Confusion persists around OECD tax proposals

Tax experts say new guidance from the economic think-tank on how its BEPS project specifically impacts private funds doesn’t contain much substance.

The Organization for Economic Co-operation and Development (OECD) is still unclear about how its highly-anticipated tax proposals will impact private fund managers, according to tax experts.

The discussion draft, which was published late last month, forms part of the think-tank’s base erosion and profit shifting (BEPS) project and will act as the blueprint for how the G20 group of rich nations will tackle tax avoidance.

The aim of the draft was to address concerns that the BEPS project would negatively impact private fund managers. Specifically, the private funds community had been worried that the OECD’s proposals may prevent GPs from domiciling funds and holding vehicles in certain jurisdictions, like Luxembourg or the Netherlands, which feature extensive networks of double tax treaties.

Yet, tax experts speaking to pfm say the OECD “doesn’t have a good grasp of how its proposals are creating problems” for fund managers.

“They are aware this is an area where people have voiced doubts and that is why they are trying to follow up on the issue,” said one UK-based tax lawyer. “But the alarming thing is that they do seem to be not even at the stage where they are aware what the issues are.”

However, the tax experts says it is not all doom and gloom for private fund managers yet as the OECD is asking for feedback on the discussion draft.

“The door has been left open still for the industry to make representations but that is about the best we can say. They [OECD] haven’t made any decisions at all which I suppose in itself is good news,” added a second UK lawyer.

The OECD is soliciting comments until January 9, 2015.