The rise of multinationals and their ability to engage in sophisticated cross-border tax planning have governments and policymakers struggling to deal with the implications. Currently, governments commonly utilise corporate interest limitation rules since they are widely perceived as an anti-avoidance mechanism that limits tax base erosion. Despite this perception, the legal basis for these rules does not reconcile with the economic basis because they present only imperfect solutions to the problem of the ‘debt bias’.

Taxing Multinationals considers whether equalising the tax deductibility of fungible intercompany funding activities would minimise opportunities for cross-border tax planning by multinationals. It approaches the issue of thin capitalisation by conceptualising the cross-border debt bias as the ‘disease’ and thin capitalisation as merely the ‘symptom’. It then explores whether the ‘disease’ would be better addressed by retaining interest limitation rules in their current form or if an alternative reform would be more effective.

1. Introduction
2. Reviewing the Theoretical and Applied Literatures
3. Designing a Principles-Based Evaluation Framework
4. Evaluating Current Legal Practice on Cross-Border Intercompany Deductions
5. Simulating Tax-Minimising Behavioural Responses to Current and Proposed Tax Rules
6. Developing Principles-Based Proposals for Tax Reform
7. Results and Conclusion

Ann Kayis-Kumar – Senior Lecturer, School of Taxation and Business Law, UNSW Sydney.