In the Addressing Base Erosion and Profit Shifting Report, there are certain key tax principles and opportunities for Base Erosion and Profit Shifting that have been analyzed, such as jurisdiction to tax, transfer pricing, leverage and anti-avoidance. Further in these key pressure areas of the Report have been discussed in detail as different chapters of this dissertation.
As the world becomes more globalized and resources become more internationally mobile, the issue related to international taxation is moving to the forefront of debates surrounding national tax system. The process of globalization has led to increased competition among businesses in the global market place. International taxation generally refers to the tax treatment of cross-national transactions. Since each nation has its own tax rules and the rules of one nation are rarely perfectly meshed with those of another, it is possible that income will be taxed more than once which is sometimes referred to as double taxation or that it will go untaxed by any jurisdiction. To prevent this, usually countries adopt different methods. In principal, two methods of taxation are there i.e. the territorial (or source) system of taxation and the worldwide (or residence) system.
Base Erosion and Profit Shifting by the multinational enterprises or by the individuals is one of the current problem by which the whole world suffering. To curb this problem Organisation for Economic Co-operation and Development (OECD) has unveiled its report on Base Erosion and Profit Shifting (BEPS) on 12 February, 2013. The Report has attempted to identify and tackle the global issue of tax base erosion, which in present time has achieved gigantic proportions.
There is a growing perception that Governments across world lose substantial revenue due to tax avoidance because of planning aimed at eroding the tax the taxable base or shifting profits to favorable tax jurisdiction. Keeping cognizance of this situation, the Organisation for Economic Co-operation and Development (OECD) recommends a holistic and planned approach to address the problem of Base Erosion and Profit Shifting (BEPS).
Table of Contents
CHAPTER ONE INTRODUCTION
1.1 International Taxation
1.2 Base Erosion and Profit Shifting
1.3 Key Pressure Areas of the OECD Report
1.4 Purported Action of Organisation for Economic Co-operation and Development
1.5 Action Steps in OECD Action Plan
CHAPTER TWO TAX JURISDICTION AND TAXATION
2.1 Introductory
2.2 The Jurisdiction to Tax
2.3 Organisation for Economic Co-operation and Development Report Views
2.4 Conclusion
CHAPTER THREE TRANSFER PRICING
3.1 Introductory
3.2 Meaning of Transfer Pricing
3.3 Transfer Pricing in India
3.4 Scope of Transfer Pricing
3.5 Organisation for Economic Co-operation and Development Report Views regarding Transfer Pricing
3.6 Key Features of the Transfer Pricing Regulations
3.7 Section 92A - Meaning of Associated Enterprise
3.8 Meaning of International Transaction (Section 92B)
3.9 Extension to Domestic Transaction
3.10 Methods for arriving at Arm’s Length Price
3.11 Conclusion
CHAPTER FOUR TAX HAVENS & HARMFUL TAX COMPETITION
4.1 Introductory
4.2 The Concept of Tax Competition
4.3 Globalization and Harmful Tax Competition
4.4 Benefits of Tax Competition
4.5 The Organization for Economic Co-Operation and Development Report on Harmful Tax Competition
4.6 Tax Haven
4.7 Harmful Preferential Tax Regime
4.8 Conclusion
CHAPTER FIVE CORPORATE GOVERNACE AND TAXATION
5.1 Introductory
5.2 Meaning of Corporate Governance / Theoretical framework
5.3 Interaction between Taxation and Corporate Governance
5.4 Studies on Corporate Governance and Taxation
5.5 Conclusion
CHAPTER SIX TAX AVOIDANCE TECHNIQUES: GAAR & SAAR
6.1 Introductory
6.2 Meaning of Anti-Avoidance
6.3 Common Methods used by Taxpayers to Reduce Tax Liability
6.4 Sources of Anti-Avoidance Measures
6.5 Some Common Anti-Avoidance Measures
6.6 Conclusion
Objective & Topics
The primary objective of this dissertation is to analyze the global challenges posed by Base Erosion and Profit Shifting (BEPS), investigate the role of international tax jurisdiction, examine transfer pricing mechanisms, and evaluate regulatory responses like GAAR and SAAR to mitigate tax avoidance.
- International taxation principles and jurisdictional conflicts.
- The impact of BEPS strategies by multinational enterprises.
- Transfer pricing regulations and the "arm's length" principle.
- The intersection of corporate governance and tax compliance.
- Comparative analysis of anti-avoidance measures (GAAR/SAAR) across different jurisdictions.
Excerpt from the Book
3.1 Introductory
After the rapid advances in technology, transportation and communication large number of multinational enterprises (MNEs) has been arisen, which have the flexibility to place their enterprises and activities anywhere in the world. The fact is that, nowadays the trade has become global trade which consists of international transfers of goods and services, capital (such as money) and intangibles (such as intellectual property) within a MNE group; such transfers are called “intra-group” transactions. There is evidence that intra-group trade is growing steadily and arguably accounts for more than 30 per cent of all international transactions.
Furthermore transactions involving intangibles and multi-tiered services have constituted a rapid growth in proportion of an MNE’s commercial transactions because of which there is great increment of the complexities involved in analysing and understanding such transactions.
The structure of transactions within an MNE group (the component parts of which, such as companies, are also called “associated enterprises” in the language of transfer pricing) can be determined by a combination of the market and group. This can differ from the open market conditions operating between independent entities. Thus, a large and growing number of international transactions are no longer governed entirely by market forces, but by forces which are driven by the common interests of the entities of a group.43
In such kind of situation, it becomes important to establish the right price, called the “transfer price”, for intragroup, cross border transfer of goods, intangibles and services. Transfer pricing is the general term for the pricing of cross border, intra firm transactions between related parties. Therefore “transfer pricing” refers to the setting of prices at which transactions occur involving the transfer of property or services between associated enterprises, which are forming part of an MNE group. These transactions are also referred to as “controlled” transactions, as distinct from “uncontrolled” transactions between companies that, for example, are not associated and can be assumed to operate independently (“on an arm’s length basis”) in reaching terms for such transactions.44
Summary of Chapters
CHAPTER ONE INTRODUCTION: Explains the fundamental concepts of taxation, the purpose of public revenue collection, and introduces the global problem of Base Erosion and Profit Shifting (BEPS).
CHAPTER TWO TAX JURISDICTION AND TAXATION: Analyzes the dual principles of residence and source-based taxation and discusses how jurisdictional conflicts arise in international trade.
CHAPTER THREE TRANSFER PRICING: Details the mechanisms for pricing transactions between associated enterprises and discusses the Indian and global regulatory frameworks, including the "arm's length" principle.
CHAPTER FOUR TAX HAVENS & HARMFUL TAX COMPETITION: Investigates the economic impact of tax competition and the role of tax havens in eroding national tax bases.
CHAPTER FIVE CORPORATE GOVERNACE AND TAXATION: Examines the synergy between good corporate governance practices and responsible tax behavior, highlighting how tax strategies impact corporate reputation and compliance.
CHAPTER SIX TAX AVOIDANCE TECHNIQUES: GAAR & SAAR: Provides a comprehensive overview of anti-avoidance strategies, specifically focusing on the implementation and principles of General Anti-Avoidance Rules (GAAR) and Specific Anti-Avoidance Rules (SAAR).
Keywords
Base Erosion and Profit Shifting, BEPS, International Taxation, Transfer Pricing, Arm's Length Principle, Tax Haven, Corporate Governance, GAAR, SAAR, Tax Evasion, Tax Avoidance, Tax Competition, Associated Enterprise, Double Taxation, Fiscal Policy.
Frequently Asked Questions
What is the core subject of this publication?
The book provides a comprehensive analysis of international taxation issues, specifically focusing on Base Erosion and Profit Shifting (BEPS), the role of transfer pricing, and various techniques used by governments to curb tax avoidance.
What are the central themes discussed in the work?
The central themes include the mechanics of transfer pricing, the influence of tax havens on global economies, the relationship between corporate governance and tax planning, and the legislative efforts to combat aggressive tax avoidance.
What is the primary objective of this research?
The primary objective is to clarify the complexity of international tax rules, evaluate why multinationals engage in tax base erosion, and outline the synchronized global efforts required to ensure tax fairness.
Which scientific methodology is employed?
The book utilizes an analytical and descriptive approach, examining existing legal frameworks, OECD reports, international case law, and economic theories to interpret how current tax systems are exploited and how they can be reformed.
What is covered in the main body of the work?
The main body covers the theoretical frameworks of tax jurisdiction, deep dives into transfer pricing methodologies (CUP, RPM, CPM, etc.), explanations of harmful tax competition, and a detailed analysis of GAAR and SAAR implementation.
Which keywords define this work?
The core keywords include BEPS, Transfer Pricing, Tax Havens, GAAR, SAAR, Corporate Governance, and International Tax Jurisdiction.
How does the book describe the difference between tax avoidance and tax evasion?
The book characterizes tax avoidance as the legal exploitation of loopholes within the tax regime, whereas tax evasion is defined as the illegal non-payment or suppression of facts to avoid tax liabilities.
What is the significance of the Vodafone case in this context?
The Vodafone case is presented as a landmark decision in India that underscores the tension between strategic tax planning and the revenue department's powers, ultimately influencing the discourse on whether the government should introduce GAAR.
Why are "conduit companies" mentioned?
Conduit companies are highlighted as a method used by multinational enterprises to navigate international tax treaties and channel income between jurisdictions to achieve a lower tax burden.
- Citar trabajo
- Dr. Vivek Shukla (Autor), Prof. (Dr.) Somesh Kr. Shukla (Autor), 2020, Base erosion and profit shifting. A global tax challenge and road ahead, Múnich, GRIN Verlag, https://www.grin.com/document/903189
