paid, together with other indicators of the location of economic activity within the MNE group. It will also cover information about which entities do business in a particular jurisdiction and the business activities each entity engages in.
G20 leaders endorsed the wide-ranging BEPS package in November 2015, marking an historic opportunity for improving the effectiveness of the international tax system.
The signed package was a result of more than two years of discussions involving all OECD and G20 countries. The discussions also included more than a dozen developing countries.