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

In order to protect their tax base from aggressive international tax planning, countries must implement measures to ensure taxes are paid where economic activity occurs. This is especially important for Minnesota, as foreign investors may attempt to move profits out of the state to avoid paying taxes. One way for countries, including Minnesota, to protect their tax base is to have strong transfer pricing regulations. Transfer pricing refers to the pricing of goods or services between related companies in different jurisdictions. Transfer pricing regulations can be used to ensure that profits are attributed to the jurisdiction where they are generated. Other measures that countries can use to protect their tax base include signing Double Taxation Agreements (DTAs) and implementing Controlled Foreign Company (CFC) rules. DTAs are agreements between two countries outlining how taxes on income and capital gains will be split between them. CFC rules apply to companies based in a different country than the one they are theoretically operating in. These rules limit the ability of companies to move profits between countries and can be used to protect a country’s tax base. Finally, countries can also work together to prevent tax avoidance through international organizations like the OECD or G20. These organizations work to promote fairer taxation between member countries and develop initiatives to make it more difficult for companies to shift around profits. In summary, countries such as Minnesota need to take steps to ensure their tax base is not threatened by aggressive tax planning. This can be done through the implementation of strong transfer pricing regulations, double taxation agreements and controlled foreign company rules, as well as through cooperation with other countries.

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

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