Justice, Equality and Tax Law

S. 2421. Introduction

In the last decades, the evolving globalization had a huge impact on corporations and their international tax planning since it got easier and more convenient to set up businesses in foreign countries. Therefore, it also got easier for multinational corporations to set up their businesses in a way to avoid taxation and to optimize their tax planning structures. This led the Organization of Economic Cooperation and Development (OECD) to start their work on the so-called “Base Erosion and Profit Shifting” (‘BEPS’) Action Plan. The final report was published in 2015 and contains actions to “[E]nsure that profits are taxable where economic activities take place”. Among others, the BEPS package includes recommendations for the limitation of base erosion through interest expenses, the neutralization of hybrid mismatches, and controlled foreign companies. In 2016, Pierre Moscovici, the former commissioner of the European Union (EU), announced an anti-BEPS package to put the OECD’s recommendations into practice. This later became the proposal of the “Council Directive (EU) 2016/1164 of 12 July 2016 laying down rules against tax avoidance practices that directly affect the fu...