The OECD's International Compliance Assurance Programme

14/8/2020 The OECD’s International Compliance Assurance Programme
May 30, 2020

PRACTICE POINT
The OECD’s International Compliance

Assurance Programme
By Kun-Chol Kim, S.J.D. Candidate, University of Florida Levin College of Law, Gainesville, FL
Share this:
   
I. Introduction
Cooperative compliance, a model that emerged in 2008,1 aims to improve

taxpayer service and tax compliance by requiring transparency in exchange for
certainty.2 The model requires taxpayers to demonstrate how they handle
transactions and tax risks; in return, it requires tax administrations to provide
early certainty as to how it will treat those tax risks.3 The United States also
introduced a Compliance Assurance Process (CAP) in 2005, beginning as a pilot
and made permanent in 2011.4 The CAP allows the IRS and taxpayers to work
together prior to the tax return and provides an “acceptable” level of assurance.5
According to the OECD, the cooperative compliance model is built on seven

pillars: transparency, disclosure, commercial awareness, impartiality,
proportionality, openness, and responsiveness.6 These pillars require tax
administrations to be impartial and to understand the commercial drivers, and to
impose disclosure and transparency obligations on taxpayers. Without this
mutual understanding and cooperation between taxpayer and tax
administration, any cooperative compliance model could not succeed.
The OECD Forum on Tax Administrations (FTA)7 introduced a new cooperative

compliance model, the international compliance assurance programme (ICAP)
pilot in January 2018 to provide increased tax certainty to multinational
https://www.americanbar.org/groups/taxation/publications/abataxtimes_home/20may/20may-pp-kim-oecd-icap/ 1/20
enterprises (MNEs) through multilateral cooperative risk assessment and

assurance processes by requiring MNEs to engage in a fully transparent manner.8
The ICAP is a voluntary program in which eight FTA member tax administrations
participated in the first phase (ICAP 1.0).9 The second phase (ICAP 2.0) began on
March 28, 2019 with 17 FTA participants.10 This phase is open to other countries
and MNEs to join.11
Transfer pricing and permanent establishment risks12 were the two main
international tax risks covered by ICAP 1.0, but ICAP 2.0 covers a wider range of
risks, including hybrid mismatch arrangements and withholding taxes.13 The
OECD states that ICAP can cover a broad spectrum of international and cross-
border risks most effectively when it is targeted to the risks that are a concern to
all involved tax administrations.14
Although still in a pilot stage, it seems clear that the two main objectives of ICAP
are (i) providing effective tax assurance by facilitating cooperation between tax
authorities and MNEs and (ii) reducing the mutual agreement procedures (MAP)
inventory by providing such tax assurance. The question is whether ICAP can
satisfy these objectives.
II. Overview of ICAP
A. ICAP’s Six Drivers and its Anticipated Benefits
In Handbook 1.0, the OECD identified the four anticipated benefits15 and the six
drivers behind the development of the ICAP risk assessment process. The ICAP
drivers are intended to (i) create an environment where tax administrations can
work together to use effectively information contained in an MNE group’s CbC
report (CbCR)16 and master file for better and more standardized information for
transfer pricing risk assessment; (ii) supplement and support the MAP to prevent
unnecessary disputes and limit MAP inventory growth; (iii) bring initiatives and
standards together as identified in best practices–areas of cooperative

compliance, joint audits, and risk management–and explore new approaches for
MNE compliance frameworks for multilateral tax risk assessment and assurance;
(iv) advance international collaboration; (v) provide a pathway to improved tax
certainty for low-or medium-risk MNE groups; and (vi) capitalize on the
multilateral context to provide improved assurance for tax
administrations.17 These can be summarized into two main objectives: to provide
effective tax assurance by facilitating cooperation between tax authorities and
MNEs, and to reduce the MAP inventory.
B. The ICAP Risk Assessment Process
In March 2019, the OECD released the second phase ICAP Handbook (Handbook
2.0) which updated the risk assessment process based on the first phase
pilot.18 Previously, the ICAP 1.0 risk assessment process required an MNE and tax
administrations to hold a “pre-risk assessment workshop” to discuss the contents
of the document before the risk assessment.19 After the pre-assessment
workshop and kick-off meetings, the tax administrations performed a Level 1 risk
assessment for 8 weeks, and in this phase, the participating tax administrations
conducted a joint workshop to review relevant information such as the CbCR, tax
filing history, tax returns, financial statements, ownership and group structure,
rulings, and publicly available information.20 If the tax administrations
determined that the risk was low or there was no risk, an assurance letter was
issued. If tax administrations were unable to conclude that the risk was low or
there was no risk, additional assessments were conducted through the Level 2
risk assessment, which generally required more information and clarification of
certain tax information.21 The entire process including the Level 2 assessment
took less than 40 weeks.22
ICAP 2.0 offers a revised four-stage process.23 During Stage I (pre-entry), an MNE
is required to provide any documentation “beyond basic information” to the
ultimate parent entity’s (UPE’s) tax administration. The documentation must
include high-level information of jurisdictions where most of the UPE’s global

revenue is raised, where key activities are undertaken, and any covered risks it
proposes to be included in its ICAP risk assessment in addition to transfer pricing
risk.24 During Stage II (scoping), tax administrations review a summary of all of
the MNE’s relevant transactions, and the MNE is required to provide a scoping
documentation package.25
Once Stage II is completed, each of the relevant tax administrations works from
the same documentation package as they discuss their findings on risk
assessment and issue resolution (Stage III).26 When the assessment is complete,
the MNE receives a completion letter providing the outcome (Stage IV).27 The
ICAP 2.0 risk assessment process also takes less than 40 weeks.28
C. Eligibility
Neither Handbook 1.0 nor 2.0 specifically identifies requirements for participation
in the program. Because ICAP uses the CbCR for risk assessment, however, it
seems only those MNEs that are subject to CbC reporting are eligible to
participate, and (as noted) the BEPS Action Item 13 requires only MNEs with
revenues of €750 million or more to file a CbCR.29
III. Analysis of the Two Main ICAP Objectives
A. ICAP as a Tax Assurance Method
As noted above, the first key objective of ICAP is to provide tax assurance by
facilitating cooperation between tax authorities and MNEs. Considering the
voluntary nature of ICAP and the resources that MNEs need to use, the question
is whether ICAP provides sufficient tax assurance to attract MNEs.
i. APA-Type Assurance with Lower-Level Legal Certainty
ICAP is a pre-audit “multilateral cooperative risk assessment and assurance

process,” which is designed to provide MNEs with “increased tax certainty” with
respect to certain of their activities and transactions.30 Both ICAP and advance
pricing agreements (APAs) provide similar tax assurance, except that an APA
applies only to transfer pricing while ICAP covers a wide range of risks that
include transfer pricing.
An APA is a pre-dispute administrative approach that aims to prevent transfer

pricing disputes arising from applying the arm’s length principle to
transactions.31 The APA process attempts to facilitate principled, practical and
cooperative negotiations to (i) resolve transfer pricing issues prospectively, (ii) use
the resources of the taxpayer and the tax administration more efficiently, and (iii)
provide a measure of predictability for the taxpayer.32 Therefore, the key
similarity between ICAP and APA is that both provide assurance and certainty at a
pre-dispute and pre-audit stage.
The OECD explains that an APA is intended to “supplement” rather than replace
the traditional judicial and treaty mechanisms for transfer pricing dispute
resolution.33 Also, while an APA is an “agreement,” it remains questionable
whether courts would treat it as a “binding contract.” In the 2013 Eaton Corp. case,
petitioner contended that contract law must be applied to interpret agreements
between the Commissioner and taxpayers because respondent represented that
APAs are “binding contracts.”34 The court held that the legal effect of the APA at
issue was governed by applicable revenue procedures:35 because those revenue
procedures grant respondent the discretion to cancel the APAs at issue in certain
circumstances, general contract law principles do not apply to APAs.36 Although
the case was reconsidered in 2017 and the court then concluded that the IRS had
abused its discretion in cancelling the APAs,37 it remains unclear from the
taxpayer’s perspective how APAs are viewed. Although an APA provides certainty,
there remains the possibility that an APA could be cancelled at the tax
administration’s discretion if the tax administration finds that a taxpayer’s activity
does not comply with the procedures. Nonetheless, because the revenue
procedure requirements are reasonable and not overly complex,38 an APA still
remains an attractive tool from the taxpayer’s perspective.
On the other hand, while an APA could provide a satisfactory level of taxpayer
assurance, the level of assurance ICAP provides is much lower. The OECD states in
Handbook 1.0 that ICAP does not “provide an MNE group with legal certainty as
may be achieved, for example, through an advance pricing agreement, but gives
assurance where tax administrations participating in the programme consider a
risk to be low.”39
Figure 1
Figure 1: Level of Certainty40
The Handbook 1.0 chart shows that ICAP only provides a “comfort” level of
certainty, much lower than the certainty that an APA provides. The APA provides
certainty with respect to specific transactions, but the scope of ICAP is broader
and could also extend to transactions with jurisdictions that do not participate in
the program.41 Even if ICAP itself may not provide satisfactory assurance to an
MNE, it may be used to supplement other tools, such as a domestic tax audit, an
APA, and MAP, to improve tax certainty both unilaterally and
multilaterally.42 Thus, ICAP could improve consistency between tax
administrations in the interpretation and treatment of transactions.43 This also
enables tax administrations to conduct a more effective and faster audit or
evaluation of a case.44
ii. ICAP as Tax Assurance from a Corporate Perspective
In sum, ICAP is a pre-audit, APA-type tax assurance program that provides a

“comfort” level of assurance. This level of assurance is lower than an APA or other
similar tool provides, but it covers a wider range of risks than those tools and
could be useful to supplement other tools such as APA and MAP. Considering the
voluntary nature of ICAP, the program is likely to struggle to achieve its objectives
without the participation of MNEs. For this reason, it is important to assess ICAP
from a corporate perspective. Two main considerations apply: (i) the level of
certainty it provides and (ii) time and cost weighed against its effectiveness.
Because ICAP requires multiple meetings and negotiations with tax

administrations and preparation of multiple documents, an MNE will have to use
its resources to support the process. In spite of the assurance it provides, it
remains questionable whether a company would be willing to use its resources
without gaining legal certainty. It could be argued that the ICAP cost could be
lower than dealing with multiple audits, but this is a difficult argument when the
extent of assurance provided is uncertain. If the assurance were rejected by all
relevant tax administrations, the MNE could still be subjected to multiple audit
costs. Moreover, it remains highly uncertain how much assistance ICAP will
provide as a complement to other tools.
In conclusion, it seems that the ICAP needs to offer more than it currently offers
to succeed. Perhaps the OECD could consider ways to provide an increased level
of certainty comparable to that provided by APAs for specified transactions and a

lower level of certainty for unspecified transactions.
B. ICAP as a Pre-Dispute Resolution Mechanism
The second key objective of ICAP is to effectively reduce unnecessary MAP

inventory. Due to criticisms of MAP effectiveness, the OECD attempted to
improve MAP through multiple updates and BEPS Action Item 14.
i. Overview of the MAP
MAP is the most common bilateral solution available for a cross-border tax
dispute,45 currently adopted in most bilateral tax treaties (BTT).46 MAP is a
negotiation process for a settlement between two countries rather than a judicial
proceeding: although the designated representatives (i.e. competent authority) of
the contracting states are obligated to “negotiate”, they are not obligated to
“achieve results.” Thus, if the competent authorities fail to reach an agreement
within the allotted time frame, the case is likely to remain unresolved. Some BTTs
contain an arbitration clause, either in a mandatory or optional form, to allow
unresolved MAP cases to be submitted to arbitration. While that guarantees a
resolution, only 178 (as of 2017) out of over 3,000 BTTs contain such a
clause.47 Only about ten cases were submitted to arbitration in the entire MAP
history in the U.S.
In October 2018, the OECD released statistics on the 2017 MAP indicating that
2,076 cases were filed on or after 1 January 2017. The number of all cases filed
increased by almost 39% between 2016 and 2017, from 1,496 to 2,076.48 2,745 cases
are reported as complete, with 84% of the MAP cases resolved.49 That means that
about 16% of the MAP cases likely remain unresolved.
Several amendments, also through BEPS Action Item 14,50 have also been made to
the MAP provision in model tax conventions, but the core MAP issues remain. To
address base erosion and profit shifting or double non-taxation, the OECD and
G20 countries selected a “15-point Action Plan” in 2013, with final reports
published in October 2015.51 Action Item 14 is a unique item focused on resolving
double taxation by improving MAP. Item 14 aims to “to develop solutions to
address obstacles that prevent countries from [re]solving treaty-related disputes
under MAP, including the absence of arbitration provisions in most treaties and
the fact that access to MAP and arbitration may be denied in certain cases.”52
Action 14 is comprised of two parts: (i) minimum standard, best practices and
monitoring processes and (ii) a commitment to mandatory and binding MAP
arbitration. Although it is mandatory for member countries to implement the
minimum standard and be regularly monitored, with reporting to the G20
Committee on Fiscal Affairs, the adoption of best practices remains optional.53
The minimum standard is comprised of three specific standards that require

member countries to:
1 Ensure that treaty obligations related to MAP are fully implemented in good
faith and that MAP cases are resolved in a timely manner;
2 Ensure the implementation of administrative processes that promote the

prevention and timely resolution of treaty-related disputes; and
3 Ensure that taxpayers can access MAP when eligible.54
Each specific standard provides several guaranteed measures. The first standard
(item (1), above) guarantees seven measures to taxpayers: (i) inclusion of modified
Article 25(1) through Article 25(3) and access to transfer pricing cases; (ii) access
for cases involving a domestic or treaty anti-abuse rule; (iii) resolution of MAP
cases within an average timeframe of 24 months; (iv) mandatory membership in
the FTA MAP Forum; (v) timely and complete MAP statistics following the new
prescribed reporting framework; (vi) peer-review of compliance with the
minimum standards; and (vii) transparency in respect of positions on MAP

arbitration.55
The second standard also guarantees seven measures: (i) publication of clear
rules, guidelines and procedures on MAPs and ensure publication, availability; (ii)
publication of country MAP profiles; (iii) certainty of the MAP function that is not
dependent on the audit function or state tax policy; (iv) remuneration not based
on collections; (v) certainty on adequate resource; (vi) clarification on domestic
audit settlements that do not preclude access to a MAP; and (vii) roll-back of APAs
in appropriate cases where there are APA programs.56
Finally, the third standard guarantees three measures: (i) access to both
competent authorities in a MAP either through an amendment of Article 25(1) or
through a bilateral notification or consultation process where one competent
authority feels a case is not justified for MAP; (ii) identification of the documents
required for a MAP request in the MAP guidance; and (iii) inclusion in the treaty of
the possibility of a MAP irrespective of domestic time limits.57
Although Action Item 14 contains detailed and lengthy obligations, the core MAP
issues remained unresolved as the mandatory three-point minimum standards
ensure nothing more than what the Model Treaty provided by using vague
language such as “in good faith” and “average timeframe.”58
Figure 2
Figure 2: The OECD MAP Statistics 2017, United States59
In terms of cases filed for the MAP, the statistics (set out in Figure 2) show that 795
MAP cases were filed in the United States before January 1, 2016, of which 574
cases or 72% were transfer pricing cases.60 Similarly, of the 182 U.S. MAP cases
started from January 1, 2016, 135 cases or 74% are transfer pricing cases.61
ii. ICAP to Reduce MAP Inventory
The high percentage of MAP transfer-pricing cases suggests that MNEs would
rather utilize an APA to prevent transfer pricing disputes. ICAP would only be
needed for the remaining 30% of MAP cases. Accordingly, the question is whether
ICAP has a real potential to effectively reduce the number of non-transfer pricing
MAP cases.
ICAP cannot be successful without MNEs’ active participation because it is

voluntary. Because it only provides a “comfort” level of assurance, it is unclear
how much protection it provides. The Handbook indicates that ICAP can serve as
a supplement to other tools such as MAP, APA, and domestic tax audit, but
without clarification about the protection ICAP can provide, it would not be an
attractive tool for MNEs. Moreover, because ICAP provides a lower level of
assurance than APA and other similar tools, there is a real possibility that a tax
administration would withdraw that assurance. If that occurs, a MAP dispute will
inevitably be filed.
In sum, the current ICAP form does not appear to effectively reduce MAP
inventory.
IV. Conclusion
Cross-border tax dispute resolution has always been a major problem for the
international tax regime as there is no single multilateral mechanism that
guarantees a final and binding decision. The MAP, which is the most common
bilateral solution available, remains unsatisfactory despite numerous updates,
including BEPS Action Item 14.
Pre-dispute resolution tools such as ICAP and APA could be a valuable tool for
corporations since pre-agreed tax consequences allows planning business
actions more effectively based on anticipated tax liabilities and minimizes costly
and time-consuming potential tax disputes. Nonetheless, pre-dispute resolution
tools have their own limits, as shown by this analysis of ICAP. Although ICAP has
potential as a multilateral pre-audit tax assurance tool, its success requires
clarification about the “comfort” level of assurance provided to MNEs and the
degree of protection assured. It is unlikely that MNEs will utilize a years-long
process without foreseeing a substantial result in certainty. Because more than
70% of the MAP cases involve transfer pricing for which APAs currently provide
greater certainty, ICAP will not be likely to reduce MAP inventory. It is unlikely that
MNEs will choose a tool that provides a lower level of assurance than an APA.
Moving forward, the “level of assurance” should be the key word for ICAP 3.0. ■
Annex 1: Risk Assessment Process
I. Risk Assessment Process Under ICAP 1.0
A. Level 1 Assessment
B. Level 2 Assessment
II. Risk Assessment Process Under ICAP 2.0
OECD, Study Into the Role of Tax Intermediaries (2008), at 9.
OECD, Co-operative Compliance: A Framework: From Enhanced Relationship

21
to Co-operative Compliance, OECD Publishing (2013), at 3.
3 Alicja Majdanska & Yuchen Wu, Using Impact Evaluation to Examine

Domestic and International Cooperative Compliance Programs, Tax Notes
International (Mar 11, 2019), at 1045.
4 IRS, Compliance Assurance Process.
5 Id.
6 See supra n. 2, at 19.
7 The FTA was created in 2002 for commissioners from 53 OECD and non-
OECD countries, including members of the G20. In May 2002, tax officials
convened in London as the FTA’s Compliance Sub-group to consider what
actions could be taken to exchange experiences in the area of compliance
risk management and to agree on a strate y for documenting guidance on
this important topic. See OECD, Compliance Risk Management: Managing and
Improving Tax Compliance, Centre for Tax Policy and Administration (2004),
at 5.
8 OECD, International Compliance Assurance Programme Pilot Handbook

(Paris, 2018), at 7.
9 OECD, International Compliance Assurance Programme (ICAP).
10 The participants are Australia, Austria, Belgium, Canada, Denmark, Finland,

Germany, Ireland, Italy, Japan, Luxembourg, Netherlands, Norway, Poland,
Spain, United Kingdom, and the United States.
11 See Leading global tax administrations agree [to] collective actions on tax
certainty, co-operation and digital transformation (Mar 28, 2019).
Id. at 11.
12
13 OECD, International Compliance Assurance Programme Pilot Handbook 2.0
(2019, Paris), at 18.
14 See supra n. 6.
15 The OECD expects these benefits: (i) provide fully informed and targeted use
of country-by-country (CbC) information by enabling MNEs to explain their
CbC reports and provide additional clarity to aid understanding of their
cross-border activities to help tax administration to reach earlier decisions;
(ii) enable tax administrations to jointly review the information supplied by
an MNE; (iii) enable tax administrations to work multilaterally to have a
comprehensive picture of an MNE’s cross-border activities to be assured
either that the tax position is satisfactory or that any tax risk has been
identified; and (iv) provide an opportunity to prevent disputes from reaching
the MAP. See supra n. 8, at 7.
16 As MNEs’ aggressive tax planning has raised questions regarding the

transparency in financial reporting for the past several years, the OECD and
the European Commission proposed the CbCR which requires MNEs with
revenues exceeding €750 million to disclose information necessary for
transfer pricing assessment, including tax jurisdiction, revenue from related
parties and third parties, corporate income tax paid, current year corporate
income tax accrued, stated capital, tangible fixed assets excluding cash and
cash equivalents, and number of employees. See Leading global tax
administrations agree [to] collective actions on tax certainty, co-operation and
digital transformation (Mar 28,2019).
17 See supra n. 8, at 8 9.
18 Leading global tax administrations agree [to] collective actions on tax

certainty, co-operation and digital transformation (Mar 28, 2019).
Supra n. 8, at 13.
19
20 Id. at 14. See also Annex 1.
21 Id.
22 See Annex 1.
23 The four-state process consists of Stage I: Pre-entry; Stage II: Scoping; Stage III:
Risk assessment and issue resolution; and Stage IV: Outcomes. Annex 1 II.
24 Supra n. 13, at 21 22.

25 Id. at 24.
26 Id. at 27.
27 Id. at 29.
28 Annex 1 II.
29 OECD, Transfer Pricing Documentation and Country-by-Country Reporting,
Action 13 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting
Project (OECD Publishing, Paris 2015), at 10.
30 Supra n. 8.
31 Supra n. 13.
32 OECD, OECD Transfer Pricing Guidelines for Multinational Enterprises and

Tax Administrations 2017 (OECD Publishing, Paris 2017), at 474.
33 Id.
34 Eaton Corporation v. Commissioner, 140 T.C. 410 (2013).
35 See Rev. Proc. 2004 40, 2004 29 I.R.B. 50, 2004 2 C.B. 50, 2004 WL 1472553.
36 Supra n. 34.
37 Eaton Corp. & Subs. v. Commissioner, T.C. Memo. 2017 147.
38 The IRS has grounds for canceling an APA if it finds: (i) taxpayer’s
misrepresentation, (ii) mistake with respect to a material fact, (iii) failure to
state a material fact, (iv) failure to file a timely annual report, (v) lack of good
faith compliance with the APA terms and conditions, or (vi) failure to file an
annual report that is timely, complete, and accurate. Otherwise, an APA
cannot be canceled. Rev. Proc. 2015 41.
39 Supra n. 8.
40 Supra n. 13, at 8.
41 Id.
42 Id. at 9.
43 Id.
44 Id.
45 The MAP was first introduced by the OECD in 1963 in its Model Tax
Convention on Income and on Capital (OECD Model).
46 Supra n. 1 at 13. See also OECD, Draft double taxation convention on income
and capital: [report of the O.E.C.D. Fiscal Committee] (OECD 1963) Art. 25.
47 H.M. Pit, Arbitration under the OECD Multilateral Instrument: Reservations,

Options and Choices, 71 Bull. Int. Tax’n 10 (2017), IBFD, at 445. See
International - Arbitration under the OECD Multilateral Instrument:
Reservations, Options and Choices.
48 OECD, OECD Mutual Agreement Procedure Statistics for 2017.

49 Id.
50 See infra n. 51.
51 Multilateral Instrument, Multilateral Convention to Implement Tax Treaty
Related Measures to Prevent Base Erosion and Profit Shifting, Information
Brochure, at 4. See OECD official webpage.
52 OECD/G20 Base Erosion and Profit Shifting Project, Making Dispute

Resolution Mechanisms More Effective, Action 14: 2015 Final Report, at 11.
53 Supra n. 51 at 28.
54 Id. at 9.
55 Id. at 13 17.
56 Id. at 17 21.
57 Id. at 28 37.
58 See S.P. Govind & L. Turcan, Cross-Border Tax Dispute Resolution in the 21st
century: A Comparative Study of Existing Bilateral and Multilateral Remedies,
Derivatives & Financial Instruments IBFD (2017), at 3.
59 OECD, OECD Mutual Agreement Procedure Statistics for 2017.

60 Id.
61 Id.
American Bar Association |

/content/aba-cms-dotorg/en/groups/taxation/publications/abataxtimes_home/20may/20may-pp-kim-oecd-icap

The OECD's International Compliance Assurance Programme

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

The OECD's International Compliance Assurance Programme

Uploaded by

Copyright:

Available Formats

14/8/2020 The OECD’s International Compliance Assurance Programme

May 30, 2020

The OECD’s International Compliance

Cooperative compliance, a model that emerged in 2008,1 aims to improve

According to the OECD, the cooperative compliance model is built on seven

The OECD Forum on Tax Administrations (FTA)7 introduced a new cooperative

enterprises (MNEs) through multilateral cooperative risk assessment and

II. Overview of ICAP

A. ICAP’s Six Drivers and its Anticipated Benefits

standards together as identiﬁed in best practices–areas of cooperative

B. The ICAP Risk Assessment Process

include high-level information of jurisdictions where most of the UPE’s global

III. Analysis of the Two Main ICAP Objectives

A. ICAP as a Tax Assurance Method

i. APA-Type Assurance with Lower-Level Legal Certainty

ICAP is a pre-audit “multilateral cooperative risk assessment and assurance

An APA is a pre-dispute administrative approach that aims to prevent transfer

Figure 1: Level of Certainty40

ii. ICAP as Tax Assurance from a Corporate Perspective

In sum, ICAP is a pre-audit, APA-type tax assurance program that provides a

Because ICAP requires multiple meetings and negotiations with tax

of certainty comparable to that provided by APAs for speciﬁed transactions and a

B. ICAP as a Pre-Dispute Resolution Mechanism

The second key objective of ICAP is to eﬀectively reduce unnecessary MAP

i. Overview of the MAP

The minimum standard is comprised of three speciﬁc standards that require

2 Ensure the implementation of administrative processes that promote the

3 Ensure that taxpayers can access MAP when eligible.54

minimum standards; and (vii) transparency in respect of positions on MAP

Figure 2: The OECD MAP Statistics 2017, United States59

ii. ICAP to Reduce MAP Inventory

ICAP cannot be successful without MNEs’ active participation because it is

Annex 1: Risk Assessment Process

I. Risk Assessment Process Under ICAP 1.0

II. Risk Assessment Process Under ICAP 2.0

OECD, Study Into the Role of Tax Intermediaries (2008), at 9.

OECD, Co-operative Compliance: A Framework: From Enhanced Relationship

3 Alicja Majdanska & Yuchen Wu, Using Impact Evaluation to Examine

4 IRS, Compliance Assurance Process.

6 See supra n. 2, at 19.

8 OECD, International Compliance Assurance Programme Pilot Handbook

9 OECD, International Compliance Assurance Programme (ICAP).

10 The participants are Australia, Austria, Belgium, Canada, Denmark, Finland,

16 As MNEs’ aggressive tax planning has raised questions regarding the

18 Leading global tax administrations agree [to] collective actions on tax

24 Supra n. 13, at 21 22.

32 OECD, OECD Transfer Pricing Guidelines for Multinational Enterprises and

47 H.M. Pit, Arbitration under the OECD Multilateral Instrument: Reservations,

48 OECD, OECD Mutual Agreement Procedure Statistics for 2017.

52 OECD/G20 Base Erosion and Proﬁt Shifting Project, Making Dispute

59 OECD, OECD Mutual Agreement Procedure Statistics for 2017.

American Bar Association |

You might also like