CIAT, in coordination with regional and international organizations (IDB, IMF, OECD, World Bank, UN, etc.), with international initiatives (International tax Compact-ITC, EUROsociAL) and civil society (Latindadd and Tax Justice Network) has organized since the year 2014, a total of 7 activities whose purpose was to disseminate the content of the BEPS Action Plan, its results and challenges with a view to its implementation in developing countries. As a result of these activities, summaries of the meetings have been elaborated, which reflect the vision of the countries on the level of priority of the different actions in their respective contexts, the applicability of the recommendations with the resources available, among other issues, related or not to the BEPS Action Plan.

According to statistics produced in 2014 by CIAT, the World Bank, and the ITC, all actions of the BEPS Action Plan presented a similar level of priority for Latin American and Caribbean countries. However, there is a slight positive bias towards actions related to the control of transfer pricing (8 to 10) and negative towards actions 2 (neutralizing the effects of hybrid mechanisms), 3 (reinforcing the CFC regulations) and 14 (making the dispute resolution mechanisms more effective). This scenario is expected, as the region has been deploying efforts in the area of transfer pricing and thus, capitalized more knowledge. In cases where there is a lower level of priority, the reasons can be multiple. For example, lack of experience in the area, not understanding the risk or as a result of the country’s specific economic context.

The evolution of the BEPS Plan of Action, the knowledge that the countries have been acquiring about this plan and the creation of the inclusive BEPS framework, which raises 4 minimum standards, have motivated changes in some priorities, with respect to the scenario posed in 2014.

As a result of compiling the conclusions of the regional meetings carried out between the years 2015 and 2017, the following are details of the aspects highlighted by the Latin America and Caribbean countries represented:

Actions 8 to 10 keep receiving the highest priority level, adding Action 13 (reexamining transfer pricing documentation), as a supplementary action to actions 8 to 10 and mandatory for countries integrating the Inclusive Framework. For its part, Action 7 (Preventing the artificial avoidance of the permanent establishment status) has also been classified as a high priority.

With respect to actions 8 to 10, in particular, the following issues have been raised for the countries of the region: low value-added services, reclassification of operations, reporting of cost and expense distribution agreements, APAs; definition, identification and valuation of intangible and utility and applicability of the profit split method and the extractive sector (present value of mines).

Secondly, Actions 1 (addressing the challenges of the digital economy for Taxation), 5 (fighting harmful fiscal practices, taking account of transparency and substance), have been classified as priorities, 6 (preventing the abusive granting of treaty benefits). Regardless of whether this last action is part of the minimum standard, its relevance or the specific weight varies depending on the network of treaties. Action 15 has also maintained the same priority level as action 6. This is reasonable, given that the development of a multilateral instrument that modifies bilateral agreements to avoid abuses is in line with action 6.

Finally, with the lowest level of priority, action 2 is positioned (neutralizing the effects of hybrid mechanisms)-although for the most advanced tax administrations in the region this action takes on greater relevance; and Action 4 (Limiting interest deductions and other financial payments).

Other actions have also been discussed and are of interest to the region. However, the priority level varies according to the country profile and its tax administration.

As regards the follow-up to the BEPS action Plan, countries have requested:

• Develop criteria and procedures to achieve maximum objectivity, equality of conditions and transparency in mechanisms that are implemented to identify and evaluate harmful tax practices (Action 5). For this, it is considered desirable that the countries of the region study more in depth and provide more specific weight to Actions 2 and 6.

• Develop appropriate induction procedures for new members of the BEPS Inclusive Framework, as well as a transition period to reach an effective participation and inclusion of new members of the region.

• Coordinate efforts at the Ibero-American level, in order to promote that the OECD considers the use of the Spanish language as official language in the meetings and documents relating to the BEPS Action Plan.

• To motivate holding international technical meetings in the region by means of a rotating mechanism between member countries. This significantly reduces the costs of the countries in the region to attend meetings.

Among the main challenges expressed by the countries of the region at the time of implementing BEPS, recommendations are the following:

• To have a robust institutional platform, endowed with adequate material resources and human resources trained and dedicated to the BEPS topic.

• To strengthen the capacity of the tax administration to participate effectively in equal conditions to the BEPS initiative and its consistent implementation. There is a significant level of inequality caused by the lack of capacity of developing countries, which in turn are unequal to each other, to study and implement in the terms defined in the MIBEPS minimum standards and the non-participation of some of them in the process of studying, discussing and formulating the recommendations for the BEPS initiative.

• Improve availability and access to information

In addition, some countries have expressed proposals to facilitate the implementation of the BEPS action Plan:

• More and better training and advice programs (transversals), which allow understanding the different issues raised in the BEPS initiative, create well-founded opinions and thus strengthen the perspective of the countries of the region.

• Increase willingness to allocate greater budgetary resources to the control of international tax planning. The need to provide funding for documents to be available in Spanish and for meetings to be interpreted.

• To promote the increase in investment in tax administrations (in technology, trained personnel and access and exchange of information, among others).

• Strengthen regional expert networks to achieve:

• Exchange of good practices and documents
• Achieving consensus
• Discuss widespread concerns, problems or limitations, viewpoints; that can be taken to international spheres.

• Increase the frequency of regional meetings on international taxation and the development of regional meetings on MIBEPS (rotary mechanism).

• Make available a library or documents database in Spanish.

In addition, the countries of the region have raised other aspects. Among them, the financial sufficiency to face the challenges imposed by the BEPS Action Plan and its follow-up, certain problems to promote reforms directly or indirectly linked to the BEPS action plan, the need to improve political dialogue between the different powers of the State, the importance of actions to raise awareness in the stages of formulating and implementing reforms, the need to strengthen the legal infrastructure and revise punitive regimes to motivate a greater and better compliance with tax obligations, greater flexibility in the implementation times of the recommendations, promoting cooperative compliance initiatives, the need to monitor tax incentives, facilitate access to BEPS documents for Countries that are not members of the OECD or the MIBEPS, the need to resolve doubts about the consequences of not implementing or partially implementing the minimum standard, fostering greater cooperation and coordination among regional actors, addressing non-BEPS issues that affect BEPS, such as: Tax code, implementing rules and procedures to know the final beneficiaries (e.g.: identification of shareholders of the country and abroad).

In the context of regional debates, issues of interest have emerged from countries in Latin America and the Caribbean, which have not been discussed within the framework of the BEPS Action Plan or which have been discussed, but would require further debate. Among them, the following are cited:

• Need to retake the debate on the balance and distribution of tax powers (source vs. residence) in the scope of the agreements to avoid double taxation.

• Need to retake research and discussions on alternative systems to the “Arm’s Length Principle”, for the purpose of controlling international operations between related parties.

• The need to advance in the development of guidelines relating to transfer pricing, which are further adjusted to the needs of the region and, in particular, to the characteristics of the most relevant activities that they develop. As an example, it has been proposed to analyze more deeply the so-called “sixth method” for the control of international operations involving “commodities”, which, according to some countries present, would make it possible to reach a market price.  On this particular, it is noted that it is important to analyze this methodology in conjunction with the effect of the “derivative financial instruments”, since the profits of the multinationals, in the cases subject to the sixth method, generally reside in these instruments.

• Need to carry out studies of economic sectors to better know their main characteristics, the way in which they operate, their profitability and the tax burden that have the MNC in the different countries in which they operate. Need to exchange this information. Among the economic sectors considered as most important to study are the mining sector, agriculture, the raw materials and natural products producers in general (banana, coffee, flowers, wood, etc.) and the financial one.

• To evaluate initiatives to promote corporate social responsibility, in relation to tax matters.

More detail on the above can be found in the summaries of regional events on BEPS, available on the CIAT website, www.ciat.org.

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