A Tax on Aggressive Tax Planning

21 Pages Posted: 11 Apr 2017  

Jan Vleggeert

Leiden University - Leiden Law School

Henk Vording

Leiden University - Leiden Law School

Date Written: April 10, 2017

Abstract

While “aggressive tax planning” is conceptually elusive, tackling it does not require elaborate definitions. Much can be achieved by taxing income flows within multinational firms, to the extent that these flows go from high-tax to low-tax jurisdictions. Such a “tax on aggressive tax planning” can take the form of a conditional withholding tax on intragroup payments of interest and royalties. Assuming a rate of 15%, the tax is only applied if the intragroup payment is not effectively being taxed at that same rate in the recipient’s state of residence. We argue that a conditional withholding tax helps to counter base erosion and profit shifting and sets an international minimum norm for corporate tax rates. We also find that such a tax is not incompatible with EU law.

Keywords: tax avoidance; withholding taxation; aggressive tax planning

JEL Classification: F23, H25, H26

Suggested Citation

Vleggeert, Jan and Vording, Henk, A Tax on Aggressive Tax Planning (April 10, 2017). Available at SSRN: https://ssrn.com/abstract=2949840 or http://dx.doi.org/10.2139/ssrn.2949840

Jan Vleggeert

Leiden University - Leiden Law School ( email )

P.O. Box 9520
2300 RA Leiden, NL-2300RA
Netherlands

Henk Vording (Contact Author)

Leiden University - Leiden Law School ( email )

P.O. Box 9520
2300 RA Leiden, NL-2300RA
Netherlands

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