This chapter focuses on the problem of ‘base erosion and profit shifting’ (‘BEPS’). BEPS typically involves large multinational enterprises (‘MNEs’) entering into transactions that exploit gaps, loopholes and mismatches in the tax rules of different jurisdictions in order to artificially shift profits from high to law tax locations. International tax havens are commonly used for this purpose. To help countries tackle BEPS, the OECD implemented the ‘BEPS project’, which has over 100 participating jurisdictions. As a consequence of this project, Australia has introduced several new measures to strengthen its tax system. These measures complement its existing transfer pricing and thin capitalisation regimes. One of the most significant aspects of the BEPS project has been the development of a ‘two-pillar solution on global tax reform’. This initiative aims to re-allocate profits of large MNEs to those jurisdictions where they are earned and ensure that MNEs pay a worldwide minimum corporate tax rate of at least 15%. Australia, like many other countries, is planning to implement this reform. This chapter outlines how the new rules are proposed to operate.

This second chapter on business strategy examines marketing mix decisions. In particular, it focuses on more complex aspects of pricing not covered in the context of Chapter 9 on market structure and pricing. This starts with a discussion of price discrimination, and its various degrees and types. It then moves on to examine multi-product pricing, transfer pricing and dynamic aspects of pricing over the product life cycle (PLC). A detailed discussion of psychological pricing is included, and this covers behavioural aspects not normally considered within the scope of managerial economics, but highly prominent in real-life applications. Advertising decisions are also discussed in the context of the marketing mix, examining the different strategy variables in terms of content and choice of media. Recent trends in strategy related to digital and social media are discussed. There is also a discussion on the controversial topic of the effects of advertising on welfare. Finally, there is an advanced section at the end of the chapter related to optimising the marketing mix, which is mathematical in nature and involves some counterintuitive conclusions.

Chapter 7 examined the concept of tax avoidance in the context of EU law. This chapter also examined various types of anti-abuse rules and their compatibility with EU law. An attempt was made to assess the Court’s judgments in the area of controlled foreign companies, thin capitalization and transfer pricing. The position following the introduction of the Anti-Tax Avoidance Directive was also assessed, whenever relevant. It was shown that there is some tension between established case law and the provisions of the Anti-Tax Avoidance Directive, most of which apply primarily in a mechanical way. What was also notable was the shift of emphasis from having the Court of Justice scrutinize national anti-abuse rules, to demanding from Member States to introduce de minimis anti-abuse rules based on this Directive. As regards transfer pricing rules, it was argued that the current judgments of the Court of Justice could give rise to variable interpretation of basic concepts of international tax law, due to the obscure relationship between the Court’s commercial justification test and the OECD’s arm’s length principle.

This final chapter looks at the alternatives between unilateral digital services taxes and a multilateral consensus on international tax reform. It analyses the key features of digital services taxes and contrasts the advantages and disadvantages against a multilateral solution. Then it goes on to analyse five key future international tax trends that form part of the 2020s compromise and considers the tax implications in the light of the COVID-19 crisis.

This final chapter looks at the alternatives between unilateral digital services taxes and a multilateral consensus on international tax reform. It analyses the key features of digital services taxes and contrasts the advantages and disadvantages against a multilateral solution. Then it goes on to analyse five key future international tax trends that form part of the 2020s compromise and considers the tax implications in the light of the COVID-19 crisis.

This chapter examines the response proposed by the OECD Secretariat to the challenges to the international tax framework posed by the digital economy. The challenges are very different because some, such as the allocation of taxing rights and taxable nexus, are comparatively recent challenges emerging from the enormous success of the digitalisation of the economy. As companies have been able to secure massive business advantages from the network effect, the use of data, the role of users and the ability of business to identify customer needs, so has the need to address taxation on remote sales become more urgent. Pillar One, with its proposal to allocate taxing rights to the market jurisdiction in circumstances where there is no physical presence, is a key part of this response. Other challenges, such as the issues in tax competition and transfer pricing, are more generic and long-standing. These are addressed by Pillar Two using broad-brush remedies against base erosion and profit shifting. They can be seen as a backstop to the more specific actions proposed by the BEPS 15 point Action Plan.

This chapter examines the response proposed by the OECD Secretariat to the challenges to the international tax framework posed by the digital economy. The challenges are very different because some, such as the allocation of taxing rights and taxable nexus, are comparatively recent challenges emerging from the enormous success of the digitalisation of the economy. As companies have been able to secure massive business advantages from the network effect, the use of data, the role of users and the ability of business to identify customer needs, so has the need to address taxation on remote sales become more urgent. Pillar One, with its proposal to allocate taxing rights to the market jurisdiction in circumstances where there is no physical presence, is a key part of this response. Other challenges, such as the issues in tax competition and transfer pricing, are more generic and long-standing. These are addressed by Pillar Two using broad-brush remedies against base erosion and profit shifting. They can be seen as a backstop to the more specific actions proposed by the BEPS 15 point Action Plan.

Considers source country taxing rights under tax treaties. Initially follows the schedular approach of the OECD Model, the distributive provisions of which give source countries full taxing rights (immovable property, business, employment), limited taxing rights (dividends, interest) or no taxing rights (royalties, capital gains, other income). Source country rights, even if full, may be limited by treaty nondiscrimination provisions, which are compared to EU fundamental freedoms. Particular attention is devoted to taxation of business profits, including source country subsidiaries and permanent establishments. Problems inherent in the dual fictions of the authorised OECD approach to taxation of permanent establishments are noted. The second heading considers source country deductibility of payments made to non-residents. Deductibility of these payments can lead to base erosion while denying deductions raises issues of discrimination. The final heading first considers two fundamental features of payments that are critical for source country taxation; quantification and characterisation. Quantification raises issues of transfer pricing. Varying taxation based on characterisation raises issues of fungibility of payments, particularly in the definitions of ‘dividends’, ‘interest’ and ‘royalties’. These issues crossover in excessive interest payments and thin capitalisation. Finally, the chapter deals with reconciliation of provisions under the schedular approach.