Limiting Base Erosion
1. Aufl. 2017
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S. 3141. Introductory remarks
Tax competition is one way to realize European tax integration. The historical purpose of rules on interest deductibility is to ensure a taxation of net profit while avoiding double economic taxation of the same income in the hands of both the lender and the borrower, or in schemes implemented in double or multiple deduction or non-taxation situations. The OECD Report “Addressing Base Erosion and Profit Shifting” notes that
From a Government perspective, globalization means that domestic policies, including tax policy, cannot be designed in isolation, i.e. without taking into account the effects on other countries policies and the effects of other countries’ policies on its own ones.
The OECD’s report under Action 4 of the BEPS Project sets out best practice recommendations for countering this but does not introduce any strategic elements apart from the suggestions and the reasoning debated previously in the OECD discussions regarding interest deductibility. It addresses the use of deductible interest payments by MNEs to achieve double-non taxation in both inbound and outbound transactions (“interest stripping”): these transactions are perhaps the easiest way f...