24 October 2018
The Action 14 peer review report (the ‘Report’) regarding Ireland was released by the OECD on 8 August 2018. The Report evaluates Ireland's implementation of Action 14 of the ongoing OECD's base erosion and profit shifting (‘BEPS’) project. The BEPS package of measures represents the first substantial reformulation of international tax rules in almost a century. The stated goal of the BEPS project is to ensure that profits of taxpayers will be reported where the economic activities that generate them are carried out and where value is created.
Action 14 of the BEPS project is titled ‘Making Dispute Resolution Mechanisms More Effective’. This action seeks to ensure countries who have committed to the BEPS project implement a ‘minimum standard’ to ensure they resolve double tax treaty-related disputes in a timely, effective and efficient manner. The purpose of Action 14 is to outline effective dispute resolution mechanisms and peer review procedures to help ensure certainty for taxpayers as they strive to implement other BEPS action items.
This peer review is the first stage of assessing Ireland's efforts in implementing the minimum standards of Action 14. The Report is broken down into four key areas:
In total 14 peers provided input into Ireland's peer review. These jurisdictions were Belgium, Canada, Denmark, Germany, Italy, Japan, Korea, Portugal, Russia, Spain, Sweden, Switzerland, Turkey, and USA. The review period opened in 1 January 2016 and ended on 31 December 2017 and was conducted through a specific questionnaire which is completed by the jurisdiction under review, the jurisdiction peers, and taxpayers.
In short, it was found that Ireland meets ‘almost all’ elements of the Action 14 minimum standards and is working to address any deficiencies. In order to become fully compliant with all four key areas of the effective dispute resolution mechanism minimum standards, Ireland needs to amend and update a certain number of its tax treaties. In this respect on 7 June 2017 Ireland signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the ‘MLI’) through which a number of its double tax treaties will potentially be modified to fulfil the Action 14 minimum standard requirements.
Where double tax treaties will not be modified by the MLI Ireland has already contacted almost all of such treaty partners proposing bilateral negotiations with a view to being in line with the Action 14 minimum standard. Ireland's stated aim is to complete the ratification of the MLI before the end of 2018 so that the MLI will then generally start to have effect for Ireland from the beginning of 2020.
Interestingly the Report includes an analysis of Ireland's MAP caseload during the review period which was as follows:
The average time needed to close MAP cases during the review period was 22.83 months.