A nation’s role in addressing base erosion and profit shifting : balancing sovereignty with international collaboration and coordination

The notion of sovereignty is central to any international tax issue. While a nation is free to design its tax laws as it sees fit and raise revenue in accordance with the needs of its citizens, it is not possible to undertake such a task in isolation. In a world of cross-border investments and business transactions, all tax regimes impact on one another. Tax interactions between sovereign states cannot be avoided. Ultimately, the interactions mean that a nation must decide whether to engage in both collaboration and coordination with other nations and supranational bodies alike or maintain an individualised stance in relation to its tax policy. Whatever the decision, there is arguably an exercise in national sovereignty in some form. In the context of an international tax regime, whether that regime is interpreted broadly as meaning international norms generally adopted by nations around the world or domestic regimes legislating for cross-border transactions, rhetoric around national fiscal sovereignty takes on many different forms. At one end of the spectrum it is relied upon by financial secrecy jurisdictions (tax havens) as a defence to their position on the basis that ‘other’ nations cannot interfere with the fiscal sovereignty of a jurisdiction. At the other end of the spectrum, it is argued that profit shifting and international tax avoidance if not stopped is, in and of itself, a threat to a nation’s fiscal sovereignty on the basis that it threatens the ability to tax and raise the revenue needed. This paper considers a modern conceptualisation of sovereignty along with its role within international tax coordination and collaboration to argue that a move towards a more unified approach to addressing international base erosion and profit shifting may be the ultimate exercise of national fiscal sovereignty. By using the current transfer pricing regime as a case study, this paper posits that it is not merely enough to have international agreement on allocation rules to be applied, but that the ultimate exercise of national sovereignty is political agreement with other states to ensure that it is governments which determine the allocational basis of worldwide profits to be taxed. In doing so, it is demonstrated that the arm’s length pricing requirement of the current transfer pricing regime, rather than providing governments with the ability to determine the location of profits, is providing multinational entities with the ultimate power to determine that location. If left unchecked, this will eventually erode a nation’s ability to capture the required tax revenue and, as a consequence, may be deemed a failure by nation states to exercise their fiscal sovereignty.

A nation's role in addressing base erosion and profit shifting : sovereignty in relation to transfer pricing

The notion of sovereignty is central to any international tax issue. While a nation is free to design its tax laws as it sees fit and raise revenue in accordance with the needs of its citizens, it is not possible to undertake such a task in isolation. Tax interactions between sovereign states cannot be avoided. Ultimately, the interactions mean that a nation must decide whether or engage in both collaboration and co ordination with other nations and supranational bodies alike or maintain a unilateral stance in relation to its tax policy. This article considers a modern conceptualisation of sovereignty to argue that a move towards a more unified approach to addressing international base erosion and profit sharing may be the ultimate exercise of national fiscal sovereignty.

Country-by-country reporting: A critical analysis

This thesis evaluates the recent work of the Organisation for Economic Cooperation and Development and civil society groups in creating requirements for multinational entities to disclose financial information on a Country-by-Country basis. Country-by-Country reports may identify profit-shifting activities and enable various stakeholders to hold multinational entities accountable for their global conduct, through the provision of transparent and decision-useful information. This thesis identifies inadequacies in current disclosure requirements and develops a standardised Country-by-Country model, which is applied to the disclosures of three multinational entities to illustrate its pragmatic feasibility and the improvement in quality of financial information available to users.

The case for unitary taxation with formulary apportionment in the finance sector and the effect on developing nations

In 2013 the OECD released its 15 point Action plan to deal with base erosion and profit shifting (BEPS). In that plan it was recognised that BEPS has a significant effect on developing countries. This is because the lack of tax revenue can lead to a critical underfunding of public investment that would help promote economic growth. To this end, the BEPS project is aimed at ensuring an inclusive approach to take into account not only views of the G20 and OECD countries but also the perspective of developing nations. With this focus in mind and in the context of developing nations, the purpose of this article is to consider a possible solution to profit shifting which occurs under the current transfer pricing regime, with that solution being unitary taxation with formulary apportionment. It does so using the finance sector as a specific case for application. Multinational financial institutions (MNFIs) play a significant role in financing activities of their clients in developing nations. Consistent with the ‘follow-the-client’ phenomenon which explains financial institution expansion, these entities are increasingly profiting from activities associated with this growing market. Further, not only are MNFIs persistent users of tax havens but also, more than other industries, have opportunities to reduce tax through transfer pricing measures. This article establishes a case for an industry specific adoption of unitary taxation with formulary apportionment as a viable alternative to the current regime. It argues that such a model would benefit not only developed nations but also developing nations which are currently suffering the effects of BEPS. In doing so, it considers the practicalities of such an implementation by examining both definitional issues and a possible formula for MNFIs. This article argues that, while there would be implementation difficulties to overcome, the current domestic models of formulary apportionment provide important guidance as to how the unitary business and business activities of MNFIs should be defined as well as factors that should be included in an allocation formula, along with the appropriate weighting. While it would be difficult for developing nations to adopt such a regime, it is argued that it would be no more difficult than addressing issues they face with the current transfer pricing regime. As such, this article concludes that unitary taxation with formulary apportionment is a viable industry specific alternative for MNFIs which would assist developing nations and aid independent fiscal soundness.

G20 host Australia faces hard truths of multinational profit shifting

The G20 Finance Ministers have the opportunity this weekend to endorse the initial recommendations of the OECD on how to address the global problem of multinational tax avoidance. The work of the OECD on the issue to date is substantial. Most notable is the adoption by many nations, including Australia, of the Common Reporting Standard for the automatic exchange of tax information. This standard will allow significant inroads to be made into tax avoidance, particularly by individuals sheltering money offshore. This is the first step in an ambitious tax reform program. There is a long way to go if we are to end the issue now known as Base Erosion and Profit Shifting (BEPS). This week’s release of the first of the OECD recommendations contains some positive signs that further advances will be made. It also recognises some hard truths.

Government cracks down on tax avoidance through foreign investment rules

The Turnbull Government announced yet another measure aimed at addressing tax base erosion and profit shifting, placing additional requirements on new foreign investment under the existing national interest test. In the last 12 months Australia has seen various reforms within the tax system. However, this latest initiative is a shift as it links Australia’s tax regime with its foreign investment regime. It sends a broader signal to the market that Australia will look beyond the collection of tax revenues to a consideration of national interest.

Thin capitalisation – the multinational tax avoidance strategy the budget forgot

We have already seen major amendments to Australia’s tax regime to tackle base erosion and profit shifting (BEPS). Several more significant measures were announced in the federal budget, most notably the diverted profits tax, aimed at multinationals which shift tax to a lower taxing jurisdiction. Yet to date, a very simple tax minimisation strategy has been largely ignored in the ongoing reforms and was ignored in the federal budget. Excessive debt loading is a problem that not been afforded the same attention as other aggressive tax planning strategies adopted by multinationals.

Theoretical analysis for mechanical erosion of carbon-base materials in ablation

This article derives and provides a theoretical analysis for the mechanical erosion of carbon-base materials in ablation. The theory of mechanical erosion based on a nondimensional critical roughness parameter is proposed, The important parameters in this analytical method are independent of the test, The analysis accounts for the heating, pressure, and shear forces acting on material particles exposed to the boundary-layer flow. For the validity of a theoretical analytical method a computational example is given. The theoretical results agree fairly with the experimental data.

Studies on the Tracking and Erosion Resistance of RTV Silicone Rubber Nanocomposite

One of the problems associated with outdoor polymeric insulators is tracking and erosion of the weathershed which can directly influence the reliability of the power system. Flame retardants are added to the base material to enhance its tracking and erosion resistance. Hydroxide fillers are regarded as the best flame retardants. This paper deals with studies related to nano - sized magnesium dihydroxide (MDH) and micron-sized Alumina Trihydrate (ATH) fillers as flame retardants in RTV silicone rubber. Tracking and erosion resistance studies were carried out on MDH and ATH silicone rubber composites using an inclined plane tracking and erosion (IPT) resistance tester. The MDH filled (5% by wt) composites performed much better than ATH composites in terms of eroded mass, depth of erosion, width and length of erosion. The eroded mass of MDH composite is 49.8 % that of ATH composite which can be attributed to high surface area and higher thermal stability of MDH nanofillers.

Using a structural approach to identify relationships between soil and erosion in a semi-humid forested area, South India

Biogeochemical and hydrological cycles are currently studied on a small experimental forested watershed (4.5 km(2)) in the semi-humid South India. This paper presents one of the first data referring to the distribution and dynamics of a widespread red soil (Ferralsols and Chromic Luvisols) and black soil (Vertisols and Vertic intergrades) cover, and its possible relationship with the recent development of the erosion process. The soil map was established from the observation of isolated soil profiles and toposequences, and surveys of soil electromagnetic conductivity (EM31, Geonics Ltd), lithology and vegetation. The distribution of the different parts of the soil cover in relation to each other was used to establish the dynamics and chronological order of formation. Results indicate that both topography and lithology (gneiss and amphibolite) have influenced the distribution of the soils. At the downslope, the following parts of the soil covers were distinguished: i) red soil system, ii) black soil system, iii) bleached horizon at the top of the black soil and iv) bleached sandy saprolite at the base of the black soil. The red soil is currently transforming into black soil and the transformation front is moving upslope. In the bottom part of the slope, the chronology appears to be the following: black soil > bleached horizon at the top of the black soil > streambed > bleached horizon below the black soil. It appears that the development of the drainage network is a recent process, which was guided by the presence of thin black soil with a vertic horizon less than 2 in deep. Three distinctive types of erosional landforms have been identified: 1. rotational slips (Type 1); 2. a seepage erosion (Type 2) at the top of the black soil profile; 3. A combination of earthflow and sliding in the non-cohesive saprolite of the gneiss occurs at midslope (Type 3). Types 1 and 2 erosion are mainly occurring downslope and are always located at the intersection between the streambed and the red soil-black soil contact. Neutron probe monitoring, along an area vulnerable to erosion types 1 and 2, indicates that rotational slips are caused by a temporary watertable at the base of the black soil and within the sandy bleached saprolite, which behaves as a plane of weakness. The watertable is induced by the ephemeral watercourse. Erosion type 2 is caused by seepage of a perched watertable, which occurs after swelling and closing of the cracks of the vertic clay horizon and within a light textured and bleached horizon at the top of black soil. Type 3 erosion is not related to the red soil-black soil system but is caused by the seasonal seepage of saturated throughflow in the sandy saprolite of the gneiss occurring at midslope. (c) 2006 Elsevier B.V. All rights reserved.

Tracking and Erosion of Silicone Rubber Nanocomposites under DC Voltages of both Polarities

In order to improve the tracking and erosion performance of outdoor polymeric silicone rubber (SR) insulators used in HV power transmission lines, micron sized inorganic fillers are usually added to the base SR matrix. In addition, insulators used in high voltage dc transmission lines are designed to have increased creepage distance to mitigate the tracking and erosion problems. ASTM D2303 standard gives a procedure for finding the tracking and erosion resistance of outdoor polymeric insulator weathershed material samples under laboratory conditions for ac voltages. In this paper, inclined plane (IP) tracking and erosion tests similar to ASTM D2303 were conducted under both positive and negative dc voltages for silicone rubber samples filled with micron and nano sized particles to understand the phenomena occurring during such tests. Micron sized Alumina Trihydrate (ATH) and nano sized alumina fillers were added to silicone rubber matrix to improve the resistance to tracking and erosion. The leakage current during the tests and the eroded mass at the end of the tests were monitored. Scanning Electron Microscopy (SEM) and Energy dispersive Xray (EDX) studies were conducted to understand the filler dispersion and the changes in surface morphology in both nanocomposite and microcomposite samples. The results suggest that nanocomposites performed better than microcomposites even for a small filler loading (4%) for both positive and negative dc stresses. It was also seen that the tracking and erosion performance of silicone rubber is better under negative dc as compared to positive dc voltage. EDX studies showed migration of different ions onto the surface of the sample during the IP test under positive dc which has led to an inferior performance as compared to the performance under negative dc.

Understanding and modelling hydrological and soil erosion processes in burnt forest catchments

Forest fires implications in overland flow and soil erosion have been researched for several years. Therefore, is widely known that fires enhance hydrological and geomorphological activity worldwide as also in Mediterranean areas. Soil burn severity has been widely used to describe the impacts of fire on soils, and has being recognized as a decisive factor controlling post-fire erosion rates. However, there is no unique definition of the term and the relationship between soil burn severity and post-fire hydrological and erosion response has not yet been fully established. Few studies have assessed post-fire erosion over multiple years, and the authors are aware of none which assess runoff. Small amount of studies concerning pre-fire management practices were also found. In the case of soil erosion models, the Revised Universal Soil Loss Equation (RUSLE) and the revised Morgan–Morgan–Finney (MMF) are well-known models, but not much information is available as regards their suitability in predicting post-fire soil erosion in forest soils. The lack of information is even more pronounced as regards post-fire rehabilitation treatments. The aim of the thesis was to perform an extensive research under the post fire hydrologic and erosive response subject. By understanding the effect of burn severity in ecosystems and its implications regarding post fire hydrological and erosive responses worldwide. Test the effect of different pre-fire land management practices (unplowed, downslope plowed and contour plowed) and time-since-fire, in the post fire hydrological and erosive response, between the two most common land uses in Portugal (pine and eucalypt). Assess the performance of two widely-known erosion models (RUSLE and Revised MMF), to predict soil erosion rates during first year following two wildfires of distinctive burn severity. Furthermore, to apply these two models considering different post-fire rehabilitation treatments in an area severely affected by fire. Improve model estimations of post-fire runoff and erosion rates in two different land uses (pine and eucalypt) using the revised MMF. To assess these improvements by comparing estimations and measurements of runoff and erosion, in two recently burned sites, as also with their post fire rehabilitation treatments. Model modifications involved: (1) focusing on intra-annual changes in parameters to incorporate seasonal differences in runoff and erosion; and (2) inclusion of soil water repellency in runoff predictions. Additionally, validate these improvements with the application of the model to other pine and eucalypt sites in Central Portugal. The review and meta-analysis showed that fire occurrence had a significant effect on the hydrological and erosive response. However, this effect was only significantly higher with increasing soil burn severity for inter-rill erosion, and not for runoff. This study furthermore highlighted the incoherencies between existing burn severity classifications, and proposed an unambiguous classification. In the case of the erosion plots with natural rainfall, land use factor affected annual runoff while land management affected both annual runoff and erosion amounts significantly. Time-since-fire had an important effect in erosion amounts among unplowed sites, while for eucalypt sites time affected both annual runoff and erosion amounts. At all studied sites runoff coefficients increase over the four years of monitoring. In the other hand, sediment concentration in the runoff, recorded a decrease during the same period. Reasons for divergence from the classic post-fire recovery model were also explored. Short fire recurrence intervals and forest management practices are viewed as the main reasons for the observed severe and continuing soil degradation. The revised MMF model presented reasonable accuracy in the predictions while the RUSLE clearly overestimated the observed erosion rates. After improvements: the revised model was able to predict first-year post-fire plot-scale runoff and erosion rates for both forest types, these predictions were improved both by the seasonal changes in the model parameters; and by considering the effect of soil water repellency on the runoff, individual seasonal predictions were considered accurate, and the inclusion of the soil water repellency in the model also improved the model at this base. The revised MMF model proved capable of providing a simple set of criteria for management decisions about runoff and erosion mitigation measures in burned areas. The erosion predictions at the validation sites attested both to the robustness of the model and of the calibration parameters, suggesting a potential wider application.

Assessing soil erosion due to land use change at the Alqueva reservoir surrounding area

Tese de doutoramento, Ciências do Mar, da Terra e do Ambiente, Faculdade de Ciências e Tecnologia, Universidade do Algarve, 2015

Estudo de uma central hidroeléctrica com base em turbina hidráulica reversível

Trabalho Final de Mestrado para obtenção do grau de Mestre em Engenharia Mecânica

Soil, water and nutrient losses by interrill erosion from green cane cultivation

Fundação de Amparo à Pesquisa do Estado de São Paulo (FAPESP)