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.

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.

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.

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.

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.

New insights on measuring bank branches efficiency through DEA:transactional, operational, and profit assessments

This thesis presents a number of methodological developments that were raised by a real life application to measuring the efficiency of bank branches. The advent of internet banking and phone banking is changing the role of bank branches from a predominantly transaction-based one to a sales-oriented role. This fact requires the development of new forms of assessing and comparing branches of a bank. In addition, performance assessment models must also take into account the fact that bank branches are service and for-profit organisations to which providing adequate service quality as well as being profitable are crucial objectives. This study analyses bank branches performance in their new roles in three different areas: their effectiveness in fostering the use of new transaction channels such as the internet and the telephone (transactional efficiency); their effectiveness in increasing sales and their customer base (operational efficiency); and their effectiveness in generating profits without compromising the quality of service (profit efficiency). The chosen methodology for the overall analysis is Data Envelopment Analysis (DEA). The application attempted here required some adaptations to existing DEA models and indeed some new models so that some specialities of our data could be handled. These concern the development of models that can account for negative data, the development of models to measure profit efficiency, and the development of models that yield production units with targets that are nearer to their observed levels than targets yielded by traditional DEA models. The application of the developed models to a sample of Portuguese bank branches allowed their classification according to the three performance dimensions (transactional, operational and profit efficiency). It also provided useful insights to bank managers regarding how bank branches compare between themselves in terms of their performance, and how, in general, the three performance dimensions are connected between themselves.

Multiculturalism, education for sustainable development (ESD) and the shifting discursive landscape of social inclusion

Australia has a long and sometimes turbulent relationship with the migrant Other. This paper examines a component of this relationship via the window of contemporary multicultural policy. The paper begins with an analysis of the political and social conditions that enabled a national and bipartisan policy of multiculturalism to emerge as formalised federal policy during the late 1960s and early 1970s. The paper re-problematises the influences that helped shape Australia's articulation of race and ethnicity and argues that multiculturalism, within a post-September 11 environment, can no longer be framed solely within its traditional framework of social justice. The paper positions education for sustainable development (ESD) as an emerging discursive field that provides educators with an alternative road map for critiquing Australia's fluid relationship with the migrant Other. By linking the tenets of multiculturalism with ESD, this paper suggests pre-service teacher educators are presented with a productive, and at the same time politically palatable, means for regaining pedagogical traction for a semi-dormant agenda of social inclusion.

An analysis of the differences in audit processes used in the audit of nonprofit and profit organisations

Nonprofits constitute a large part of collective behaviour in society. Presently there is little formal research addressing the role of audits in nonprofit organisations. Before models can be developed for the production of nonprofit auditing information, it is necessary to examine the present conduct of nonprofit audits. The Australian Accounting Research Foundation - Legislation Review Board has released a position paper on the Association Incorporation Acts in Australia - the most frequently used legal form for nonprofit organisations. The Board is addressing the issue of financial statement reporting including audit. This is coinciding with the investigations resulting from the collapse of the National Safety Council (Victorian Division), (NSC). The NSC, a nonprofit organisation formed as a company limited by guarantee, is in liquidation and the auditors are being sued for damages resulting from their alleged failure to perform their duties adequately.

Performance configurations over time: implications for growth-and profit-oriented strategies

Entrepreneurship research and practice places emphasis on company growth as a measure of entrepreneurial success. In many cases, there has been a tendency to give growth a very central role, with some researchers even seeing growth as the very essence of entrepreneurship (Cole, 1949; Sexton, 1997; Stevenson & Gumpert, 1991). A large number of empirical studies of the performance of young and/or small firms use growth as the dependent variable (see reviews by Ardishvili, Cardozo, Harmon, & Vadakath, 1998; Delmar, 1997; Wiklund, 1998). By contrast, the two most prominent views of strategic management – strategic positioning (Porter, 1980) and the resource-based view (Barney, 1991; Wernerfelt, 1984) – are both concerned with achieving competitive advantage and regard achieving economic rents and profitability relative to other competitors as the central measures of firm performance. Strategic entrepreneurship integrates these two perspectives and is simultaneously concerned with opportunity seeking and advantage seeking (Hitt, Ireland, Camp, & Sexton, 2002; Ireland, Hitt, & Sirmon, 2003). Consequently, both company growth and relative profitability are together relevant measures of firm performance in the domain of strategic entrepreneurship.

Large amplitude Fourier transformed AC voltammetric investigation of the active state electrochemistry of a copper/aqueous base interface and implications for electrocatalysis

The higher harmonic components available from large-amplitude Fourier-transformed alternating current (FT-ac) voltammetry enable the surface active state of a copper electrode in basic media to be probed in much more detail than possible with previously used dc methods. In particular, the absence of capacitance background current allows low-level Faradaic current contributions of fast electron-transfer processes to be detected; these are usually completely undetectable under conditions of dc cyclic voltammetry. Under high harmonic FT-ac voltammetric conditions, copper electrodes exhibit well-defined and reversible premonolayer oxidation responses at potentials within the double layer region in basic 1.0 M NaOH media. This process is attributed to oxidation of copper adatoms (Cu*) of low bulk metal lattice coordination numbers to surface-bonded, reactive hydrated oxide species. Of further interest is the observation that cathodic polarization in 1.0 M NaOH significantly enhances the current detected in each of the fundamental to sixth FT-ac harmonic components in the Cu*/Cu hydrous oxide electron-transfer process which enables the underlying electron transfer processes in the higher harmonics to be studied under conditions where the dc capacitance response is suppressed; the results support the incipient hydrous oxide adatom mediator (IHOAM) model of electrocatalysis. The underlying quasi-reversible interfacial Cu*/Cu hydrous oxide process present under these conditions is shown to mediate the reduction of nitrate at a copper electrode, while the mediator for the hydrazine oxidation reaction appears to involve a different mediator or active state redox couple. Use of FT-ac voltammetry offers prospects for new insights into the nature of active sites and electrocatalysis at the electrode/solution interface of Group 11 metals in aqueous media.

Lanthanide chelate complexes of salicyloyl hydrazide-salicylaldehyde schiff base (SHSASB) and anthranilic acid-salicylaldehyde schiff base (AASASB)

New lanthanide complexes of salicylaldehyde-Schiff bases with salicyloyl hydrazide and anthranilic acid, were synthesized by a novel method consisting of refluxing the mixtures of Schiff base ligands and lanthanide trichloroacetate in acetone. Solid complexes of formulae Ln(SHSASB)s*2Hz0 and Ln2(AASASB)s*2Hz0 where Ln = La-Yb and Y, were isolated. Proton NMR and IR spectra for the complexes reveal the bidentate binding of both the Schiff base ligands to the lanthanide ion. Electronic spectra along with the conductance data for the complexes indicate a coordination number of six for the lanthanide ion in the complexes of both the Schiff bases.

Genetic erosion and changes in distribution of sorghum (Sorghum bicolor L. (Moench)) landraces in north-eastern Ethiopia

Ethiopia is believed to be the centre of origin and domestication for sorghum, where sorghum remains one of the main staple crops. Loss of biodiversity is occurring at an alarming rate in Ethiopia and crops, including sorghum, have long been recognized as vulnerable to genetic erosion. A major collection of sorghum germplasm was made in 1973 by Gebrekidan and Ejeta from north-eastern Ethiopia. A new collection of landraces was made in 2003, and these were field evaluated at Sirinka in 2004 along with representative samples from the 1973 collection. Farmer surveys and soil and climate surveys were also performed. Preliminary analysis demonstrated that some important landraces have disappeared either locally or regionally in the past 30 years and many other landraces have become marginalized. Landraces which are less preferred in terms of agronomic value and end use, and introductions, have become increasingly important. Late maturing landraces were found to be particularly vulnerable, with a number disappearing altogether. Farmers have become more risk averse, and factors such as declining soil fertility, more frequent drought and unreliable rainfall, and increased pest infestation have contributed to a change in farmer landrace selection. Data are presented on the variability and unique characters of some of the Ethiopian landraces, and implications for conservation are discussed.

Schiff Base Complexes and their Assemblies on Surfaces

Schiff bases and their transition metal complexes are of significant current interest even though they have been prepared for decades. They have been used in various applications such as catalysis, corrosion protection, and molecular sensors. In this study, N-aryl Schiff base ketimine ligands as well as numerous new, differently substituted salen and salophen-type ligands and their cobalt(II), copper(II), iron(II), manganese(II), and nickel(II) complexes were synthesised. New solid state structures of the above compounds and the dioxygen coordination properties of cobalt(II) complexes and catalytic properties of three synthesised binuclear complexes were examined. The prepared complexes were applied in the formation of self-assembled layers on a polycrystalline gold surface and liquid-graphite interface. The effect of metal ion and ligand structure on the as-formed patterns was studied. When studying gold surfaces, a unique thiol-assisted dissolution of elemental gold was observed and a new thin gold foil preparation method was introduced. In the summary, synthesis, structures, and properties of Schiff base ligands and their transition metal complexes are described in detail and the applications of these reviewed. Assemblies of other complexes on a liquid-graphite interface and on a gold surface are also presented, and the surface characterisation methods and surfaces employed are described.