Tag: Tax avoidance

Chapter I paragraph 1.2

When independent enterprises transact with each other, the conditions of their commercial and financial relations (e.g. the price of goods transferred or services provided and the conditions of the transfer or provision) ordinarily are determined by market forces. When associated enterprises transact with each other, their commercial and financial relations may not be directly affected by external market forces in the same way, although associated enterprises often seek to replicate the dynamics of market forces in their transactions with each other, as discussed in paragraph 1.5 below. Tax administrations should not automatically assume that associated enterprises have sought to manipulate their profits. There may be a genuine difficulty in accurately determining a market price in the absence of market forces or when adopting a particular commercial strategy. It is important to bear in mind that the need to make adjustments to approximate arm’s length conditions arises irrespective of any contractual obligation undertaken by the parties to pay a particular price or of any intention of the parties to minimize tax. Thus, a tax adjustment under the arm’s length principle would not affect the underlying contractual obligations for non-tax purposes between the associated enterprises, and may be appropriate even where there is no intent to minimize or avoid tax. The consideration of transfer pricing should not be confused with the consideration of problems of tax fraud or tax avoidance, even though transfer pricing policies may be used for such purposes ...

Chapter I paragraph 1.23

Even if some countries were willing to accept global formulary apportionment, there would be disagreements because each country may want to emphasize or include different factors in the formula based on the activities or factors that predominate in its jurisdiction. Each country would have a strong incentive to devise formulae or formula weights that would maximise that country’s own revenue. In addition, tax administrations would have to consider jointly how to address the potential for artificially shifting the production factors used in the formula (e.g. sales, capital) to low tax countries. There could be tax avoidance to the extent that the components of the relevant formula can be manipulated, e.g. by entering into unnecessary financial transactions, by the deliberate location of mobile assets, by requiring that particular companies within an MNE group maintain inventory levels in excess of what normally would be encountered in an uncontrolled company of that type, and so on ...

Chapter IV paragraph 4.23

Civil monetary penalties for tax understatement are frequently triggered by one or more of the following: an understatement of tax liability exceeding a threshold amount, negligence of the taxpayer, or wilful intent to evade tax (and also fraud, although fraud can trigger much more serious criminal penalties). Many OECD member countries impose civil monetary penalties for negligence or willful intent, while only a few countries penalise “no-fault” understatements of tax liability ...

April 2013: Draft Handbook on Transfer Pricing Risk Assessment

The 2013 Draft Handbook on Transfer Pricing Risk Assessment is a detailed, practical resource that countries can follow in developing their own risk assessment approaches. The handbook supplements useful materials already available with respect to transfer pricing risk assessment. The OECD Forum on Tax Administration published a report entitled “Dealing Effectively with the Challenges of Transfer Pricing” in January 2012. One chapter of that report also addresses transfer pricing risk assessment. Draft-Handbook-TP-Risk-Assessment-ENG ...

UK Parliament, House of Commons, Committee of Public Accounts, Hearings on Tax Avoidance Schemes

Follow the work of the UK Parliament, House of Commons Committee of Public Account, on corporate tax avoidance schemes. http://www.parliament.uk/business/committees/committees-a-z/commons-select/public-accounts-committee/taxation/ Statements from Amazon, Google and Starbucks, November 2012 UK Parlement, September 2012 Google Amazon Starbucks Statement from Google June 2013 UK Parlement, June 2013, Tax Avoidance–Google ...

Australian Parliament Hearings – Tax Avoidance

In a public hearing held 22 August 2017 in Sydney Australia by the Economics References Committee, tech companies IBM, Microsoft, and Apple were called to the witnesses stand to explain about tax avoidance schemes – use of “regional headquarters” in low tax jurisdictions (Singapore, Ireland and the Netherlands) to avoid or reduce taxes. Follow the ongoing Australian hearings into corporate tax avoidance on this site: http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Corporatetax45th Transcript from the hearing: Tax Avoidance, Australian Senate Hearing, 22 August 2017 ...

Tax avoidance in Australia

In May 2018 the final report on corporate tax avoidance in Australia was published by the Australian Senate. The report contains the findings, conclusions and recommendations based on 4 years of hearings and investigations into tax avoidance practices by multinationals in Australia. Australian-final-report-on-tax-avoidance ...

Netherlands vs Crop Tax Advisors, June 2019, Court of the Northern Netherlands, Case No 200.192.332/01

The question in this case is whether a tax adviser at Crop BV acted in accordance with the requirements of a reasonably competent and reasonably acting adviser when advising on the so-called royalty routing and its implementation and when giving an advice on trading. Click here for translation NL royalty routing1 ...

France vs. Google, April 2019, Administrative Court of Appeal, Case N° 17PA03065

In this case the French tax administration argued that Google had a permenent establishment in France because the parent company in the US and its subsidiary in Ireland had been selling a service – online ads – to customers in France. In 2017 the administrative court found that Google France did not have the capability to carry out the advertising activities on its own. Google Ireland Limited therefore did not have a permanent establishment in France. The same conclution was reached i 2019 by the Administrative court of appeal. Click here for translation France vs Google April 2019, No 17PA03065, ...

New Zealand vs Cullen Group Limited, March 2019, New Zealand High Court, Case No [2019] NZHC 404

In moving to the United Kingdom, a New Zealand citizen, Mr. Eric Watson, restructured a significant shareholding into debt owed by a New Zealand company, Cullen Group Ltd, to two Cayman Island conduit companies, all of which he still controlled to a high degree. This allowed Cullen Group Ltd to pay an Approved Issuer Levy (AIL) totalling $8 million, rather than Non-Resident Withholding Tax of $59.5 million. The steps in the arrangement were as follows: (a) Mr Watson sold his shares in Cullen Investments Ltd to Cullen Group, at a (rounded) value of $193 million, being $291 million less his previous $98 million shareholder advances. The sale was conditional on Cullen Investments Ltd selling its shares in Medical Holdings Ltd to Mr Watson and on Cullen Investments Ltd selling its shares in Vonelle Holdings Ltd to Maintenance Ltd which was owned by Mr Watson. (b) Cullen Group’s purchase of the Cullen Investments Ltd shares from Mr Watson was funded by a vendor loan from Mr Watson of $193 million (Loan A). Mr Watson also lent Cullen Group $98 million (Loan B) which Cullen Group on-lent to Cullen Investments Ltd so that Cullen Investments Ltd could repay Mr Watson’s shareholder advance of that amount. (c) Mr Watson assigned his rights under Loans A and B to the two conduit companies, Modena and Mayfair, respectively. Mr Watson made back-to-back loans of $193 million (Modena Loan) and $98 million (Mayfair Loan) to each of them to fund their payment to him of consideration for those respective assignments in return for security over all property owned by Modena and Mayfair respectively. The result was therefore that Cullen Investments Ltd was owned by Cullen Group which owed money to Modena/Mayfair which owed money to Mr Watson. Effectively, instead of Mr Watson owning the shares in Cullen Investments Ltd, he held loans for the same value to Cullen Investments Ltd’s owner, Cullen Group, through Modena and Mayfair. He had exchanged equity for debt. The tax authorities held that Cullen Group had avoided $59.5 million of NRWT (withholding tax) while it paid $8 million in Approved Issuer Levy. An assessment in the amount of the difference, $51.5 million, was issued. There are three requirements for there to be tax avoidance in New Zealand: There is an arrangement which uses, and falls within, specific tax provisions. Viewed in light of the arrangement as a whole, the taxpayer has used the specific provisions in a way which cannot have been within the contemplation and purpose of Parliament when it enacted the provisions. The arrangement has a purpose or effect, that is more than merely incidental, of directly or indirectly altering the incidence of income tax. The High Court found there was a tax avoidance arrangement because it was not within Parliament’s contemplation and purpose in enacting the Approved Issuer Levy regime. Cullen Group Ltd was found liable for the $51.5 million difference plus interest and penalties. 1Cuo ...