February 2016  
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World Tax Journal
 
This free e-mail service informs you about the contents of the forthcoming edition of World Tax Journal.

Issue No. 1 - 2016 of the World Tax Journal is now available online.

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Number 1 - 2016 contains the following:
 

Market Infrastructure Regulation and the Financial Transaction Tax

Caroline Heber and Christian Sternberg

Based on the sensitivity of the European financial markets highlighted by the last financial crisis, the European Union is pushing for reforms of the existing regulatory framework and has also proposed a financial transaction tax. Until now, the European Union has already adopted a Regulation on short selling and certain aspects of credit default swaps and a European Market Infrastructure Regulation aiming at regulating over-the-counter derivatives markets. The Directive on Markets in Financial Instruments was subject to major reforms and Regulations on Markets in Financial Instruments and on Central Securities Depositories were enacted. This strand of financial market regulation shall be complemented by a Financial Transaction Tax pushed forward through the enhanced cooperation mechanism. This article analyses the interplay between the financial market regulation and the proposed financial transaction tax. The authors will conclude that both ways of regulating financial markets are not sufficiently coordinated.

Hybrid Mismatch Arrangements – A Myth or a Problem That Still Exists?

Christian Kahlenberg and Agnieszka Kopec

In recent months, a fierce discussion on Base Erosion and Profit Shifting (BEPS), in particular concerning the use of hybrid financial instruments, has been rumbling. In addition to the OECD Report released under Action 2, the European Commission has also made its contribution to the fight against “international tax arbitrage” by issuing Directive (2014/86/EU) amending the Parent-Subsidiary Directive. The authors investigate various tax classification criteria of financial instruments in each EU Member State, and indicate the causes of qualification conflicts leading to unintended double non-taxation. The article provides a detailed examination of the operation of the proposed “linking rules” at the OECD and EU level. In this context, the authors address the question whether the solutions published by the OECD and the EU are an effective tool in the prevention of qualification conflicts, and whether, in the absence of a tie-breaker rule, the interrelation of these approaches may lead to double taxation. Further, it will be examined whether the newly introduced standards are able to ensure international coherence in corporate income taxation.

Improving the Chinese General Anti-Avoidance Rule: A Comparative and Functional Approach

Jurian van der Pas

Seven years after its introduction in 2008 with the enactment of the new Chinese Corporate Income Tax Law, the Chinese general anti-avoidance rule (GAAR) has become a complex and incoherent piece of legislation. Despite its current shortcomings, the international impact of the Chinese GAAR is expected to grow significantly given China’s increasingly proactive participation in the G20’s fight against international tax avoidance and its embrace of the OECD’s Base Erosion and Profit Shifting (BEPS) initiative. Against this background, this research takes a comparative-functional approach to analyse and evaluate the functioning and efficacy of the Chinese GAAR. The comparative-functional approach is used to critically compare the Chinese GAAR with the GAARs of the Netherlands and the United Kingdom. These jurisdictions were chosen for reasons that are both practical and theoretical, as the comparators both have a large amount of reliable and openly accessible literature and jurisprudence, and strike a balance between civil law jurisdictions and common law jurisdictions. The analysis reveals that for a number of legal, institutional and cultural reasons, the Chinese GAAR is not working as effectively, and is not as balanced, as it could be. On these grounds, the article puts forward some suggestions for reforms on a legal and administrative level that could lead to a more balanced application of the Chinese GAAR. The article does not advocate judicial reforms.

Financial Transaction Tax: An Eleven-Point Analysis of Transaction Taxes across Member States

Carmel Said Formosa

This article analyses the European Commission's Proposal for Financial Transaction Tax with transaction taxes currently implemented in Member States of the European Union. The features identified for this purpose include transactions liable to tax, recognition of legal title, the tax base, jurisdictional rules, provisions for groups, exemptions, deduction rules and timing considerations. This analysis highlights that the Proposal, in principle, varies little from existing transaction taxes; tax rates are generally low and an extraterritorial effect is found in a number of Member States. The Proposal is however broader in scope and contains limited exemptions. The commonalities found in transaction taxes could help to forge a common framework for future reform of the Proposal whilst differences shed light on problems that may be encountered with respect to implementation. Greater support and guidance will be required.

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