Global Actions Against Aggressive Tax Planning: International Business Models According OECD

Abstract

Economic globalization poses serious challenges on economic and political side of international society. It implies weakness of the old idea of the national tax sovereignty having an profound impact on the way multinational enterprises (MNEs) are structured and managed. In fact The increasing mobility of capital and people and digital technologies have allowed to multinational enterprise to restructuring their business models and strategies .In particular the actions for reducing the tax liabilities of MNE have become more aggressive over the past decade. Moreover, digital technologies have made it possible for businesses to supply goods and services from their geographic locations. This has made it easier to shift profits, which can be done in a variety of ways. One of the most common tools for moving capitals in the international tax system is a hybrid mismatch arrangement, that exploit in the monetary or transaction operations the different interconnection between states is to avoid paying tax.Furthermore Some MNE, based in high-tax regimes, create numerous off-shore subsidiaries or shell-companies, forming the group operate together as an integrated enterprise following an overall business strategy so that each time taking advantage of the tax breaks allowed in various jurisdiction. They also claim expenses and losses in high-tax countries and declare profits in jurisdictions with a low or no tax rate.All of this strategies allow that Some multinationals end up paying as little as 5% in corporate taxes when smaller businesses are paying up to 30% according to study commissioned by the G-20 - Addressing Base Erosion and Profit Shifting (BEPS). Business leaders often argue that they have a responsibility towards their shareholders to legally reduce the taxes that their companies pay. But the realty is that these gaps, as well as lack of cooperation among governments, enables multinationals to eliminate or reduce their taxation on income, having an unfair competitive advantage over smaller businesses. This destroys the productive’s class faith to the justice and impartiality of a "tax system"."Although tax planning per se legal and legitimate some weaknesses in the current international tax system, erode the tax base of many countries and threaten the stability of the international tax system," said OECD Secretary-General Angel Gurria. "It is crucial that all tax payers - private and corporate - to the public finances paying their fair amount of taxes without discrimination (in compliance with the spirit of the law)."The strategies are based on a old economy on a domestic and international rules originated from principles developed by the League of Nations in the 1920s. So this inconsistency has generated not only problems regarding double taxation but also problems regarding double no taxation. So the policy implemented until now with the convention in order to eliminate double taxation for cross-border investments or transfer pricing guidelines cannot be followed in the future. In fact the first measure has produced over 3,000 bilateral Tax Treaties without being able to mitigate the phenomenon.In short, the international cooperation to combat tax evasion and cross-border financial crimes, must be multilateral. It is necessary an international coordination among different computer databases to which each State has and identifies the different and most common strategies used by multinational companies that may erode the tax base of the various states. Moreover, in order to involve all international institutions in May of 2013 was set to Moscow the Forum on Tax Administration that gathers the Tax Commissioners of all OECD and G20 countries. The Forum focused on the problems of erosion of the tax base as they are becoming more frequent cases of international tax avoidance artificial system.Here is that during 2013, the OECD published the report "Addressing Base Erosion and Profit Shifting" which provides an analysis of the key principles that form the foundation of the taxation of cross-border activities and opportunities that these principles offer to the phenomenon of the BEPS. Following the meeting of the OECD Council, held in Paris on 29 and 30 May 2013, has been published the report: "Base Erosion and Profit Shifting" through which the OECD has formed three working groups temporary "Countering base erosion" which deals with the examination of the anti-circumvention measures and instruments which counter the harmful tax practices; "Jurisdiction to tax", which deals with the provisions relating to CFCs and "Transfer pricing", which deals with the study of questions relating to issues related to transfer pricing.On 19 July 2013, the OECD published the document "Action Plan on Base Erosion and Profit Shifting" which identifies fifteen specific actions aimed at providing to give to various countries international and internal tools, Establishing coherence transparency to corporate income taxation with certainty and predictability. The fifteen actions identified by the OECD to be developed over a period of approximately two years them will be evaluated as part of the work of the EU Platform for Good Governance Tax, Aggressive Tax Planning and Double Taxation, established by the European Commission April 23, 2013. Here in this work (thesis) will be divided into three chapters. In the first chapter will examine the various business models Global (corporate governance) and taxation as well Concerns related to base erosion and profit shifting. In the second chapter Verrano examine the main actions to be taken by 2014 for the Tax and the Digital Economy (Action 1) going to the 2015 to Strengthen the CFC rules by OECD along with other actions. And the last part will be examined Examples of MNEs' tax planning structures going in the specific E-commerce structure (ITAX apple houses synthesis) and Transfer of manufacturing operations to end Leveraged acquisition and use of intermediate holding companies.