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Countries Make Progress on Dispute Resolution Procedures

20th April 2022

As anyone who has ever been to tax court knows, no one benefits from long, drawn-out tax disputes. So, the OECD has made improving dispute resolution an integral part of the BEPS initiative. The organization has determined a minimum tax-resolution standard, which ensures that taxpayers in countries under treaties can access the mutual agreement procedures (MAP)basically tax dispute mediationand that those cases are resolved in a timely manner. How do you ensure that countries are living up to that bare minimum status? Not surprisingly, the OECD has a process for that, too. A Stage 1 peer review calls out countries that are not meeting the standard, while a Stage 2 peer review evaluates the progress that these countries have made since being called out on the rug.  

Last week, the OECD released the latest results of the Stage 2 peer review for Andorra, Bahamas, British Virgin Islands, Cayman Islands, Faroe Islands, Macau (China), Morocco, and Tunisia. The results? Mostly good news—every country appears to have made progress, though some have made more than others. The multilateral instrument was signed by Morocco and Tunisia—an admirable first step that was topped by Andorra, which has both signed and ratified it. Other bilateral negotiations are taking place, as well. The Bahamas, Bermuda, British Virgin Islands, Cayman Islands, Faroe Islands, Macau (China), Morocco, and Tunisia have documented a bilateral notification process, which goes into effect when a competent authority raises a tax issue. The average time to close a MAP dispute is 24 months, and the Faroe Islands closed MAP cases within that timeframe, but the others have had no MAP experience. Bermuda, Faroe Islands, Macau, Morocco, and Tunisia have all issued or updated MAP guidance, so while tax issues may still be debatable, no one can dispute that these jurisdictions are making it easier to resolve them.