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OECD Publishes Mutual Agreement Procedure Statistics

OECD Publishes Mutual Agreement Procedure Statistics

Statistics aimed at monitoring compliance with BEPS-driven minimum standards on MAP have been published by the OECD.


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The final BEPS report on Action 14 (Making Dispute Resolutions More Effective) included a minimum standard requiring jurisdictions to seek to resolve mutual agreement procedure (MAP) claims within 24 months. Members of the Inclusive Framework on BEPS (including the UK) committed to report their MAP statistics under an agreed reporting framework in order to monitor compliance. The first report under the new methodology provides some encouragement for the future of MAP, with an overall drop in the inventory of cases over 2016, and 25 percent of new cases started within 2016 already resolved by the end of the year.  However it is probably too early to tell how the changes to the OECD Transfer Pricing Guidelines emerging from the BEPS initiative will affect the number of disputes. And on a less positive note, transfer pricing cases took an average of 30 months to resolve.

The OECD statistics now cover a larger number of reporting jurisdictions, and use modified counting rules. As a member of the Inclusive Framework on BEPS, HMRC published their statistics in September 2017 after a gap of three years (although the statistics used in this report relate to a slightly different reporting period). Whilst the total caseload reported by the OECD has declined over the period, the UK figures show an increase.

The commentary also notes that 85 percent of MAP cases resolved the issue at hand (whether through unilateral or bilateral action). 5 percent were withdrawn by the taxpayer and 10 percent were left unresolved. Further actions undertaken by the OECD, EU and individual tax authorities, including HMRC, should improve this last statistic, as arbitration mechanisms start to have more of an effect.

The OECD has divided MAP cases between ‘attribution/allocation’ cases (also referred to as transfer pricing cases) and all other cases. Whilst the average time for other cases to be resolved is 17 months, the average time for transfer pricing cases remains stubbornly high, reflecting the complexity of the issues involved.  But it is very interesting to note that some cases are resolved very quickly.  Specifically, the OECD note that of the 25 percent of new cases in 2016 that were resolved within the year, the average time to resolve them was 2.5 months for transfer pricing cases, and 1.5 months for other cases. This should encourage taxpayers with relatively straightforward transfer pricing adjustments to use MAP to resolve the associated double taxation.

Whilst the transfer pricing-related BEPS final paper on Actions 8-10 published in October 2015 may have had some impact in the year, it is far more likely that its main impact will start to flow through in 2017, or maybe even 2018. There is a significant time lag between the raising of a domestic enquiry and an ultimate application for MAP. There will therefore be a combination of upward and downward pressures on the MAP statistics in the coming years. The expected increase in focus on transfer pricing, post-BEPS (as evidenced, for example, by HMRC’s 90 percent increase in transfer pricing assessments in 2016/17), will drive the number of enquiries and adjustments, and therefore create a greater need for MAP. Meanwhile the differing interpretations of the BEPS transfer pricing guidance changes by tax administrations may make MAP discussions more difficult. But the Action 14 work by the OECD, and the adoption of binding arbitration under the Multilateral Instrument by a significant number of countries, should mitigate these pressures to an extent, such that while inventories of cases may increase, the average time to resolve them should start to fall. The work of the EU on expanding the scope and increasing the effectiveness of the EU Arbitration Convention through a Directive should also help with this. MAP will therefore continue to be a very effective tool for taxpayers seeking relief from double taxation.

To view the final BEPS report on Action 14 (Making Dispute Resolutions More Effective), click here.

For further information please contact:

Peter Steeds

Paul Fields

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