How can countries protect their tax base from aggressive international tax planning?

One way countries can protect their tax base from aggressive international tax planning is by implementing a controlled foreign corporation (CFC) regime. This system allows a country to tax income earned by foreign companies owned by its residents and also prevent companies from shifting profits to low-tax countries. A CFC regime requires that a foreign company owned or controlled by a resident of a country be subject to taxation in the same manner as a domestic company. This ensures that residents of the country cannot avoid taxes by transferring income to a company located in a lower tax jurisdiction. Another way countries can protect their tax base is through a transfer pricing regime. This system requires that companies conducting business between related entities (such as a parent and subsidiary company) set the price of goods or services exchanged at fair market value. By doing so, it eliminates the opportunity to underprice one company to another in order to shift profits to a lower-tax jurisdiction. Finally, countries can also protect their tax base by using information exchange systems between countries. Under this system, tax authorities exchange information on taxpayer activities and transfers between countries. This helps them detect any aggressive tax planning or schemes and prevent profits from being shifted to tax havens. Overall, countries have a variety of tools available to them to protect their tax base from aggressive international tax planning. By using a controlled foreign corporation regime, implementing transfer pricing rules, and setting up information exchange systems, countries can protect their own base from income shifting and other tax avoidance schemes.

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How can countries protect their tax base from aggressive international tax planning?

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