Law360 Quotes Peter Barnes on OECD Multilateral Treaty

Law360 Tax Authority

The U.S. government's review of a multilateral treaty designed by the Organization for Economic Cooperation and Development to reallocate taxing rights casts further doubt on countries' ability to finalize the document and sign it before the end of the year, according to tax professionals.

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Peter Barnes of Caplin & Drysdale told Law360 that the OECD has done well to detail the mechanics of Amount A in the convention, but he noted that implementing and administering the regime remains extremely complex.

"I think the impression I take away from it is, a salute to the OECD staff, but a recognition that the complexity is quite real," Barnes said.

He said the complexity associated with calculating Amount A liabilities would likely lead to questions about the accuracy of those payments and subsequently raise concerns about how tax authorities would conduct audits under the regime.

It's unclear how other countries would consider the information received from an ultimate parent entity's tax authority, which would be tasked with collecting and distributing most of the Amount A information, Barnes said. He added that the U.S., and the Internal Revenue Service in particular, would be responsible for collecting Amount A information on more than half of the companies subject to the new system, which would account for a majority of the revenue expected from the plan.

"Are they going to just assume that the parent jurisdiction has looked at this and that the numbers are right? Or is the jurisdiction going to say, 'Hey, I need to understand why this is the number,'" Barnes said.

He explained that there are broader political concerns about countries' tax authorities providing Amount A information on companies headquartered within their borders to other jurisdictions, whether the information is from the U.S. or elsewhere.

For countries that may have only one or two companies subject to Amount A, Barnes said, the concern about accuracy could be more significant.

"That is compounded for other countries that may have one or two companies that are probably their biggest and most successful companies; they're national champions," Barnes said. "Are we going to be confident that those tax jurisdictions are being eagle-eyed and reviewing their national champions to be sure that they're determining tax revenue to be sent to other countries?"

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