Digitalisation and globalisation have had a profound impact on economies and the lives of people around the world, and this impact has only accelerated in the 21st century. These changes have brought with them challenges to the rules for taxing international business income, which have prevailed for more than a hundred years and created opportunities for base erosion and profit shifting (BEPS), requiring bold moves by policy makers to restore confidence in the system and ensure that profits are taxed where economic activities take place and value is created..

The minimum standard on treaty shopping included in the Report on Action 6 is one of the four BEPS minimum standards. Action 6 of the BEPS Project identified treaty abuse, and in particular treaty shopping, as one of the principal sources of BEPS concerns. Owing to the seriousness of treaty shopping, jurisdictions have agreed to adopt, as a minimum standard, measures to address it, and to subject their efforts to an annual peer review (OECD, 2017[1]). (OECD, 2021[2]). The Inclusive Framework on BEPS published reports for each of the three peer review processes carried out in 2018, 2019 and 2020 (OECD, 2019[3]) (OECD, 2020[4]) (OECD, 2021[5]).

This section sets out the aggregate data on the implementation of the minimum standard on treaty shopping included in the Report on Action 6 (OECD, 2015[1]).

The MLI started to show its effect and to strengthen the bilateral tax treaty network of jurisdictions that ratified it in the course of 2020. The number of agreements that became compliant with the MLI increased from 60 to over 350 between 2019 and 2020. In 2021, this number has surpassed 650. The peer review continues to reveal an important difference in the progress made on implementing the minimum standard by jurisdictions that have ratified the MLI compared with other jurisdictions.

A number of jurisdictions reported agreements, concluded with other members of the Inclusive Framework, that are not compliant, not subject to a complying instrument or to a general statement on the detailed LOB, and in respect of which no steps have been taken to implement the minimum standard. These agreements are included in the table titled ‘Other agreements’ in the jurisdictional sections.

As part of the support provided to jurisdictions in the implementation of the minimum standard under the revised peer review methodology, recommendations are issued to members in two categories of cases. First, a member that is implementing the minimum standard by signing the MLI will be recommended to complete the steps to have it take effect with respect to its tax agreements. Second, where a jurisdiction has tax agreements for which a plan for the implementation of the minimum standard needs to be developed, if the jurisdiction does not make such a plan (or provide an update on the plan), a recommendation will be made to provide a plan with respect to the concerned tax agreements.

The peer review provides jurisdictions that encounter difficulties in reaching agreement with another jurisdiction to implement the Action 6 minimum standard with an opportunity to raise concerns with the OECD Secretariat. This process, which is set out in paragraph 35 of the Revised Peer Review Documents, was initially put in place in the 2017 Peer Review Documents (paragraph 19) to identify cases where a jurisdiction is facing a treaty partner that is a member of the Inclusive Framework that is unwilling to respect its commitment to implement the minimum standard. The process was examined as part of the review of the peer review methodology, and it was determined that the process was adequate as it stood and no changes were needed.

The 2021 peer review shows that in general, most jurisdictions that are members of the Inclusive Framework are respecting their commitment to implement the minimum standard. The 2021 peer review also highlights that the MLI, which has been the main tool used to implement the minimum standard, has continued to have a significant and increased effect and is strengthening the bilateral tax treaty network of jurisdictions that ratified it.

Over the last decades, bilateral tax agreements, concluded by nearly every jurisdiction in the world, have served to prevent harmful double taxation and remove obstacles to cross-border trade in goods and services, and movements of capital, technology and persons. This extensive network of tax agreements has, however, also given rise to so-called “treaty-shopping” arrangements.