handbook-tb

Protecting the tax base of developing countriesjurisdiction to which current rules may assign taxing rights over theincome that those activities generate. For example, the interposition ofan intermediate or conduit company between a parent company andits operating subsidiary may result in income being attributed to anintermediate company that has no real substance. Similarly, currentrules may allow a company to have a substantial economic presencein a jurisdiction without that jurisdiction having a recognized taxingright. This situation may arise as a result of the increased importanceof technological and communications advances that make physicalpresence in a jurisdiction less necessary or no longer necessary at all.Or it may arise because of the technical requirements of existing rulesin domestic tax law or tax treaties that relate to taxing jurisdiction.In addition to the importance of reassessing the applicable substantiverules, the OECD Action Plan on BEPS stresses the need fortransparency and sharing of information among jurisdictions. Thus,one of the action items calls for the development of better mechanismsfor information sharing to implement the substantive rules.The basic focus in the OECD Action Plan on BEPS calls foradjustments to current international tax rules that would reducethe ability of companies to generate non-taxed or low-taxed incomeby modifying existing rules. However, the Plan states that: “[w]hileactions to address BEPS will restore both source and residence taxationin a number of cases where cross-border income would otherwisego untaxed or would be taxed at very low rates, these actions are notdirectly aimed at changing the existing international standards on theallocation of taxing rights on cross-border income.” 6Subsequent to the publication of the OECD Action Plan onBEPS, the OECD issued a number of Discussion Drafts and Reportson various Action Plan items, which culminated in seven Reports andRecommendations published in 2014. 7 These materials were presentedto the G20 Leaders’ Meeting in November 2014 and were welcomed6See OECD, Action Plan on Base Erosion and Profit Shifting, supranote 2, at 11.7OECD, OECD/G20 Base Erosion and Profit Shifting Project, ExplanatoryStatement, 2014 Deliverable (Paris: OECD, 2014), available at www.oecd.org/tax/beps-2014-deliverables-explanatory-statement.pdf.5