5 Capital

Subject(s):

Breach of contract — Performance of contract — Payment of price

This chapter is devoted to the problems surrounding the transfer, use, and rewards to capital. It highlights the evolution of international tax planning by MNEs to include significant shifts of capital to low or no tax states. The chapter also discusses the limited relevance of the ALP to those developments. The scale and public profile of MNE tax planning using tax havens, coupled with the apparent inability of the international tax system to prevent these developments, increased the pressure for some form of response. In addition, the significant shift of capital to low-function companies in low or no tax states has led to increased concerns on the lack of guidance relating to the return to capital for transfer pricing purposes. The combination of these issues meant that, in the run-up to BEPS, there were mounting questions and pressures facing the ALP and the OECD.