The OECD, in promulgating the discussion draft for action 12 of the base erosion and profit shifting project, sought to have tax authorities mandate disclosure initiatives that target the aggressive tax planning community. The drafters’ goal is to ‘‘rein-in’’ unwarranted activities by enabling tax administrations to challenge both domestic and international aggressive tax schemes. The draft itself, however, has significant limitations:
· It focuses almost exclusively on mass market tax schemes, minimizing the taxing jurisdiction’s potential remedies against perpetrators of individualized, in-house, international schemes;
· It seeks to curtail, rather than expand, tax administrations’ remedies against aggressive international tax planning schemes; and
· While the OECD designed action 12 to address aggressive tax planning, the drafters failed to address many of the parameters that determine the nature of this tax aggressiveness.
In addition, the draft fails to specify the scope of the aggressive tax shelter community itself. At various times, and depending on the specific context, the draft could apply such participant rules to promoters, advisers, material advisers, intermediaries, taxpayers, users, end-users, and others who provide ‘‘material assistance’’ to such schemes. The drafters acknowledge that those terms will need to be defined. It is unlikely that the action 12 drafters can weld these definitions into country-specific legislation.
For more on this see The OECD Challenges Aggressive Tax Planning: A Moving Target
by Robert Feinschreiber and Margaret Kent, Tax Notes Int’l,September 21, 2015, p. 1037.
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