By: Trans World Compliance
As acknowledged by the G20 leaders, maintaining and strengthening tax certainty is essential to supporting investment, employment, and economic expansion. Despite enormous efforts being made by tax administrations and taxpayers to advance the tax certainty agenda in the face of the economic repercussions of a pandemic, this is a particularly significant and difficult objective.
Tax Certainty Day, now in its fourth edition, is part of the OECD Forum on Tax Administration’s effort to achieve one of its primary objectives: the improvement of tax certainty. The event, held on the November 2022, provided tax policymakers, tax administrations, business representatives, and other stakeholders with an opportunity to assess the tax certainty agenda and strive toward additional improvements in dispute prevention and resolution.
The OECD provided the most recent Mutual Agreement Procedure (MAP) figures, which encompass 127 jurisdictions and nearly all MAP cases globally. These statistics are a component of the BEPS Action 14 Minimum Standard and the broader G20/OECD tax certainty agenda, which aims to enhance the efficacy and timeliness of tax-related dispute resolution systems.
What do the 2021 MAP Statistics show?
Significantly more MAP cases were closed in 2021
In 2021, over 13% more MAP cases were closed than in 2020, with transfer pricing cases (+22%) and other cases (nearly +7%) closing at much higher rates than in 2020. The competent authorities were able to close more cases in 2021 as a result of the increased utilization of virtual meetings, the prioritizing of easier cases, and the increased coordination to resolve common concerns that could be applied to many MAP cases. In addition, the jurisdictions reported that additions in staff and the experience of this staff are now reflected in their capacity to settle more cases.
Fewer new cases in 2021
Compared to 2020, the number of new MAP cases opened in 2021 fell (nearly -3%) (see trends since 2016). This is due to a considerable decline in the number of new transfer pricing cases launched (almost -10.5%), while the number of other cases opened grew (nearly +4%) compared to 2020.
Outcomes remain generally positive
In 2021, approximately 75% of MAPs will have fully fixed the issue for both transfer pricing and other cases (compared to 76% for transfer pricing and 74% for other situations in 2020). Approximately 2% of MAP cases were resolved without an agreement, a decrease from the 3% rate in 2020.
Cases still take a long time
MAP cases resolved in 2021 took an average of 32 months for transfer pricing cases (compared to 35 months in 2020) and around 21 months for other cases (18.5 months in 2020). Some countries encountered delays, particularly for more difficult cases, and the COVID-19 problem negatively impacted the quality of their communication with certain treaty partners.
Competent authorities have continued to adapt
Throughout the duration of the pandemic, MAP remained accessible due to the efforts taken by the authorized authorities. Particularly towards the end of 2021, jurisdictions observed an upsurge in MAP interaction with treaty partners. In addition, while jurisdictions welcomed the return of face-to-face sessions, the sustained use of virtual meetings has enabled the advancement of individual cases in the time between face-to-face meetings. Numerous jurisdictions continue to utilize this hybrid method to expedite MAP resolutions and enhance the efficiency and efficacy of their MAP programs.
The 2021 MAP Awards were also delivered on Tax Certainty Day. These awards recognize the efforts of competent authorities.
OECD releases new mutual agreement procedure statistics and country awards on the resolution of international tax disputes - OECD. (n.d.). https://www.oecd.org/tax/dispute/oecd-releases-new-mutual-agreement-procedure-statistics-and-country-awards-on-the-resolution-of-international-tax-disputes.htm