Base Erosion and Profit Shifting – A project of the OECD to curb international income tax planning.
On May 11th a very interesting conference with the topic “How Source and Residence have Developed: Rethinking the Principles of International Income Taxation” has taken place, in Bergamo, organised by the Department of Law of the University of Bergamo and by the University of Heidelberg. Having not stayed until the discussion, I could not comment…
What the UK government wants by way of Brexit outcome seems to change daily, with the government and political parties in Parliament divided among various factions. The only legal certainty about Brexit is that unless the UK and the remaining member states agree otherwise, EU law will cease to apply in the UK after 29…
Introduction One of the most controversial topics of transfer pricing, in today’s multinational world, is the pricing of intercompany financial transactions. The 2017 OECD transfer pricing guidelines (TPG) lack clear rules specifically tailored to financial transactions, which can lead to a higher risk of divergent treatment of these transaction between tax administrations and taxpayers and…
The Existing Framework: Nexus and Profit Attribution Rules Under the current Double Taxation Avoidance Agreement (DTAA) framework, business profits are in principle taxable in the State of residence of the enterprise. However, the source (market) jurisdictions may tax the profits if a permanent establishment (PE) is triggered therein. A PE arises when the non-resident operates…
I am delighted to see that my post on value creation has stimulated discussion on the fundamental thinking about international taxation. See the posts of my friends and colleagues Werner Haslehner and Sergio André Rocha. At the IFA seminar in Rotterdam, we puzzled over the meaning of “value creation”. Werner also referred to another mystifying…
The well-known expression “butterfly effect” comes from chaos theory, and it refers to the idea that a butterfly could flap its wings in Brazil and, through ripple effect, set off a tornado in Texas. Bringing this expression into the tax world, a decision by a domestic court on a seemingly domestic tax matter could trigger…
For many years, I have been advocating a drastic change in the distribution approach for taxing rights in international taxation. The focus of my criticism has been Article 7 of the OECD and UN Model Conventions. My core argument continues to be that the so-called “permanent establishment principle” disregards the role of the infrastructure that…
Economic development has been historically associated with the fulfilment of two major conditions: a) Peace and b) low taxation. Peace was the necessary component for prosperity from the point of view of foreign policy. Empires, kingdoms, duchies, principalities and republics have been prosperous only as long as there has been peace. Low taxation was the…
Following up on Jonathan Schwarz’s latest blog contributing to the debate on taxation and value creation, I wanted to attempt adding some further critical points. The OECD’s stated goal of the second pillar (“Substance”) of its BEPS action plan is to align taxation with value creation. It has already been observed that this is a…
The importance of the permanent establishment (PE) principle in tax treaties cannot be undermined. Whether or not a source country has the right to tax business profits of a foreign company would depend wholly on the existence or non-existence of a PE of that company in the source country. Work undertaken by the OECD in…
Introduction This is the second part of the input dealing with the MLI’s LOB rule. It focuses on the second and the third subtests under the MLI’s LOB rule, i.e. the concept of income emanating from or being incidental to the taxpayer’s active conduct of business in a State of residence and a State of…
“Those who cannot remember the past are condemned to repeat it” George Santayana, The Life of Reason: Reason in Common Sense (1905). A seminar was held in Rotterdam on 18 May 2018 on “value creation” in the new tax universe to celebrate the 80th anniversary of the International Fiscal Association. An erudite panel, comprising Prof…
Introduction This is the first part of the input regarding the MLI’s LOB. It addresses the active conduct of a business, which constitutes the first subtest under the MLI’s LOB rule. The second part, in turn, will draw attention to the second and the third subtests, i.e. the concept of income emanating from or being…
Introduction As the General Reporter for the Subject 2 (The Future of Transfer Pricing) of the 2017 IFA Congress in Rio de Janeiro, I joined the plenary session on August 29 in a panel chaired by Luís Eduardo Schoueri and composed of Isabel Verlinden, Jefferson Vanderwolk, Mateus Calicchio Barbosa, Natalia Quiñones, Richard Vann, and Yariv…
