On July 19, the Organisation for Econo- mic Cooperation and Development (OECD) released its Action Plan on Base Erosion and Profit Shifting (BEPS).

The intention of the action plan is to close tax gaps which the OECD believes are the result of national tax laws not having kept pace with the globalisation of corporations and the digital economy, which is being used by multinational corporations to reduce their tax liability.

According to the OECD, the BEPS offers a global roadmap for governments to collect the tax revenues they need to serve their citizens and to provide businesses with the certainty they need to invest and grow.

The BEPS identifies the actions that will give governments domestic and international instruments to prevent multinational corporations from paying few or low taxes. The 15 actions are addressing the tax challenges of the digital economy; neutralising the effects of hybrid mismatch arrangements; strengthening the controlled foreign company; limiting base erosion through interest deductions and other financial payments; countering harmful tax practices more effectively, taking into account transparency and substance; preventing treaty abuse; preventing the artificial avoidance of permanent establishment status; ensuring that transfer pricing outcomes are in line with value creation intangibles, risks and capital and other high-risk transactions; establishing methodologies to collect and analyse data on BEPS and the actions to address it; requiring taxpayers to disclose their aggressive tax planning arrangements; re-examining transfer pricing documentation; making dispute resolution mechanisms more effective; and developing a multilateral instrument.

The BEPS contains an annexure comprising an overview and timelines that provide for the action description, the expected output and the deadline. These actions are expected to be delivered in the next 18 to 24 months by the joint OECD/Group of 20 (G20) BEPS Project, which involves all OECD members and G20 countries to ensure that the actions are implemented quickly. A multilateral instrument will also be developed for interested countries to amend their existing bilateral treaties.

The OECD believes that the action plan marks a turning point in the history of international tax cooperation in that it will allow coun- tries to draft coordinated comprehensive and transparent standards required to prevent base erosion and profit shifting. According to the OECD, international tax rules, many of which date from the 1920s, ensure that businesses do not pay taxes in two countries – in other words, that they avoid double taxation. These rules are now being abused to permit double nontaxation. In addition, the action plan recognises the importance of addressing the digital economy, which offers a borderless world of products and services that often do not fall within the tax regime of any country, leaving loopholes that allow profits to go untaxed.

TDCA Safeguard Guidelines Republished
In last week’s column, I informed of the publication of a Government Gazette notice on July 19 pertaining to the International Trade Admini- stration Commission of South Africa’s (Itac’s) guidelines and conditions with respect to an agricultural safeguard application in terms of Article 16 of the Trade, Development and Cooperation Agreement (TDCA) between the European Community and its member States and South Africa. Since the notice contained only the first page of the application form, it was republished on July 26.

Frozen Potato Chips
Through a notice in the Government Gazette of July 26, Itac extended an invitation to a public-interest hearing in the investigation for remedial action in the form of a safeguard against the increased imports of frozen potato chips. You will recall that frozen imported potato chips classifiable under tariff subheading 2004.10.90 are currently subject to an antidumping investigation (unfair trade remedy) and a safeguard (fair trade remedy) investigation.

The public hearing is scheduled for 10:00 on September 4. Those who wish to attend and make oral representations to the commission on public interest should indicate their intention on or before 15:00 on August 21.

Unframed Glass Mirrors Dumping Duty
On July 26, the South African Revenue Service (Sars) informed of the imposition of an antidumping duty (final duty) on unframed glass mirrors of a thickness of 2 mm or more but not exceeding 6 mm, classifiable under tariff subheading 7009.91, originating in or imported from the People’s Republic of China. (The imposition of the antidumping duty is indicative of the fact that the antidumping investigation was not contested by the Chinese exporters.) The provisional payment was imposed on March 8. The antidumping item is 213.03/7009.91/03.06 and the rate of antidumping duty is 40.22%.

Customs Valuation Opinion
On July 25, the World Customs Organisation (WCO) informed of the publication of a new advisory opinion of the technical committee on customs valuation. Advisory Opinion 4.15 provides guidance in a case where royalties have been paid to a third-party licensor (in other words, the licensor is not the seller of the goods) and determines whether or not it is appropriate to include the royalty fee in the customs value of the imported goods.

WTO Statistics Database
The World Trade Organisation (WTO) informed on July 25 that it had updated its statistics database, which now includes 2012 statistics on global exports and imports of merchandise and commercial services. According to the WTO, the data is available by country and by country grouping. The next update of the database will be in the second week of August.

Draft Taxation Laws Amendment Bill
Comments on the Draft Taxation Laws Amendment Bill and Tax Administration Laws Amendment Bill were due by August 5. The proposed amendments include a beneficial tax regime for companies to locate in special economic zones, revitalisation of the marine sector, requiring foreign ecommerce suppliers to register for value-added tax in order to ensure that they compete on an equal footing with local ecommerce suppliers and streamlining the research and development tax incentive.