Tackling aggressive tax planning : assessing OECD’s base erosion and profit shifting initiative

Abstract

Purpose – The purpose of this research study is aimed at evaluating the element of tax competition and the notions of tax avoidance and aggressive tax planning in the ambit of international taxation in light of the OECD/G20 BEPS initiative. Design - The research objectives were attained through the undertaking of semistructured interviews with nine respondents, spanning from Members of Parliament, tax specialists working at audit firms and high ranked officials at the Inland Revenue Department. Findings - This study focused on the importance of tax competition, as one of the means in attracting foreign direct investment to any jurisdiction. The study also discussed the extent to which the attractiveness of Malta as a jurisdiction relies on the preferential tax regime. Moreover, the interviews also brought to light the element of tax planning in local and international scenarios and the importance of tax planning in reducing the tax burden. The study also sets forth on the element of aggressive tax planning techniques used by MNEs to exploit loopholes in tax systems and mismatches between national rules to reduce their tax liabilities. Moreover, throughout the interviews a discussion on the effects of the proposed measures set forth by the OECD/G20 BEPS was held with intent to establish the possible effects on Malta’s economy and the European Union as a whole. Lastly, the research also affirmed the need for a coordinated approach in the implementation of the various proposed measures to ensure a level playing field especially in the European Union. Value: Tax is vital in the grand scheme of operations of an economy and a society. Thus it is important to ensure that the right amount of tax is collected from each and every individual and body of persons. Conclusion – While noting the fact that certain MNEs made use of aggressive tax planning to take advantage of tax loopholes, it was mutually agreed throughout the interviews that an element of tax competition is vital. Hence, policy makers especially at EU level must ensure that tax matters remain a matter of national competence and each member state maintains sovereignty over direct tax matters.