Quotation Blum, Daniel. 2018. Controlled Foreign Companies: Selected Policy Issues – or the Missing Elements of BEPS Action 3 and the Anti-Tax-Avoidance Directive. Intertax, 4 (46), 296


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Abstract

The discussion of controlled foreign corporations (CFCs) in both the Final Report on Action 3 of the OECD’s Base Erosion and Profit Shifting Project and the Anti-Tax Avoidance Directive (ATAD) has failed to address some high-level policy questions that are worth considering in more detail. Depending on the scope of the tax system (worldwide vs. territorial) and the means by which double taxation is avoided (credit vs. exemption), the crucial policy questions revolve around the issue as to which tax base should be protected and in which capacity (i.e. as the residence state or the source state). Moreover, the question as to whether deferral and income diversion should be curtailed as a matter of principle or only if the deferred/diverted income is low taxed in the state of residence of the CFC must be answered. On an operational level, the means by which income is included require careful assessment. Depending on whether a CFC regime pierces the CFC’s corporate veil or applies a deemed dividend approach, the interaction with both the relevant distributive rules and – in case of EU Member States – the EU Fundamental Freedoms, potentially limit the scope of a CFC regime. By tracing back the underlying structural tensions inherent in domestic corporate tax laws and highlighting the policy choices that legislators face along the way to enact coherent CFC regimes that counter both tax deferral and income diversion while respecting the existing network of rules governing the allocation of taxing rights in cross-border situations, this article facilitates a principled discussion and, thus, helps to overcome the widespread BEPS fallacy of accepting the technical outcomes of the BEPS project without questioning the underlying principles.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Intertax
WU-Journal-Rating new STRAT-C
Language English
Title Controlled Foreign Companies: Selected Policy Issues – or the Missing Elements of BEPS Action 3 and the Anti-Tax-Avoidance Directive
Volume 4
Number 46
Year 2018
Page from 296
Reviewed? Y
DOI na
Open Access N

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People
Blum, Daniel (Details)
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Austrian and International Tax Law IN (Details)
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