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Irma Johanna Mosquera Valderrama
Intertax
Volume 47, Issue 5 (2019) pp. 454 – 467
https://doi.org/10.54648/taxi2019046
Abstract
This article analyses the standard of good governance in tax matters introduced by the Economic and Financial Affairs Council (ECOFIN) in 2008, with a view to tackle tax fraud and tax evasion. At that time, the standard included transparency, exchange of information and fair tax competition. Later on, several OECD and EU developments have changed the content of this standard. As of April 2018, the standard of good governance includes also the four Minimum Standards of the Project to tackle base erosion and profit shifting (BEPS) practices by multinationals. This standard has been introduced by the EU as a precondition for third (non-EU) countries that receive EU development aid, conclude strategic partnership agreements, free trade and economic partnership agreements and more recently as a standard that determines whether the third (non- EU) country should be included in a single EU common list of non-cooperative jurisdictions. This article aims answers two questions (1) whether the standard of good governance in tax matters is an import and/or export of EU norms? and (2) what is the legal status of this standard vis-á-vis third (non-EU) countries? Finally, this article provides conclusions and recommendations for further research.
Extract
A comparability analysis forms the core of transfer pricing and involves the analysis of controlled transactions and the search for the right comparable. However, difficulties often arise in exactly matching the identified comparable to the controlled transaction. Hence, various comparability adjustments (such as the accounting, balance sheet, etc.) are undertaken primarily to eliminate differences and to achieve greater comparability between the comparable transactions/companies selected and the controlled transactions/companies under analysis.
It is pertinent to mention that many of the commonly used adjustments cannot entirely take care of all of the functional and economic variations pre-existing between the comparable and the controlled transactions (one such problem area is the functional variation that occurs due to rapid digital and technological advancements and changes). The authors, therefore, believe there is a need to devise and implement a change (i.e., digital data intensity adjustment that could account for the differences between comparable companies due to these digital/data developments.
In the context of the above background, the paper summarizes some of the existing comparability adjustments; thereafter, it highlights the need for a new adjustment to keep pace with the growth of the digital/data economy along with a case study. Further, certain broad frameworks for this new adjustment are discussed.
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