The OECD's BEPS project was no mean feat but the real challenge now is implementation as BEPS Phase 2 kicks in, considering the complexity ahead and the different weight the various Actions carry. Some are an agreement to a minimum standard such as a commitment to implementing country-by-country reporting (CBCR) and improved dispute resolution; some require changes to existing rules (Model Treaty and the Transfer Pricing Guidelines); some call for common approaches (hybrid mismatches and interest deductions); others represent best practice - relating to controlled foreign company (CFC) rules or disclosure of tax planning; and one is an agreement to further research the effect of the digital economy. There are two clear risks - countries could now act unilaterally, as in the case of the UK's diverted profits tax rules, or they might start to back off and cherry pick only what suits them when faced with the potential downsides for their home-based multinationals or their tax base. Either approach would lead to increased complexity and uncertainty in international taxation, more disputes and loss of faith in the whole process.
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