OECD as a standard-setting organization: questions remain on cultural acceptance.

• Author: Bennett, Mary
• Position: The Organisation for Economic Co-operation and Development's Base Erosion and Profit Shifting Final Report, part 2

With the release of the OECD's BEPS final report, it's an appropriate time to consider how the BEPS Project has affected the role of the OECD as a standard-setter in international tax and how that role is likely to evolve in the future.

The OECD itself has been understandably effusive about the significance of the work undertaken and completed in the BEPS Project and the extent to which it has played out on a global stage. Upon releasing the final BEPS reports on October 5, 2015, OECD Secretary-General Angel Gurria said: "The measures we are presenting today represent the most fundamental changes to international tax rules in almost a century: They will put an end to double non-taxation, facilitate a better alignment of taxation with economic activity and value creation, and when fully implemented, these measures will render BEPS-inspired tax planning structures ineffective." The explanatory statement accompanying the reports stated: "The level of interest and participation in the work has been unprecedented, with more than sixty countries directly involved in the technical groups and many more participating in shaping the outcomes through regional structured dialogues."

Whether the BEPS Project will have the fundamental, global impact on international tax rules hoped for by its participants remains to be seen. The project has definitely brought into focus, however, some challenges inherent in being an effective international tax standard-setter in today's world.

OECD's Traditional Role as a Standard-Setter

When viewed historically, there is no question but that the OECD has had a profound impact on those aspects of international tax law for which it has sought to establish standards. The prime examples of that influence have traditionally been its international tax standard-setting instruments, the Model Tax Convention and the Transfer Pricing Guidelines.

When the Model was first developed more than fifty years ago, only a few dozen bilateral tax treaties were in force around the globe, and no single model treaty text or commentaries had achieved widespread consensus. Today, that network has grown to well over 3,000 double tax treaties in force, and their text is based mainly on the OECD Model.

While the UN Model Tax Convention is also, of course, the source for many of the provisions appearing in that network of treaties, it is fair to say that a large proportion of the text of that Model is drawn from the OECD Model. The Commentaries on the OECD Model have been cited as persuasive interpretive guidance by courts in virtually every OECD member country and in a large and growing number of non-OECD jurisdictions. Significant portions of those OECD Commentaries have also been incorporated into the UN Model, giving them further currency. As such, the OECD Model has been broadly successful in achieving the objective set out in its introduction, namely providing "a means of settling on a uniform basis the most common problems that arise in the field of international juridical double taxation."

Likewise, as described in the Commentary on Article 9 (Associated Enterprises) of the OECD Model, the OECD's document entitled Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (TPG) "represents internationally agreed principles and provides guidelines for the application of the arm's length principle of which the Article is the authoritative statement." Here, too, the TPG have had enormous influence on the development of transfer pricing law and practice across the globe. While only a handful of countries had transfer pricing rules in place twenty years ago when the modern version of the TPG was first published, that number has now climbed to well over one...