ICC Policy Statement – Application of Anti-Avoidance Rules in the field of taxation (rev. 2012)
ICC tackles the Application of Anti-Avoidance Rules in the Field of Taxation.
The International Chamber of Commerce has recently adopted the policy statement on “Application of Anti-Avoidance Rules in the Field of Taxation”, produced by the ICC Commission on Taxation.
In recent observations, there is a growing trend for tax authorities’ disregard transactions relating to tax assessment based on their interpretations of Anti-Avoidance Rules, which are at times quite extensive.
ICC believes that it is necessary that tax authorities understand that in order for businesses to be competitive, they must seek out the most efficient ways to carry out business transactions. This is very critical today because of the increasing globalization of businesses and the world economy. ICC reasons 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 also destructive to countries themselves, when other countries impose them on a home country multinational in a manner to diminish the home country tax base and produce a bilateral controversy”, says ICC Commission on Taxation, Vice Chair Cym Lowell.
In this paper, the ICC seeks the elimination of double taxation and other obstacles which 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 are usually accompanied by penalties provided for, in case of tax evasion.
Even though tax avoidance is legal, (unlike tax evasion), the ICC realizes that tax authorities can reduce the deliberate avoidance of tax. Also, they 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 claims that when considering Specific Anti Avoidance Rules, they must be clear and precise and tax law must be fully respected with no exceptions.