Global Trends in VAT/GST and Direct Taxes

S. 30I. Introduction

Financial and economic crises and, as a consequence, budget cuts have led governments to raise income and profit taxes and save resources in terms of manpower for the tax assessment process. As a result, this lack of financial resources has significantly increased interest in tackling tax fraud and tax avoidance. Unilateral and bilateral solutions such as controlled foreign company (CFC) legislation, thin capitalization rules and double taxation treaties with specific anti-abuse rules no longer seem sufficient. Supranational institutions, like the “G8”, “G20” and the European Union (hereafter, EU), as well as the Organisation for Economic Co-operation and Development (hereafter, OECD) are searching multilateral solutions to combat base erosion and profit shifting to low-tax jurisdictions. Prominent examples are successful enterprises like Apple, Microsoft, Google, Amazon and Starbucks, which have optimized their group tax rate using sophisticated tax planning tools. These cases have been widely discussed in the media and in the public with the consequence that politicians felt the urge to respond to these tax optimizations. This development has been supported by vari...