Tax complexity and transfer pricing blueprints, guidelines, and manuals

JE Colliard, L Eden, CP Georg - Tax Management International …, 2021 - papers.ssrn.com
Tax Management International Journal, 2021papers.ssrn.com
A key motivation underlying the October 2020 OECD Pillar One and Pillar Two Blueprints is
the goal of reducing tax complexity for taxpayers and tax authorities. In this article, we
assess the tax complexity of the Blueprints relative to the 2017 OECD Transfer Pricing
Guidelines (TPG) and the 2017 United Nations Transfer Pricing Manual (TPM). We focus on
one form of tax complexity, rule complexity, which measures the problems faced by
taxpayers when interpreting written and unwritten tax rules. We use a novel method drawn …
Abstract
A key motivation underlying the October 2020 OECD Pillar One and Pillar Two Blueprints is the goal of reducing tax complexity for taxpayers and tax authorities. In this article, we assess the tax complexity of the Blueprints relative to the 2017 OECD Transfer Pricing Guidelines (TPG) and the 2017 United Nations Transfer Pricing Manual (TPM). We focus on one form of tax complexity, rule complexity, which measures the problems faced by taxpayers when interpreting written and unwritten tax rules. We use a novel method drawn from the literature on the complexity of algorithms and software to assess the tax complexity of the Blueprints relative to the TPG and TPM. Our analysis shows that, overall, both Blueprints exhibit greater tax complexity than either the TPG or TPM, with Pillar One being the most complex and the TPG the least complex of the four documents. We conclude with some policy recommendations for reducing tax complexity.
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