31 countries signed MCAA to boost transparency in international tax matters

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Who: Multilateral Competent Authority Agreement
What: Signed by 31 countries
When: 27 January 2016
Why: To boost transparency in the functioning of MNEs

31 countries on 27 January 2016 signed the Multilateral Competent Authority Agreement (MCAA) to boosttransparency in the functioning of multinational enterprises (MNEs) by allowing automatic exchange of Country-by-Country reports by tax administrators.

The signing of the agreement marks an important milestone towards implementation of the OECD/G20 Base Erosion and Profit Shifting (BEPS) project.

Features of the Multilateral Competent Authority Agreement

• Under this multilateral agreement, information will be exchanged between tax administrations, giving them a single, global picture on the key indicators of multinational businesses.
• With Country-by-Country reporting, tax administrations will get aggregate information annually, starting with 2016 accounts, 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 enable consistent and swift implementation of new transfer pricing reporting standards developed under Action 13 of the Base Erosion and Profit Shifting (BEPS) Action Plan.

• The 31 signatory countries are the parties of or territories covered bythe Convention on Mutual Administrative Assistance in Tax Matters or have signed or expressed their intention to sign the convention.
The signatories are – Australia, Austria, Belgium, Chile, Costa Rica, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Japan, Liechtenstein, Luxembourg, Malaysia, Mexico, Netherlands, Nigeria, Norway, Poland, Portugal, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland and United Kingdom.

About OECD/G20 Base Erosion and Profit Shifting Project

• The project refers to tax planning strategies that exploit the gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid.
• It sets 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.
• It was jointly developed by the Organisation for Economic Co-operation and Development (OECD) and the G20 to provide governments with solutions for modernising international tax rules.
• The project assumes significance as estimates conservatively indicate that BEPS problem causes annual losses of anywhere from 4 to 10 percent of global corporate income tax (CIT) revenues that is 100 to 240 billion US dollars.
India decided to implement the BEPS guidelines from 1 April 2016.