Progress continues in combatting harmful tax practices

Further progress has been made on the implementation of the international standard on harmful tax practices as the OECD/G20 Inclusive Framework on BEPS agrees new conclusions on preferential tax regimes and substance in no or only nominal tax jurisdictions.​

Preferential regimes

At its April 2022 meeting, the Forum on Harmful Tax Practices (FHTP) agreed new conclusions on 12 regimes as part of the implementation of the BEPS Action 5 minimum standard on harmful tax practices. Eswatini and Honduras made government commitments, and therefore, three regimes are now in the process of being amended/eliminated. Four regimes have been amended to be in line with the standard and are now not harmful (Costa Rica, Greece and Kazakhstan). Italy abolished its patent box regime. Furthermore, three regimes were concluded as potentially harmful (Armenia and Pakistan); the FHTP will assess at its next meeting if these regimes are actually harmful. Finally, one new regime from Cabo Verde is under review.

Since the start of the OECD/G20 BEPS Project tackling international tax avoidance, the FHTP has reviewed a total of 319 regimes, which are concluded as follows:

Annual monitoring of substance in no or only nominal tax jurisdictions

As part of the standard on substantial activities requirements in no or only nominal tax jurisdictions, the FHTP undertakes an annual monitoring exercise to assess whether the standard operates effectively in practice. The FHTP started this exercise in 2021 and now reveals the results of the first monitoring year. Recommendations for substantial improvement were made for four jurisdictions (Anguilla, the Bahamas, Barbados and the Turks and Caicos Islands) and areas for focused monitoring were identified for another four jurisdictions (Bahrain, Bermuda, the British Virgin Islands and the Cayman Islands). No issues were identified for Guernsey, Jersey, the Isle of Man and the United Arab Emirates.

The next annual monitoring will take place over the second half of this year. The FHTP will then consider whether the overall compliance of jurisdictions is still satisfactory, particularly for those jurisdictions for which recommendations for substantial improvement were made.

More information on BEPS Action 5 on harmful tax practices can be found at https://oe.cd/bepsaction5.

Source : OECD, Topics, Juli 2O22