The Soft Rules of BEPS (Base Erosion and Profit Shifting)
Tags: BEPS, blockchain, BREXIT, FASB, FX trade execution, Hedge Accounting, iTreasurer, June 2017, KYC, options vs. forwards, prime money market funds, talent management, USD
From taxes to accounting, the June issue of iTreasurer covers a wide variety of topics, from taxes to new hedge guidance with several stops in between.
Beginning on page 1 is a story about how countries are weighing the implementation of the ongoing Organisation for Economic Co-operation and Development project known as BEPS or base erosion and profit shifting. The BEPS plan encompasses 15 action items that are intended to “equip governments with domestic and international instruments to address tax avoidance,” according to the OECD. But the actions are considered “soft rules” and member-country lawmakers can implement them at whatever level of severity they choose. And this will be an important balancing act. Countries do want to collect as much tax revenue as they can; however, they do not want to scare business away either. “My new tax philosophy is not exactly ‘the more, the merrier,’” said Carrie Lam, the new chief executive-designate in her first public speech.
On page 6 iTreasurer looks at data from Fitch Ratings Agency that show cash is trickling back to institutional prime money market funds, pulled in by stable net asset values and widening spreads. However, “trickle” is the operative word here in that it is likely that the levels of cash going to prime institutional funds will never reach the pre-reform highs.
In the summary of the NeuGroup’s FX Managers’ recent meeting, we hear what group members discussed about the dollar’s prospects and the Fed. Members also received an update about changes to hedge accounting requirements; discussed using options vs. forwards and debated best FX trade execution.
On page 11 we discuss how time is running out for those companies that want to get ahead of new FASB hedge accounting guidance that will kick in in 2018. Heavy commodity users should consider adopting early, contributor John Hintze says, because of “several advantageous provisions in the new guidance.”
In “Getting to ‘Know Your Customer’ Is a Major Pain” on page 12, contributor Geri Westphal discusses how the KYC “process has become extremely manual and over burdensome with many corporates complaining about the amount of documentation required and the extremely slow response times.” But fintech could help, particularly Blockchain technology.
Talent is the subject of a story on page 14, where contributor Julie Zawacki-Lucci delves into a recent exchange between treasurers discussing whether assistant treasurers (AT) should hold a VP title. A majority of those who spoke up said their ATs do not have a VP designation and were reluctant to start handing them out. The reason? Title inflation.
Finally, on page 15 we discuss recent goings-on with Brexit. Most observers feel that it will be an orderly exit of the UK from the European Union. However, that doesn’t mean there will not be some tough negotiations and ruffling of feathers. One area that Europe is trying to get its hands on is the highly profitable euro clearing business that is mainly based in London. The EU is busy trying to make this the outcome post-Brexit, with its Executive Commission “readying a draft law on euro clearing with France at the forefront of eurozone countries angling for a piece, if not all, of the lucrative business.”
For over 20 years, iTreasurer has delivered intelligence for treasurers. Based on exclusive access to senior treasury executives who are members of The NeuGroup Network of treasury peer groups, iTreasurer takes their real-world experience to produce articles, case studies and reports that are specifically meaningful to treasury best practice. www.iTreasurer.com.