Interest Deductions and Multinational Enterprises: Goldilocks and the Brave New World

Bulletin for International Taxation, Vol. 69, No. 6/7, pp. 326-333, 2015

Sydney Law School Research Paper No. 15/59

15 Pages Posted: 7 Jul 2015  

Chloe Burnett

The University of Sydney Law School

Date Written: July 7, 2015

Abstract

This article compares the “brave new” group-wide approach under Action 4 of the G20/OECD Base Erosion and Profit Shifting initiative to the fixed ratio alternative. The conclusion in this article is that the group-wide approach – which is not as novel as some assume – should be supported. Resisting the “Goldilocks” standard of perfection, it can be combined with a modest fixed ratio safe harbour.

Keywords: BEPS, Action 4, related party debt, debt shifting, interest allocation, interest cap, safe harbor, intragroup debt, interest barrier, transfer pricing, thin capitalization, earnings stripping, group-wide ratio, fixed ratio rule, combined rule, combined approach

JEL Classification: K10, K30, K34

Suggested Citation

Burnett, Chloe, Interest Deductions and Multinational Enterprises: Goldilocks and the Brave New World (July 7, 2015). Bulletin for International Taxation, Vol. 69, No. 6/7, pp. 326-333, 2015; Sydney Law School Research Paper No. 15/59. Available at SSRN: https://ssrn.com/abstract=2627521

Chloe Burnett (Contact Author)

The University of Sydney Law School ( email )

New Law Building, F10
The University of Sydney
Sydney, NSW 2006
Australia

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