International Tax Planning: A Global Challenge from a Danish Perspective

Abstract

Due to globalisation, the opening of the European market and the full mobility within the market, companies have become multinational and are subject to different legislations, including tax legislations. As a result, it has been revealed that companies engage in aggressive tax planning, by taking advantage of differences in countries’ legislation to minimize their tax payment. As a consequence, legislators and organizations have taken initiatives globally to avoid this behaviour. Denmark has implemented two general anti-avoidance rules in section 3 of the Assessment Act, one concerning the EU-directives and one concerning tax treaties signed by Denmark. The objective of this master’s thesis is to clarify the content and scope of the two general antiavoidance rules. In addition, the thesis will investigate whether companies perform tax planning, and whether the two general anti-avoidance rules are the most effective instrument. The master’s thesis concludes that the two general anti-avoidance rules are vague. Therefore it is difficult to clarify the content and scope. However it can be derived that the scope of the rules is very broad, in consequence of which it is expected that a variety of company behaviour may fall within the scope, and be found illegal. Furthermore it is concluded, that the fact that companies’ object is to maximize profit, implies that they have incentive to minimize taxes. In addition, it is established that companies do perform tax planning by shifting profit from high- to low-tax jurisdiction. The thesis concludes that general anti-avoidance rules are an effective instrument to prevent aggressive tax planning, as companies constantly change their tax planning strategies. However, it is necessary to provide some detailed guidelines, in order for both courts and companies to act in accordance with the object of the rules. In addition, it is concluded that the general anti-avoidance rules need to be implemented globally to be effective.