DISPUTE resolution is important from the point of view of international investments by MNCs. Governments need to take unilateral steps to curb the generation and proliferation of tax disputes. The Indian government has indeed taken a number of steps in this regard although much more perhaps can be done.

Base Erosion and profit shifting is a project for protecting the tax base of the G-20 countries. It is supposed to be an initiative of the G-20 of which India is a member. OECD works as the secretariat of G-20. But since the work started, it is the OECD member countries that have been the focus of the OECD secretariat. A few sops here and there have been thrown in by the OECD secretariat to placate a few obdurate members of the G-20 who managed to participate in the project. OECD is headquartered in Paris and obviously the main work of the secretariat is done at Paris and other delegates need to travel to Paris to participate. E-mail communication helps but face to face communication is important. In all groupings the secretariat plays an important part in setting the agenda. Although the BEPS project is known as OECD- G-20 project, the secretariat normally takes the examples of the practices of its member countries. In many places, the examples or statistics are exclusively from the OECD countries (partly for the reason that these are available in those countries in specific format and may not be available for other G-20 countries).

So, when the first BEPS report came up, the emphasis was on how base erosion takes place and how profit is shifted. Developing countries were interested in the OECD project because of the fact that finally OECD was at least discussing base erosion that has been the constant feature of the operation of OECD based multinational companies operating in developing countries like India. Dispute resolution, even though important, is a separate subject altogether. However, when the OECD came up with its action plan, it included an action point on dispute resolution, apparently being convinced by the BIAC rhetoric that if rules relating to mode of doing business is tightened, then simultaneously steps should be taken to reduce the disputes. One is not privy to the discussions that took place but apparently the non-OECD G-20 was also convinced or perhaps did not raise objections.

Even after taking on the subject, the initial prescription put forward by the OECD was mandatory binding arbitration in the context of the Mutual Agreement Procedure. Now, it is well known that developing countries are against such binding arbitration based on their experience in the context of investment agreements. Non-OECD member countries therefore objected to the proposal although all accepted that dispute resolution is desirable. In the final paper put out by the OECD in November 2015, the document on action point 14 says that no consensus could be achieved on the issue even though some 20 member countries of the OECD agreed to put in such a clause in their bilateral agreements. That is the sovereign choice of these countries and no one can question their right to do so. But that does not mean that the same medicine has to be thrust down the throat of the unwilling developing countries who, as the OECD never tires of pointing out these days, are apparently participating in the project 'on an equal footing'.

The final report on action 14 therefore contained a via media that the countries should recognize that this is an important issue and implement certain minimum standards. The minimum standard did not contain compulsory binding arbitration. However, taxpayers were to be given certainty in certain forms and the tax administration was to put its views on certain contested topics in public so that the foreign investors are aware of the potential hazards that they will be exposed to. This is a fair proposition. The work on the action point was however to continue further.

In that regard, the OECD secretariat has on the 20th October, 2016 put forward a proposal that may again raise the hackles of developing countries. Instead of the compulsory binding arbitration, the OECD is now proposing to adopt a peer review of the MAP process of other countries. No prize for guessing who will be in charge of monitoring the process- the OECD secretariat although the veneer of acceptability is proposed to be achieved by routing it through the Forum of tax administrations where the tax heads of G-20 will participate. OECD is thus arrogating to itself of monitoring the sovereign tax collection functions of not only its member countries but all the countries of the world.

In this context, it will be interesting to examine what were the minimum standards that were already agreed. These were:

1. Full implementation in good faith of the treaty obligation relating to MAP and resolution of cases in a timely manner.

Under this broad head, certain specific points are mentioned as follows:

-  Inclusion of paragraphs 1 to 3 of Article 25 of the OECD Model as interpreted in the OECD Commentary and access should be given to MAP in transfer pricing cases.

-  Access to MAP in cases where there is a disagreement between the tax authorities and the taxpayer as to whether the conditions for the application of a treaty anti-abuse provision has been met or whether the application of a domestic anti-abuse provision is in conflict with the provisions of a treaty.

-  Commitment of countries to resolve MAP cases in a timely manner within an average time frame of 24 months.

-  Timely submission of statistics relating to MAP cases

-  Countries should provide transparency in relation to their position on MAP arbitration

-  Countries should become members of Forum on Tax administration (FTA MAP forum)

-  Countries should commit to have their compliance with the minimum standard reviewed by their peers in the context of the FTA MAP Forum.

2. Ensure that administrative processes promote the prevention and timely resolution of treaty-related disputes. The specific points under this head are :

-  Easy and timely access to rules, guidelines and procedures of MAP to the public

-  Sharing MAP profile in a public platform .

-  More controversially the next point states: " Countries should ensure that the staff in charge of MAP processes have the authority to resolve MAP cases in accordance with the terms of the applicable tax treaty, in particular without being dependent on the approval or the direction of the tax administration personnel who made the adjustments at issue or being influenced by considerations of the policy that the country would like to see reflected in future amendments to the treaty."

We do not know why it is included here. It seems to have been dictated by the USA. Indian competent authorities or competent authorities of other developing countries discharge many functions. They may also be involved in some way or the other in the policymaking. But that does not mean that the CA will not be able to separate the two functions.

The next two points under this sub-head are also somewhat condescending

-  Countries should not use performance indicators for their competent authority functions and staff in charge of MAP processes based on the amount of sustained audit adjustments or maintaining tax revenue.

-  Countries should ensure that adequate resources are provided to the MAP function. This is easier said than done particularly in the context of developing countries.

The next point states that countries should clarify that audit settlements between tax authorities and taxpayers do not preclude access to MAP. This is certainly not the case in India. It is then stated that if countries have an administrative or statutory dispute settlement/resolution process independent from the audit and examination functions and that can only be accessed through a request by the taxpayer, countries may limit access to the MAP with respect to the matters resolved through that process. I think India should implement this recommendation. We give too many options for people to litigate and that is one reason of our increasing pendency.

-  Finally, it has been recommended that countries with bilateral APA programmes should provide for the roll-back of APAs in appropriate cases.

3. Countries should ensure that taxpayers that meet the requirements of paragraph 1of Article 25 can access the mutual agreement procedure .

-  The competent authorities of both the countries should be made aware of MAP requests being submitted and should be able to give their views on whether the request is accepted or rejected.

-  Countries' published MAP guidance should identify the specific information and documentation that a taxpayer is required to submit with a request for MAP assistance.

-  Countries should include in their tax treaties the provision any agreement reached under the Competent Authority process shall be implemented notwithstanding any time limits in the domestic law of the Contracting States. Countries that cannot include the second sentence of paragraph 2 of Article 25 in their tax treaties should be willing to accept alternative treaty provisions that limit the time during which a Contracting State may make an adjustment pursuant to Article 9(1) or Article 7(2), in order to avoid late adjustments with respect to which MAP relief will not be available.

Having agreed on the minimum standard, the countries also agreed that there will be a peer review of the relevant law, regulations etc., and of the actual implementation of the standards.The output will be put out in the form of a report that will point out the strengths and weaknesses of the countries concerned as also make recommendations for improvement.

As stated earlier, on 20th October, 2016, the OECD has released four documents that will form the basis of such peer review along with a schedule of such review. As usual, the OECD release mentions that this has been done by the inclusive framework where developing countries are working on an equal footing.

According to the schedule released, the review of 61 countries/jurisdictions will be in 8 batches. All the OECD member countries are to be reviewed first. Belgium, Canada, Netherlands, Switzerland, UK and USA are in the 1 st batch where the review commences in December, 2016. India is in the 6th batch where review will commence in August, 2018 and Brazil, China and Russia are in the 7th batch where the review will start in December, 2018. Peer review of Pakistan, Egypt, Senegal, Seychelles and a few others have been deferred till 2020. It is mentioned that review of a non-OECD developing country that has not encountered significant level of MAP request will be deferred. It is also mentioned that the review will be desk-based and will be coordinated by the secretariat of FTA MAP forum. According to the OECD website, the Forum on Tax Administration was created in 2002 as a forum of cooperation between revenue bodies at the level of Commissioners. It currently has 46 members, out of which BRICS and a few others like Hong Kong, Singapore, Malaysia, Indonesia etc., are not OECD members. How different will this secretariat be from the CTPA is not known although the CTPA has recently advertised for the post of an advisor. Interestingly, the FTA MAP Forum is chaired by the USA.

The review will be in two stages-Stage 1 and Stage 2. Stage 1 has three steps- obtaining inputs from the assessed jurisdiction, obtaining inputs from the assessed jurisdiction's peers and obtaining inputs from the taxpayers.

Inputs from the assessed jurisdiction will be obtained in the form of answers to a questionnaire that will contain information relating to the legal framework for MAP, guidance about MAP. Interestingly, it is also mentioned that the standard questionnaire will be supplemented by jurisdiction-specific questions regarding issue raised by peers. A peer questionnaire will be sent to the members of the FTA MAP in a standard format and those having a treaty with the assessed jurisdiction will be asked to submit their comments on the jurisdiction's compliance with the minimum standards described above. It may be mentioned that the OECD has also put out some best practices in relation to MAP but these are not to be assessed in the peer review process.

These parts of the peer review process are in line with the peer review process that is already in progress in respect of the exchange of information article. However, for the MAP peer review the OECD now proposes to seek inputs from the taxpayers. The OECD justifies the move on the ground that the main users of the MAP are the taxpayers and hence for the peer review to be meaningful, taxpayers should be able to provide input on their experience on the MAP process.

Therefore taxpayers and associations of taxpayers (e.g. business and industry associations) from all assessed jurisdictions will be invited to provide input focused on aspects of the minimum standard. The questionnaire will therefore centre on questions relating to access to MAP, clarity and availability of MAP guidance and the timely implementation of MAP agreements. It has been clarified that this questionnaire will not request technical issues relating to specific cases and responses should not contain any information to which an assessed jurisdiction could not respond for reasons of taxpayer confidentiality. However, those answering the questionnaire will need to identify themselves.

The questionnaire will be available on the OECD website and written responses to the questionnaire should be submitted to the OECD Secretariat. The Secretariat will share the responses received from taxpayers with the assessed jurisdiction at the commencement of the peer review process of the assessed jurisdiction. The assessed jurisdiction, if it so wishes, could provide comments on any such responses and submit these comments to the Secretariat within a maximum of 4 weeks.

It is well known that there is a difference in view between India and the OECD in relation to the dispute resolution process. It is therefore interesting to see that there is a note only from India in respect of the effort to obtain inputs from the taxpayers as follows:

"India consistently opposed the direct participation of taxpayers in the Peer Review process on the principles that, (i) this was not part of the final report on Action 14 and (ii) taxpayers are not peers of sovereign countries. However, in a spirit of compromise, India agreed for the inclusion of taxpayers' inputs as mentioned in this document."

As can be seen from the minimum standards already agreed, there was no agreement in respect of any review by taxpayers. Therefore, the note by India is fully justified.

Based on the inputs received from the 3 sources, the OECD secretariat will prepare a draft report and send the same to the reviewed jurisdiction and its peers. It is stated that after obtaining comments from the jurisdiction and the peers that raised issues, the secretariat will try to resolve the differences if any.

The draft report will then be presented to the FTA MAP forum and its members will give their comments, if any. If there are no comments, the report will be adopted. If however, there are comments or objections, the same will be discussed in the FTA forum and the OECD secretariat will present the main issues. It is stated that the forum will then discuss the issues, agree any changes that should be made and approve the revised report. It is not clear if the decision is to be taken by majority or by consensus. On technical issues, the relevant working party will have to be consulted. Following the approval of the report, the same will be published.

There is a second stage peer review involved to monitor the progress of the assessed jurisdiction in respect of the points made in the first stage peer review. The assessed jurisdiction is supposed to submit an update report to the OECD CFA detailing the steps it has taken to address the shortcomings and any plans for change in its legislative or administrative framework. Again based on the feedback from the peers, the secretariat will prepare the stage 2 peer review report and submitted to the FTA MAP Forum and the process as in stage 1 will be repeated and stage 2 report will be prepared and published.

The OECD and its secretariat will have a very important role to play in the matter of dispute resolution involving sovereign states where the two countries might have fundamental differences in the matter of process, outlook etc. OECD is surely not an impartial organisation and the success of the peer review process will therefore depend on how inclusive in actual practice is the inclusive framework and whether it can function independently of the OECD secretariat.