Case Study Introduction (for students)
Governments rely on tax revenue to provide public services such as education, healthcare, defence, legal systems, and infrastructure for transportation. While we may not like paying taxes, where would we be without these much needed services?
The global and increasingly digital economies in which we do business compromises nations’ tax bases. For the past decade, the spot light has been on many well-known multinationals and their ability to minimise their global tax obligations through aggressive planning and by exploiting differences in nation’s tax legislation.
As tax revenue is the life-blood of nations, the international community has come together to combat such aggressive tax avoidance and strengthen their respective legal positions and their bilateral agreements. The G20 and the OECD reacted swiftly with the Base Erosion and Profit Shifting package which comprises 15 measures to tackle tax avoidance caused by BEPS. There are over 125 countries and jurisdictions now working together to monitor the implementation of the BEPS measures. The EU also continues to tackle tax avoidance and evasion issues through a number of directives and proposals. The Anti-Tax Avoidance Directive (ATAD) with its five measures came into force 1 January 2019 for all Member States.
The DIPCAT Project
We are developing a case study that highlights national and international tax issues of a MNE operating throughout Europe. The case features a leading manufacturer and retailer in eco-fashion. The fictitious Group has developed a technique by which their clothing is manufactured through 3D printing. The medium-term strategy of the Group is for their sales to be made directly in the homes of their customers through software download.
We suspect this fantasy Group is not far from reality. The Financial Transaction Tax proposed by the EU and emerging in national legislation is aimed at current and very real digital giants (i.e. Amazon, Google, Netflix, YouTube). The Common Consolidated Corporation Tax Base is another EU proposal responding to the relative ease of shifting profits to lower tax jurisdictions.
This case will give students an appreciation for the complexities MNEs, tax advisers and tax authorities face in the current international tax environment. We will consider national and supra-national frameworks that impact the European Group. The case is being designed to cover a multitude of issues which, taken in its entirety, would necessitate a full semester’s engagement. The elements that will be considered in DIPCAT’s Intensive Study Programmes are narrowly focused and foundational. Students will enjoy three specific, team-oriented tasks. The finale will be a courtroom role-play between the Group’s Tax Advisers and two nations’ Tax Authorities!