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 need to create and enforce strategies to counter these tactics. One strategy is to implement a system of transfer pricing rules, which establishes the taxable value of a company’s goods or services when they are sold abroad. Transfer pricing rules can help countries prevent companies from artificially pricing goods and services in order to pay less taxes. Another strategy is to create anti-avoidance laws that prevent companies from deferring income taxes or shifting profits to low-tax jurisdictions. These laws also prevent companies from exploiting loopholes in tax systems or taking advantage of weak regulation. A third strategy is to combat tax evasion, which is when taxpayers do not report or underreport their income. Countries can do this by increasing penalties for individuals and corporations who evade taxes, or by engaging in information sharing with other countries. For example, Nevada has signed on to the Foreign Account Tax Compliance Act, which requires financial institutions to disclose information about U.S. taxpayers to the Internal Revenue Service. Finally, countries should review and update their tax laws regularly to make sure that they are keeping up with changing international tax rules. By implementing these strategies, countries can protect their tax base from aggressive international tax planning.

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

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