Fighting tax evasion: How to end hybrid mismatch arrangements
Globalisation has generated opportunities for multinational enterprises to reduce their taxes, often by moving profits to offshore financial centres, and this can erode a country's tax base. The OECD/G20 Base Erosion and Profit Shifting (BEPS) Project provides governments with solutions for closing the gaps in existing international rules, that currently allow corporate profits to “disappear” or be artificially shifted to low/no tax environments, where little or no economic activity takes place. One target of attention is hybrid financial instruments, such as a convertible bond whose tax treatment might differ between countries, thanks to different laws. Is there a solution? A change to the domestic laws to create more coherence between them may be the answer since this would close down another one of those gaps that enable tax avoidance to take place.
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Updated: 22/02/2021
