Tag Archives: Action 7

The Multilateral Convention on BEPS

The BMG has now published its Explanation and Analysis of MC-BEPS to implement the tax treaty related provisions of the BEPS project. (A slightly revised version was substituted on 24 April 2017, to add a couple of sentences at the bottom of p.8 explaining the procedure for entry into effect under article 35.7).


This multilateral convention aims to implement the tax treaty related changes recommended by the G20/OECD project on base erosion and profit shifting (BEPS), by modifying existing tax treaties as rapidly as possible. It is open for all countries to join, even if they are not otherwise participants in the BEPS project. It is formulated so that it can apply to all tax treaties, whether based on the OECD or the UN model, or indeed another.

It is understandable that some countries may feel resistance to accepting provisions which they had little or no involvement in formulating. We also have been critical of the BEPS project outcomes, which fell short of providing a comprehensive and cohesive approach to reform of international tax rules. Nevertheless, it is important to evaluate the provisions in this convention in relation to existing tax treaty provisions. This report aims to provide an explanation and analysis of the convention, including most importantly also our recommendations for individual country implementation of the convention. We hope this will help to inform those in government as well as the wider public about its effects.

Overall, we consider that most of the provisions would be improvements on existing tax treaty rules. Tax treaties generally restrict rights to tax income at source, in favour of the residence countries of taxpayers. By restricting abusive techniques which erode the tax base, these provisions help to restore some source country taxation powers. The provisions against tax treaty abuse, including treaty shopping, will also strengthen the general powers of tax authorities to control tax avoidance.

Although we endorse some of the improvements to the mutual agreement procedures for amicable resolution between tax authorities of conflicts over interpretation of legal provisions and factual situations, we do not support those which entail a shift towards legalized dispute resolution, especially arbitration. International tax rules, especially on allocation of MNE profits, are subjective and discretionary, so it is inappropriate for states to assume a binding obligation to accept the decisions of arbitrators. Public opinion will not accept the legitimacy of decisions involving substantial government revenue being taken in complete secrecy by a small community of specialists likely to remain dominated by corporate tax advisers and officials mostly from rich countries.