Abstract
The aim of this chapter is to provide the background of profit shifting, explain the concept of profit shifting, the relevance of this phenomena in the context of the twenty-first century and the importance of tax havens in these areas. Furthermore, the development of corporate taxation during the last century was mentioned with a stress on its weaknesses and obstacles that have been faced or are currently being faced. Moreover, a brief summary of the fight against tax base erosion and aggressive tax planning was performed. Lastly, aggressive tax planning opportunities and tax base erosion, were mentioned with respect to post-communist countries.
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Notes
- 1.
For more details, see European Parliamentary Research Service (2015).
- 2.
Income tax was introduced for example in the UK in 1798, in the US in 1891, in Australia in 1915, and in Canada and France in 1917. Corporate taxation as a separate tax on companies was introduced in the UK in 1965 followed by others, for example in Ireland in 1976. For more details see Frecknall-Hughes (2015) and Grapperhaus (2009).
- 3.
For more details see Frecknall-Hughes (2015).
- 4.
For more details, see above.
- 5.
The arm’s length principle can be considered a rule against the mispricing of any intra-group transaction between associated enterprises with an aim to manipulate the volume of the tax base, and has been used as an international tax rule since 1933. A similar rule is also used in the case of permanent establishment. The authoritative statement of this principle is mentioned in Article 9(1) of the OECD Model Tax Convention on Income and Capital (hereinafter OECD Model Convention) known as primary adjustment:
“When conditions are made or imposed between two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.” For more details, see also OECD (2017a), Commentary on Article 9(2), MN 6, 2017 (available at: https://read.oecd-ilibrary.org/taxation/model-tax-convention-on-income-and-on-capital-condensed-version-2017_mtc_cond-2017-en#page1) and OECD (2017b), TP Guidelines, MN 4.35, 2017 (available at: https://read.oecd-ilibrary.org/taxation/oecd-transfer-pricing-guidelines-for-multinational-enterprises-and-tax-administrations-2017_tpg-2017-en#page1).
- 6.
The authoritative statement on taxation of business profit is mentioned in Article 7 of the OECD Model Convention, OECD (2017a) For more details, see also the OECD Commentary on Article 7.
- 7.
The definition of permanent establishment is mentioned in Article 5 of the OECD Model Convention, and taxation of business profit generated through permanent establishment is mentioned in Article 7 of the OECD Model Convention, OECD (2017a). For more details, see also OECD Commentary on these articles.
- 8.
Definition of tax residency is mentioned in Article 4 of the OECD Model Convention, OECD (2017a).
- 9.
- 10.
Nexus rule is based on the assumption that a state’s jurisdiction has a right to tax foreign or non-resident persons/entity if they have fulfilled the relevant factors such as physical presence or economic activity, or a combination of both. Moreover, a source country has limited taxing rights instead of most taxing rights in the case of residual—home countries of resident persons/entity. However, due to the rapid nature of business digitalization and the development of the digital economy, business activities are very often performed without physical presence and avoid taxation in the source State under the current nexus rule. This issue is a subject of interest in the BEPS project, Action 1—Tax Challenges Arising from Digitalisation. For more details see OECD (2015b). For other results related to the nexus rule, and a new one, see Falcão and Michel (2014), Collin and Colin (2013), Hongler and Pistone (2015), López (2015), Deveraux and de la Feria (2014), Popa (2016), Hellerstein (2014), Olbert and Spengel (2017), de Wilde (2015), Pinto (2006) and Kemmeren (2006).
- 11.
For more details, see Olbert and Spengel (2017).
- 12.
For more details about business models see Nerudová and Solilová (2020).
- 13.
Established by the Treaty of Rome in 1957, signatories Belgium, France, Italy, Luxembourg, the Netherlands, and West Germany. The EEC is considered a precursor to the EU, established by the Maastricht Treaty which came into force in 1 November 1993.
- 14.
Report of the Fiscal and Financial Committee, prof. Fritz Neumark, 1963.
- 15.
Using multilateral tax convention was also recommended by the Segrè Report (1966) for the purpose of develo** a European capital market. For more details, see the EEC Commission (1966).
- 16.
Specifically, in 1969 Capital Duties Directive, Council Directive 69/335/EEC as a precursor to the Parent-Subsidiary Directive.
- 17.
In a classical system profits of corporations are taxed at the corporate level, and then if profits are distributed to shareholders it is again taxed as distributed profits via withholding tax.
- 18.
Proposal for a Council Directive concerning the harmonisation of systems of company taxation and of withholding taxes on dividends, COM(75) 392 final, 23 July 1975. Through a partial imputation system, a reimbursable tax credit is available to shareholders based on the taxation of distributed profits.
- 19.
See Council Resolution of 10 February 1975 on the measures to be taken by the Community in order to combat international tax evasion and avoidance, OJ C35, 14. 2. 1975.
- 20.
Council Directive 77/799/EEC of 19 December 1977 Concerning Mutual Assistance by the Competent Authorities of the Member States in the Field of Direct Taxation and Taxation of Insurance Premiums. This Directive was repealed by Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation known as DAC 1.
- 21.
See Report of the Committee of Independent Experts on Company Taxation, March 1992.
- 22.
See Toward Tax Co-ordination in the European Union, A Package to Tackle Harmful Tax Competition. Doc COM(97) 495 final, 1. October 1997.
- 23.
Council Directive 2003/48/EC of 3 June 2003 on Taxation of Savings Income in the Form of Interest Payments. No longer in force, date of end of validity: 31/12/2015 as it was superseded by parts of Directive 2014/107/EC of 9 December 2014, known as DAC 2.
- 24.
Council Directive 2003/49/EC of 3 June 2003 on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States. This act has been changed. Current consolidated version: 01/07/2013, available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02003L0049-20130701.
- 25.
See Company Taxation in the Internal Market, SEC(2001) 1681. The study presented detailed classification of obstacles, such as transfer pricing rules, double taxation, unavailability of cross-border loss reliefs and reliefs/deferrals in cases of cross-border reorganisations/mergers/acquisitions and others.
- 26.
For more details, see above.
- 27.
See COM(2011) 121/4, 2011/0058 (CNS), SEC(2011) 316 final. In October 2016, the Commission re-launched the CCCTB, however, not with the aim of harmonizing corporate taxation across Member States, but to make corporate taxation in the EU fairer, more competitive and more growth-friendly. The re-launched CCCTB will be implemented through a two-step approach and will be mandatory for the largest groups in the EU fulfilling the threshold of consolidated net turnover of at least 750 million EUR. Firstly, the common rules for tax base construction without the possibility of tax consolidation will be introduced as CCTB is newly understood as a tool for fair and efficient taxation within the EU eliminating base erosion and profit shifting. Secondly, the consolidation regime should be introduced in the second step.
- 28.
With regard to directives in the area of corporate taxation, only six Directives solving partial issues and one Convention were approved during this time. The Parent-Subsidiary Directive—Council Directive 2011/96/EU of 30 November 2011 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States, previous version 90/435/EEC of 23 July 1990, amended by 2003/123/EC of 22 December 2003, the Merger Directive—Council Directive 2009/133/EC of 19 October 2009 on the common system of taxation applicable to mergers, divisions, partial divisions, transfers of assets and exchanges of shares concerning companies of different Member States and to the transfer of the registered office of an SE or SCE between Member States, this act has been changed—current consolidated version: 01/07/2013; the Saving Directive (see Note 23); the Interest and Royalties Directive—Council Directive 2003/49/EC of 3 June 2003 on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States (see Note 24); the Mutual Assistance Directive (see Note 20) and the Arbitration Convention on the elimination of double taxation in connection with the adjustment of profits of associated enterprises, (90/463/EEC) of 23 July 1990.
- 29.
See more in European Commission (2013).
- 30.
See above.
- 31.
See the following section.
- 32.
For more details about the Forum see: http://www.oecd.org/tax/transparency/.
- 33.
For more details about the EOIR and Exchange of information see: http://www.oecd.org/tax/transparency/what-we-do/exchange-of-information-on-request/exchange-of-information-on-request-peer-review-process.htm.
- 34.
For more details about the AEOI and Exchange of information see: http://www.oecd.org/tax/automatic-exchange/. In 2015, more than 90 countries committed to the AEOI and gradually joined the Common Reporting Standard Multilateral Competent Authority Agreement.
- 35.
For more details see: https://home.treasury.gov/policy-issues/tax-policy/foreign-account-tax-compliance-act. Furthermore, there are available FATCA agreements and understandings in effect by jurisdiction.
- 36.
Furthermore, based on the Statistics, in 2020 there were already 4400 activated bilateral exchange relationships within the common reporting standards (CRS) and over 2700 within Country-by-Country Reporting. These include exchanges between the signatories to the CbC Multilateral Competent Authority Agreement (CbC MCAA), between EU Member States under EU Council Directive 2016/881/EU known as DAC 4, and between signatories to bilateral competent authority agreements for exchanges under Double Tax Conventions or Tax Information Exchange Agreements, including 41 bilateral agreements with the United States. For more information about CbC MCAA, see: https://www.oecd.org/tax/automatic-exchange/international-framework-for-the-crs/.
- 37.
SAARs are typically very targeted legal statements that remove or reduce the tax effect of certain transactions. Unlike SAARs, a GAAR is intended to apply to all types of transactions and arrangements with the aim of counteracting tax advantages arising from tax arrangements that are abusive.
- 38.
For more details see also Pistone (2016).
- 39.
- 40.
For example, until the collapse of the Breton Woods system (early 1970s), the international capital flow was controlled, furthermore, intra-group transactions between associated enterprises were not so significant as they are nowadays. Intra-group transactions between associated enterprises have increased since the 1970s and 1980s, when IT technology (PC and internet) allowed the coordination between MNEs and also the global capital market was reconstructed so that European and Japanese MNEs returned to the global FDI scene, where only the US MNEs remained. Moreover, since the 1960s, the use of offshore, and also onshore jurisdictions, offering some preferential tax regimes was more often across MNEs. For more details, see Dunning and Lundan (2008).
- 41.
BEPS project, see in detail: https://www.oecd.org/tax/beps/about/.
- 42.
For more details see: http://www.oecd.org/tax/transparency/what-we-do/.
- 43.
The EU confirmed support for work within the BEPS project in May 2013, see Council document 9405/13.
- 44.
Specifically Action 1-Tax Challenges Arising from Digitalisation; Action 2-Neutralising the effects of hybrid mismatch arrangements; Action 3-Controlled Foreign Company; Action 4-Limitation on Interest Deductions; Action 5-Harmful tax practices; Action 6-Prevention of tax treaty abuse; Action 7-Permanent establishment status; Actions 8–10—Transfer pricing; Action 11-BEPS data analysis; Action 12-Mandatory Disclosure Rules; Action 13-Country-by-Country Reporting; Action 14-Mutual Agreement Procedure; and Action 15-Multilateral Instrument. Final reports covering recommendations are mentioned in the link for each action. For more details see: https://www.oecd.org/tax/beps/beps-actions/.
- 45.
Until beginning of 2021, it covers over 135 members and 14 observer organisations.
- 46.
For more details, see OECD (2015b).
- 47.
- 48.
Usage of differences in the tax treatment of an entity/financial instrument/branch structure under the domestic laws of two or more tax jurisdictions with an aim of reaching tax advantages and/or double non-taxation.
- 49.
See more in OECD (2015c).
- 50.
For example, the USA, Australia, New Zealand, and EU Member States (see below).
- 51.
Council Directive (EU) 2017/952 of 29 May 2017 amending Directive (EU) 2016/1164 regarding hybrid mismatches with third countries. Available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?toc=OJ:L:2017:144:FULL&uri=uriserv:OJ.L_.2017.144.01.0001.01.ENG.
- 52.
See more in OECD (2015d).
- 53.
Council Directive (EU) 2016/1164 of 12 July 2016 laying down rules against tax avoidance practices that directly affect the functioning of the internal market. Available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32016L1164.
- 54.
For more details, see OECD (2016b).
- 55.
See OECD Corporate Tax Statistics Database, OECD (2020a).
- 56.
Council Directive (EU) 2016/1164 of 12 July 2016 laying down rules against tax avoidance practices that directly affect the functioning of the internal market. Available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32016L1164.
- 57.
For more details see OECD (2015e).
- 58.
For this purpose, the Exchange on tax rulings (ETR) XML Schema, User guide standardised electronic format and the ETR Status Message XML Schema were created for exchange between jurisdictions. Since 1 April 2020 their second version has been introduced and used.
- 59.
It focuses on the information gathering process, exchange of information, confidentiality of information received and statistics.
- 60.
It includes the process for collecting relevant data based upon the standardised questionnaires, the preparation of reports and their approval, and outputs of the review.
- 61.
It includes requirements of the standards, exchange timelines, and standardizes IT format for the exchange and NTJ XML Schema.
- 62.
For more details see OECD (2015f).
- 63.
See in detail OECD (2017a).
- 64.
Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI Convention), Article 12—Artificial Avoidance of Permanent Establishment Status through Commissionnaire Arrangements and Similar Strategies, Article 13—Artificial Avoidance of Permanent Establishment Status through the Specific Activity Exemptions, Article 14—Splitting-up of Contracts, Article 15—Definition of a Person Closely Related to an Enterprise. Available at: https://www.oecd.org/tax/treaties/multilateral-convention-to-implement-tax-treaty-related-measures-to-prevent-BEPS.pdf.
- 65.
- 66.
See more in Schoueri (2015). The current version of the OECD TP Guidelines are available at: https://www.oecd.org/tax/transfer-pricing/oecd-transfer-pricing-guidelines-for-multinational-enterprises-and-tax-administrations-20769717.htm. However, up until the beginning of 2021, the guidelines were updated several times; separate updates were not included in the comprehensive version of the OECD TP Guidelines. The comprehensive version of the OECD TP Guidelines should be available by early 2021.
- 67.
For more details see OECD (2015g).
- 68.
In the 2017 version, the following changes were incorporated: statements aligning transfer pricing outcomes with value creation and related transfer pricing documentation and Country-by-Country Reporting (amendments in Chap. I, II, V, VI, VII and VIII); changes in the guidance on business restructuring related to Actions 8–10 and 13; and changes on guidance for safe harbours in Chap. IV, OECD (2017b).
- 69.
Such as Revised Guidance on the Application of the Transactional Profit Split Method-BEPS Action 10 published in June 2018 (available at: https://www.oecd.org/tax/transfer-pricing/revised-guidance-on-the-application-of-the-transactional-profit-split-method-beps-action-10.htm), Guidance for Tax Administrations on the Application of the Approach to Hard-to-Value Intangibles - BEPS Action 8 published in June 2018 (available at: https://www.oecd.org/tax/transfer-pricing/guidance-for-tax-administrations-on-the-application-of-the-approach-to-hard-to-value-intangibles-beps-action-8.htm),Transfer Pricing Guidance on Financial Transactions: Inclusive Framework on BEPS: Actions 4, 8–10 published in February 2020, available at: https://www.oecd.org/tax/beps/oecd-releases-transfer-pricing-guidance-on-financial-transactions.htm.
- 70.
- 71.
For more details, see OECD (2015h).
- 72.
For more details, see: OECD (2015i).
- 73.
Council Directive (EU) 2018/822 of 25 May 2018 amending Directive 2011/16/EU regarding mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements, available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32018L0822. The Directive took effect from July 2020. Implementation was postponed due to the Covid-19 pandemic.
- 74.
See more in OECD (2018).
- 75.
See more details in OECD (2015j).
- 76.
Exchange of CbCRs can be performed via the Multilateral Convention on Administrative Assistance in Tax Matters, Bilateral tax conventions and Tax Information Exchange Agreements (TIEAs).
- 77.
See also OECD TP Guidelines, Chap. IV, OECD (2017b). The MAP procedure can also be opened through the EC Arbitration Convention on the elimination of double taxation in connection with the adjustment of profits on associated enterprises (90/463/EEC).
- 78.
Article 25, para 5 was incorporated into the OECD Model Tax Convention in 2008. In the case of the UN Model Tax Convention in 2011.
- 79.
See also: Schoueri (2016).
- 80.
Mutual Agreement Procedure Statistics for 2019 is available at: https://www.oecd.org/tax/dispute/mutual-agreement-procedure-statistics.htm.
- 81.
MAP Statistics Reporting Framework is available at: https://www.oecd.org/tax/dispute/mutual-agreement-procedure-statistics-reporting-framework.pdf.
- 82.
- 83.
For more details, see: OECD (2015l).
- 84.
Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI Convention). Available at: https://www.oecd.org/tax/treaties/multilateral-convention-to-implement-tax-treaty-related-measures-to-prevent-BEPS.pdf. The explanatory statement providing clarification to the approach taken in the MLI and how each provision is intended to affect tax treaties is available at: https://www.oecd.org/tax/beps/explanatory-statement-multilateral-convention-to-implement-tax-treaty-related-measures-to-prevent-BEPS.pdf.
- 85.
Toolkit for Application of the Multilateral Instrument for BEPS Tax Treaty Related Measures, where the MLI Matching Database is available. Available at: https://www.oecd.org/tax/beps/application-toolkit-multilateral-instrument-for-beps-tax-treaty-measures.htm.
- 86.
For more about the MLI Positions of individual Signatories see: https://www.oecd.org/tax/beps/beps-mli-signatories-and-parties.pdf.
- 87.
See Note 53 above. The ATAD Directive was amended on 1 January 2020, in consolidated text: Council Directive (EU) 2016/1164 of 12 July 2016 lays down rules against tax avoidance practices that directly affect the functioning of the internal market; available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02016L1164-20200101.
- 88.
For more details about the implementation of those rules see chapter “Tax Policy in Relation to Fair Corporate Taxation”.
- 89.
For more details about the Anti Tax Avoidance Package, see https://ec.europa.eu/taxation_customs/business/company-tax/anti-tax-avoidance-package_en.
- 90.
The predecessor of Council Directive 2011/16/EU, known as DAC 1, was a Mutual Assistance Directive released in 1977. Council Directive 2011/16/EU of 15 February 2011, known as DAC 1 is available at: https://eur-lex.europa.eu/legal-content/en/ALL/?uri=CELEX:32011L0016.
- 91.
- 92.
See Communication from the Commission to the European Parliament and the Council on External Strategy for Effective Taxation COM/2016/024 final, available at http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A52016DC0024.
- 93.
For more details see: https://ec.europa.eu/taxation_customs/business/company-tax/tax-transparency-package_en.
- 94.
The EU Action Plan contains 5 Key Areas, specifically (1) Re-launching the Common Consolidated Corporate Tax Base (CCCTB), (2) Ensuring fair taxation where profits are generated, (3) Creating a better business environment, (4) Increasing transparency and (5) Improving EU coordination. For more details see: https://ec.europa.eu/taxation_customs/business/company-tax/action-plan-corporate-taxation_en. See also Commission’s Action Plan on a Fairer Corporate Tax System (COM (2015) 302) to tackle tax avoidance: https://ec.europa.eu/taxation_customs/sites/taxation/files/resources/documents/taxation/company_tax/fairer_corporate_taxation/com_2015_302_en.pdf.
- 95.
Spontaneous exchange of information takes place if a country finds out information on possible tax evasion relevant to another country (the source country or the country of residence).
- 96.
The automatic exchange of information secured automatic electronic channels for the exchange of information and a central directory for storing and sharing information on financial account information, advance cross-border rulings, CbCR, beneficial ownership information or on tax planning cross-border arrangements (tax planning schemes). The first experience in the automatic exchange of information came from the Directive 2003/48/EC known as the Savings Directive, which was repealed by DAC 2 (see Notes 23, 98).
- 97.
Exchange of information upon request is used when additional information for tax purposes is needed from another country.
- 98.
Directive 2014/107/EU (known as DAC 2) dated 9 December 2014 amending Directive 2011/16/EU regarding mandatory automatic exchange of information in the field of taxation in relation to financial account information, available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32014L0107. Furthermore, Commission Implementing Regulation (EU) 2015/2378 dated 15 December 2015 laying down detailed rules for implementing certain provisions of Council Directive 2011/16/EU on administrative cooperation in the field of taxation and repealing Implementing Regulation (EU) No 1156/2012, available at: https://eur-lex.europa.eu/eli/reg_impl/2015/2378/oj. Council Directive (EU) 2015/2376 (known as DAC 3) dated 8 December 2015 amending Directive 2011/16/EU (known as DAC 1) concerning mandatory automatic exchange of information in the field of taxation in relation to advanced cross-border rulings and advanced pricing arrangements, available at: https://eur-lex.europa.eu/legal-content/en/TXT/?uri=CELEX%3A32015L2376. Council Directive (EU) 2016/881 (known as DAC 4) dated 25 May 2016 amending Directive 2011/16/EU regarding mandatory automatic exchange of information in the field of taxation in relation to CbCR, available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32016L0881. Council Directive (EU) 2016/2258 (known as DAC 5) dated 6 December 2016 amending Directive 2011/16/EU concerning access to anti-money-laundering information by tax authorities (to beneficial ownership information), available at: https://eur-lex.europa.eu/legal-content/CS/ALL/?uri=uriserv%3AOJ.L_.2016.342.01.0001.01.ENG. Council Directive (EU) 2018/822 (known as DAC 6) dated 25 May 2018 amending Directive 2011/16/EU regarding mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements, available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32018L0822.
- 99.
For more details see http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32013L0034&from=EN.
- 100.
For more details see http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:176:0338:0436:En:PDF.
- 101.
EU Transfer pricing documentation and its requirements are mentioned in the Code of Conduct, covering a master file and country specific documentation.
- 102.
For more details see OECD (2017b), TP Guidelines, Chap. V–Documentation.
- 103.
For the comparison of OECD CbCR requirements and EU CbCR requirements, see Solilová and Nerudová (2019).
- 104.
See the list of all Taxation papers published and available since 2004, available at: https://ec.europa.eu/taxation_customs/publications/taxation-services-papers/taxation-papers_en.
- 105.
European Commission, Brussels, 21.9.2017, COM(2017) 547 final. Communication from the Commission to the European Parliament and the Council: A Fair and Efficient Tax System in the European Union for the Digital Single Market, available at: https://ec.europa.eu/taxation_customs/sites/taxation/files/communication_taxation_digital_single_market_en.pdf.
- 106.
Brussels, 21.3.2018, COM(2018) 147 final. Proposal for a COUNCIL DIRECTIVE laying down rules relating to the corporate taxation of a significant digital presence {SWD(2018) 81 final}—{SWD(2018) 82 final}, available at: https://ec.europa.eu/taxation_customs/sites/taxation/files/proposal_significant_digital_presence_21032018_en.pdf, and Brussels, 21.3.2018, COM(2018) 148 final. Proposal for a COUNCIL DIRECTIVE on the common system of a digital services tax on revenues resulting from the provision of certain digital services.
{SWD(2018) 81}—{SWD(2018) 82}, available at: https://ec.europa.eu/taxation_customs/sites/taxation/files/proposal_common_system_digital_services_tax_21032018_en.pdf. For more details see link: https://ec.europa.eu/taxation_customs/business/company-tax/fair-taxation-digital-economy_en.
- 107.
We focus on Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, the Slovak Republic and Slovenia. This group of countries is considered to be CEE-EU countries.
- 108.
A target entity is an entity in a multinational group that has its tax base reduced as a result of aggressive tax planning. Moreover, at least one lower entity must be determined for the identification of a target entity within an MNE group. For further details, see European Commission (2017).
- 109.
A lower-tax entity is an entity in the multinational group that has its tax base increased as a result of aggressive tax planning, but the base is taxed at lower tax rate. Moreover, at least one target entity must be determined for the identification of a lower-tax entity within an MNE group. For further details, see European Commission (2017).
- 110.
A conduit entity is an entity in the multinational group that does not see its tax base significantly affected, but this entity is needed for an aggressive tax planning structure. A conduit entity cannot be identified as either the target or lower-tax entity. Moreover, at least one target entity must be determined to identify a conduit entity within an MNE group. For further details, see the European Commission (2017).
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The chapter is the result of the GA ČR No. 18-14082S “Fair corporate taxation: Measurement of the impact of the corporate profit shifting on the budget of the Czech Republic”.
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Solilová, V., Nerudová, D., Dobranschi, M. (2021). Profit Shifting and Tax Base Erosion in the Twenty-First Century. In: Nerudová, D., Pavel, J. (eds) Profit Shifting and Tax Base Erosion . Contributions to Finance and Accounting. Springer, Cham. https://doi.org/10.1007/978-3-030-74962-0_2
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