Taking away the tax effect of tax havens (30/05/17)
Cross border taxation methods and reverse tax credit
This report introduces the reader to a much-neglected area of international taxation, tax credits, and shows how a more active utilization of tax credits and one of its accompanying features, withholding tax, can fix some of the issues we have with multinational companies not paying taxes.
In addition, the report shows how by reversing the principles of tax credits and applying them unilaterally to cross-border transactions on the cost side, one is able to effectively negate the negative effects of multinational companies not paying taxes. An application of reverse tax credits on cross-border transactions can effectively restore the taxation of multinational companies to where it does not matter whether the companies use low- or no-tax jurisdictions anymore.
This report is thus about increasing the international tax toolbox, and reversing the situation where countries feel they have to participate in the downward spiral of tax competition. It shows that by tweaking international tax mechanisms, it is possible to unilaterally fix the tax situation of many multinational companies. Reverse Tax Credit is for application with subsidiaries in a country with cross-border cost transactions, while a more active application of withholding tax and tax credits works wonders with cross-border transactions without active representation in the country.