Has Cross-Border Arbitrage Met Its Match?
12 Pages Posted: 2 Sep 2021 Last revised: 11 Apr 2022
Date Written: August 31, 2021
In this essay, we review two decades of criticisms of both the concept of international tax arbitrage and regulatory responses meant to reduce such arbitrage. We conclude that although objections to curbing arbitrage have merit, they are not so fundamental that they should stand in the way of reforms. Finally, we explore recent international cooperative efforts — pursued under the auspices of the OECD/G20 Base Erosion and Profit Shifting Project (BEPS Project) — to curb international tax arbitrage. We liken the anti-hybrid rules developed under the BEPS Project to penalty defaults in contract law, and we argue that the result they reach is in some ways similar to — and no more objectionable than — mutual recognition under EU law.
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