If you haven't been paying attention to what's been going on in the global tax environment, you may want to start by paying particular attention to the latest trends with MAPs and BEPS, according to Mike Danilack, principal tax expert at PwC.
MAPs (Mutual Agreement Procedures), as you may know, are the international mechanism that competent authorities in government use to negotiate and resolve tax disputes between countries. BEPS (for Base Erosion and Profit Shifting) is a project launched by the Organization for Economic Cooperation and Development (OECD) and G-20 last year in an effort "to provide governments with clear international solutions for fighting corporate tax planning strategies that exploit gaps and loopholes of the current system to artificially shift profits to locations where they are subject to more favorable tax treatment."
The two programs are in the spotlight, as a growing number of what Danilack considers "aggressive tax audits on multinational companies conducted in a variety of different countries" has increased OECD MAP inventories by 94% from 2006 to 2013.
Though the trend of increasing tax audits began in 2006, the BEPS project seems to have exacerbated it. "It seems that mere existence of the BEPS project, the mere fact that these issues are being talked about, has encouraged audit activity as countries begin to focus on the fact that the international rules are perhaps not where they should be," Danilack explained in a recent PwC webcast.
At the same time, BEPS Action 14 dovetails with efforts to wrestle with challenges to MAPs, to make dispute resolution mechanisms more effective. A draft resolution was released last December.
Meanwhile the U.S. also has stepped up efforts to review tax planning strategies of several U.S. multinational corporations, including a focus on so-called "inversion" transactions, in which domestic corporations become foreign corporations through mergers, and transactions in which intellectual property is transferred to offshore subsidiaries.