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Tax Dispute Program Increasing Exchanges With Treaty Partners

Jun. 04, 2019 1:09PM

Bloomberg Law News Jun 16, 2019
Jun 4, 2019

    An international framework for handling disputes between tax authorities is bringing more countries to the table, an IRS official said.

    The Mutual Agreement Procedure program—a dispute resolution process between tax treaty partners—has improved the way countries’ tax competent authorities communicate, and has opened communication with treaty partners that previously didn’t correspond with the Internal Revenue Service, John C. C. Hughes, director of the IRS’s Advance Pricing and Mutual Agreement Program, said.

    The OECD’s base erosion and profit shifting initiative addresses barriers that prevent treaty-related tax disputes from being resolved in a timely manner, through BEPS Action 14, which includes a set of minimum standards that will be peer-reviewed by other countries.

    “Action 14 has affected the relationships sometimes in ways that are not visible. In our experience, it’s certainly preferable to meet face to face with our treaty partners, especially in places where language is an issue,” Hughes said June 4 at a conference in Washington sponsored by the Organization for Economic Cooperation and Development.

    Countries are more aware of the importance of the MAP process, and it’s much easier to set up meetings with other authorities, which is making a difference, said Harry Roodbeen, director of international tax and consumer tax at the Ministry of Finance in the Netherlands.

    The U.S. averages 24 months to resolve a dispute through MAP, which could lead to a substantial backlog of cases, speakers said. “It’s staggering that even at 24 months for resolution you’d have accumulation of cases to the end of time,” said Elizabeth J. Stevens, an associate at Caplin & Drysdale Chartered.

    To contact the reporter on this story: Siri Bulusu in Washington at sbulusu@bloombergtax.com

    To contact the editors responsible for this story: Meg Shreve at mshreve@bloombergtax.com; Kathy Larsen at klarsen@bloombergtax.com

    Siri Bulusu

    Reporter