Understanding the oecds campaign against harmful tax competition morriss, andrew p moberg, lotta formed in 1961 to promote global economic and social wellbeing, the organisation for economic cooperation and development oecd has become the collective voice of rich countries on international tax issues. Through its work, the oecd endeavours to build support for fair competition so as to minimise tax induced distortions of financial and, indirectly, real investment flows, and to increase the confidence of taxpayers in the even handed application of tax rules. One of the more entrenched issues in international taxation over the last thirty years has been how to define and respond appropriately to harmful tax competition among nations, especially. The oeds view of harmful tax competition, and the reason for a multilateral approach to the issue, can be understood as a type of prisoners dilemma, where countries ability to choose their own tax. Harmful tax competition wirtschaftsuniversitat wien. Fiscal competitiveness versus harmful tax competition in the. Oecd launches new effort to undermine tax competition. An emerging global issue is a report issued by the organisation for economic cooperation and developments centre for tax policy and administration. Commission welcomes adoption of package to curb harmful tax competition ip03787 brussels, 3rd june 2003 taxation. Under these premises, tax competition between sovereign states is inherently harmful because it restricts the capacity of each state to pursue social welfare policies through its tax system. While tax competition has many positive effects, and the report stresses the benefits of fair tax competition, the report also recognizes that tax policies can have harmful external effects on other countries. In this article we analyze the evolution on direct taxation harmonization within the eu framework, as we consider that the harmful tax competition is a consequence of the lack of harmonization. Issues for the years ahead, comprising papers from a conference held in amsterdam, in april 2012, organized by the amsterdam centre for tax law in cooperation with the eu tax law group, is a comprehensive examination of recent and future developments in the area of european tax law.
Then, it looks back at the objectives of the 1998 oecds campaign and the key steps that have been undertaken in their pursuit. Chapter thetheoryofinternationaltax competitionandcoordination. The harmful tax competition is so identified with the adoption of fiscal policies by a member state which determines, at least potentially, a subversive tax order compared to the majority of the other states, as it introduces elements of fiscal facilitation or, however, some tax benefits that induce the economic agents to be located in. This report sets out the criteria for determining a harmful preferential tax regime in oecd countries and a. Over the last few weeks, a transatlantic war of words has been going on between the us treasury and the european union commission ec over what amounts to. The desired document is not currently available in open access but you can request a copy from the authors through the form below. Others point out that tax competition between countries bears no relation to competition between companies in a market. Background in 1998, the oecd committee on fiscal affairs published a report on harmful tax competition 1998. Document complet disponible sur olis dans son format dorigine. It focuses on fundamental concerns and controversies explored in the public finance literature. Tax competition in the form of harmful tax practices can distort trade and investment patterns, erode national tax bases and shift part of the tax burden onto less mobile tax bases, such as labor and consumption, thus adversely affecting employment and undermining the fairness of tax structures. Harmful effects of tax competition legal service india. Are such agreements likely to discourage tax competition or conversely cause it to spread. An emerging global issue 22 s 50 1998 hereinafter oecd report.
Sep 22, 2011 the existence of a harmful tax competition and a fair competition is acknowledged. For that, some fortyseven jurisdictions were originally examined to see whether they were tax havens. Apple, state aids, tax competition, and the rule of law alden f. Is targeted tax competition less harmful than its remedies. Harmful tax competition taxation and customs union. Ten years ago the oecd published its report on harmful tax competition.
The oecd harmful tax competition report university of michigan. To end harmful tax practices the work of the forum has focussed on three areas. The proposals on harmful tax practices may slow but will not halt tax competition, since they continue the approach. The world is facing a new round of international tax competition that may result in a ruinous race to the bottom, undermining the fiscal capacity of states to respond to global challenges and to. An emerging global issue the oecd organisation for economic cooperation and development created a special forum, forum on harmful tax practices. The other aspect of that campaign was the listing of tax havens and the obtaining of commitments from these tax havens. In doing so, this paper also focuses on the comparative analysis of arbitration in tax treaties and investment arbitration, i.
Action 5 of the oecd action plan on base erosion and profit shifting beps, therefore, addresses the detecting and coordinated countering of such harmful tax practices, with a renewed focus on transparency and substance requirements. Fiscal affairs launched its project on harmful tax competition. In response to the ministers request, the oecds committee on fiscal affairs launched its project on harmful tax competition. We study a general model of competition for multiple tax bases and establish conditions for a restriction on preferential regimes to increase or. The recently released oecd report on harmful tax competition represents a first step in attempting to curb the. Tax competition between member states is largely unregulated. This book sheds light on the complexity of the environment in which the beps project operates. Harmful tax competition and beps action point 5 been there. Since verona, the progress towards achieving a more coordinated approach to taxation policy within the union has been considerable.
Commission welcomes adoption of package to curb harmful tax competition the european commission has welcomed the councils adoption of a package of three measures to tackle harmful tax competition. April 2004 the worldwide response to the harmful tax competition campaigns 3 seven identified by 2000. Ibfd, your portal to crossborder tax expertise why this book. The current controversy over foreign sales corporations fscs provides a good opportu nity to address the broader ques tion of the proper relationship.
Aviyonah is a professor of law at the michigan law school. Platform for tax good governance competitiveness and tax. This was followed by a series of concrete measures designed to limit some forms of harmful tax. Section 5 discusses the key issue of dispute resolution mechanisms in tax and non tax agreements. The action 5 report is one of the four beps minimum standards. World wide response to the harmful tax competition campaigns. In particular, the oecd has worked on the issue at least since 1998,7 seeking to identify the harmful elements of tax competition in order to pursue a minimum level playing field. The report emphasises that governments must intensify their cooperative actions to curb harmful tax practices. Oecd model tax convention issued in looseleaf format in 1992, updated. The report identifies factors that characterize tax havens and harmful preferential tax regimes and recommends numerous measures in the areas of domestic legislation, tax treaties, and international cooperation, that countries may pursue to counter harmful tax competition.
Pdf on sep 1, 2017, vladislav burilov and others published the oecd model of harmful tax competition. Some governments have recently called for international accords restricting the use of preferential taxes targeted to attract mobile tax bases from abroad. The economic rationale for a project to eliminate international tax competition is very simple. Following a report in 1998 harmful tax competition. If your request is accepted you will receive, by email, a link allowing you to access the document for 5 days5 download attempts maximum. Apple, state aids, tax competition, and the rule of law. Agree also to engage with third countries on this matter. In 1996 ministers called upon oecd to fight and solve the distorting consequences and effects of harmful tax competition by 1998 a report the same, thus a report was prepared titled harmful tax competition an emerging global issue which was approved on april 9th, 1998. Tax competition in the form of harmful tax practices can distort trade and investment patterns, erode national tax bases and shift part of the tax burden onto less mobile tax bases. Tax competition in the form of harmful tax practices can distort trade and investment patterns, erode.
The commission, recognising the need to avoid any suggestion that the respective competences. The impact of international tax competition on low and middle. Tax compliance 2629 2008, available at files071708. Similarly, the oecd identifies factors that may potentially cause harm to the tax systems of other countries as they facilitate both corporate and individual income tax avoidance and evasion. May 30, 2018 particularly harmful are tax competition practices that a erode the tax bases of other countries, thereby diminishing global welfare, b deny other countries the opportunity to adapt their tax regimes in response to unwanted spillovers, due to a lack of transparency of the measures, or c introduce market distortions in favor of specific. The commission in its communication a package to tackle harmful tax competition in the european community 24 considered fair competition in tax matters differently from harmful tax competition, as this relates to those measures that may significantly affect the location of business activities in the european union. International tax competition a 21stcentury restraint on government by chris edwards and veronique. One author notes the format and style are late twentiethcentury bureaucratic and further notes.
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