Fulfilment House Due Diligence Scheme - CIOT comments

6 Jul 2017

The CIOT has consistently supported the BEPS project. In the context of this consultation, we recognised that the tax treaty-related BEPS measures are an important step to improving public trust in the international tax system by reducing the incidence of double non-taxation arising from the use of treaties in ways that were not envisaged when they were agreed. We observed that it is clear that the multilateral agreement will allow the tax treaty measures developed in the course of the OECD/G20 BEPS project to be implemented far more swiftly than bilateral treaty renegotiations.

We commented that it is important that the multilateral instrument achieves such implementation accurately and effectively and without unintended consequences, and leads to certainty of outcomes for taxpayers. We also said that given the unique nature of this instrument and the significance of the changes proposed, the draft text should be made available to facilitate consultation, so that the multilateral instrument can achieve implementation of the BEPS tax treaty measures accurately and effectively, even if this is released in stages.

We recommended there should be an agreed prospective date on which the MI has effect, with this date chosen to ensure that most countries have sufficient time to ratify the MI before it: the intention being that the MI takes effect for the majority of signatories on the same date.

We also noted that the proposed flexibility over which specific provisions each country can choose to adopt, such that countries will not have to sign up to the MI as a whole. We understand that this will be the case even in respect of those provisions of the MI which are part of the minimum standards. We agree with this approach to ensure that the take up of the MI is as wide as possible.

However, we said that the resulting matrix of provisions applying between all the countries that do adopt the MI to a greater or lesser extent will inevitably be very complicated. Thus it should be incumbent on the OECD, as well as fiscal authorities around the world, to ensure that a register is readily available and is maintained so that taxpayers are able to easily identify where the MI, and which provisions of it, effectively amend a bilateral treaty between any two particular countries.

We noted the importance of the arbitration provisions as resolving as many cases as quickly as possible will assist taxpayers and tax authorities alike, minimizing backlog and aiding efficiency.

Technical Team