It is critical that tax authorities understand that in order for businesses to be competitive, they must seek out the most efficient ways of carrying out business transactions. This is especially crucial in the context of the increasing globalization of businesses and the world economy.
In recent observations, there is a growing trend for tax authorities to disregard transactions relating to tax assessment based on their interpretations of anti-avoidance rules, which are at times quite extensive.
ICC upholds that the use of anti-avoidance rules of taxation that establish barriers to cross-border business transactions is counterproductive and should be stopped.
“These anti-avoidance rules are destructive to countries themselves, when other countries impose them on a home country multinational in a way that diminishes the home country tax base and produces a bilateral controversy,” said ICC Commission on Taxation Vice-Chair Cym Lowell.
ICC, in this paper, seeks the elimination of double taxation and other obstacles that interfere with international business transactions. In addition, the document discusses the problems of imposing unnecessary tax burdens on business or creating business uncertainty. Disregarding or re-characterizing tax assessments, in the case of tax evasion, is usually accompanied by penalties.
Even though tax avoidance is legal, unlike tax evasion, ICC maintains that tax authorities can reduce the deliberate avoidance of tax. Tax authorities are entitled to take certain measures deemed appropriate within the applicable legal systems.
Ultimately, ICC recommends that tax authorities should respect legitimate business transactions even if it allows a reduction of overall tax costs. The paper also makes the claim that specific anti-avoidance rules must be clear and precise, and that tax law must be fully respected with no exceptions.
Read the policy statement on anti-avoidance rules.