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21 September 2018 OECD releases Ireland peer review report on implementation of Action 14 minimum standard On 30 August 2018, the Organisation for Economic Co-operation and Development (OECD) released the fourth batch of peer review reports relating to the implementation of the Base Erosion and Profit Shifting (BEPS) minimum standards under Action 14 on improving tax dispute resolution mechanisms.1 Ireland was among the assessed jurisdictions in the fourth batch.2 Overall the report concludes that Ireland meets almost all of the elements of the Action 14 minimum standard. In the next stage of the peer review process, Ireland's efforts to address any shortcomings identified in its Stage 1 peer review report will be monitored. In October 2016, the OECD released the peer review documents (i.e., the Terms of Reference and Assessment Methodology) on Action 14 on Making Dispute Resolution Mechanisms More Effective.3 The Terms of Reference translated the Action 14 minimum standard into 21 elements and the best practices into 12 items. The Assessment Methodology provided procedures for undertaking a peer review and monitoring in two stages. In Stage 1, a review is conducted of how a member of the Inclusive Framework (IF) on BEPS implements the minimum standard based on its legal framework for Mutual Agreement Procedure (MAP) and how it applies the framework in practice. In Stage 2, a review is conducted of the measures the member of the IF on BEPS takes to address any shortcomings identified in Stage 1 of the peer review. Both of these stages are desk-based and are coordinated by the Secretariat of the Forum on Tax Administration's (FTA) MAP Forum.4 In summary, Stage 1 consist of three steps or phases: Input is provided through questionnaires completed by the assessed jurisdiction, peers (i.e., other members of the FTA MAP Forum) and taxpayers. Once the input has been gathered, the Secretariat prepares a draft Stage 1 peer review report of the assessed jurisdiction and sends it to the assessed jurisdiction for its written comments on the draft report. When a peer review report is finalized, it is sent for approval of the FTA MAP Forum and later to the OECD Committee on Fiscal Affairs' to adopt the report for publication. The report includes a number of recommendations relating to the minimum standard. In general, the performance of Ireland with regard to MAP has proven to be satisfactory in their respective reports. Overall, Ireland meets almost all of the elements of the Action 14 minimum standard. Ireland in principle meets the Action 14 minimum standard concerning the prevention of disputes, as the Irish competent authority has in place a bilateral Advance Pricing Agreement (APA) program. Rollbacks of APA's are available and accepted in practice. It is recommended that Ireland ratify the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI) as early as possible. Ireland meets almost all requirements regarding the availability and access to MAP under the Action 14 minimum standard. Its policy is to provide MAP in all eligible cases, including cases involving transfer pricing, anti-abuse provisions or where the taxpayers and tax authorities have already reached an audit settlement. Ireland has published clear and comprehensive guidance on the availability of and procedural steps surrounding MAP, and has in place a documented bilateral notification process for situations in which the competent authority consider the objection raised by taxpayers in a MAP request as not being justified. It is recommended that Ireland ratify the MLI as early as possible, as this should modify any double tax treaties which do not currently meet the Action 14 minimum standard. In addition, there should be a provision that allows taxpayers to submit a MAP request within a period of no less than three years from the first notification of the actions resulting in taxation. Ireland should continue to update MAP guidance and make this publicly available. In principle, Ireland meets the majority of the requirements under the Action 14 minimum standard concerning the resolution of MAP cases. Its competent authority operates independently from the audit function, and operates under performance indicators which are appropriate to perform the MAP function. Peers reported positive relationships with the Irish competent authority. The majority of Ireland's double tax treaties contain a provision requiring the competent authority to endeavor to enter into discussions with other competent authorities to resolve cases of taxation not in accordance with treaty provisions where the taxpayer's objection is justified. The Irish competent authority provides adequate resources to its MAP function, and the directors have authority to resolve cases. During the reporting period, it took the Irish competent authority 22.83 months on average to close MAP cases, meaning the 24 month average time frame for resolving MAP cases is currently being adhered to. It is recommended that Ireland ratify the MLI as early as possible. Ireland should seek to resolve all post-2015 MAP cases pending within an average 24 month timeframe, and continue to closely monitor whether it has adequate resources in place to ensure timely, efficient and effective resolution of MAP cases. Ireland concluded 19 MAP cases during the period under review. In order to be considered compliant with the Action 14 minimum standard for the implementation of MAP agreements, Ireland will need to implement agreements reached on a timely basis. Ireland should provide in its double tax agreements that any mutual agreement reached through MAP shall be implemented notwithstanding any domestic time limits or be willing to accept alternative treaty provisions that limit the time during which an adjustment can be made. Currently, 54 of Ireland's 76 double tax treaties comply with this provision. It is recommended that Ireland ratify the MLI as early as possible in order to be fully compliant with the minimum standard as set out under Action 14. Ireland is already working to address deficiencies identified in its peer review and will now move on to Stage 2 of the process, where Ireland's efforts to address any shortcomings identified in its Stage 1 peer review report will be monitored. Under the peer review program methodology, Ireland shall submit an update report to the Forum on Tax Administration's MAP Forum within one year of the OECD Committee on Fiscal Affairs' adoption of the Stage 1 peer review report. In a post-BEPS world, where multinational enterprises (MNEs) face tremendous pressures and scrutiny from tax authorities, the release of Ireland's peer review report represents the continued recognition and importance of the need to achieve tax certainty for cross-border transactions for MNEs. While increased scrutiny is expected to significantly increase the risk of double taxation, the fact that tax authorities may be subject to review by their peers should be seen by MNEs as a positive step to best ensure access to an effective and timely mutual agreement process. Furthermore, the peer review for Ireland provides insights to taxpayers on the availability and efficacy of MAP. With additional countries continuing to be reviewed, the OECD has made it known that taxpayer input continues to be welcomed on an ongoing basis. With stakeholder feedback in mind, businesses are encouraged to share their views with the OECD on the peer review for Ireland and any other jurisdictions, and to perhaps comment on whether the next iteration of the OECD's assessment of tax administration's MAP performance warrants greater feedback from taxpayers as the primary source. Feedback from the international tax community is the logical next step after peer review, which may help to further validate the current favorable result. 1 See EY Global Tax Alert, OECD releases fourth batch of peer review reports on Action 14, dated 4 September 2018. 2 See the OECD report, Making Dispute Resolution More Effective – MAP Peer Review Report, Ireland (Stage 1). 3 See EY Global Tax Alert, OECD releases BEPS Action 14 on More Effective Dispute Resolution Mechanisms, Peer Review, dated 31 October 2016. Document ID: 2018-6112 |
