The effectiveness of anti-avoidance provisions and the global initiatives created to prevent multinationals avoiding tax

Abstract

Tax structuring arrangements resulting in the shifting of profits by Multinationals has become increasingly relevant, with Multinationals such as Starbucks, Amazon, Google and MTN amongst others, coming under scrutiny by tax authorities. Multinationals are being challenged in respect of these tax avoidance strategies adopted in order to pay as little tax as possible. In the UK for example, the accounts of Starbucks have shown that since 1998, Starbucks has obtained approximately £3 billion from its UK coffee sales, opened seven hundred and thirtyfive outlets throughout the UK, but paid only £8.6 million in income taxes. Despite the measures undertaken by Multinationals to avoid paying taxes, or paying limited taxes, these Multinationals have maintained that they have not avoided tax as they have complied with the tax legislation in the countries in which they operate and transact. The loss of revenue for the fiscus as a result of the Multinationals avoiding paying taxes in the countries in which they operate could have serious consequences, and it is the responsibility of the legislators to enact or amend legislation, or to create frameworks to prevent tax avoidance taking place. This study research is aimed at the analysis of the general anti-avoidance provisions found in South Africa and in the UK in order to ascertain whether these provisions have been an effective deterrent against tax avoidance by Multinationals. In addition, this study will further provide an insight into the BEPS current global framework, which aims to equip governments with the domestic and international instruments required to tackle BEPS in an attempt to prevent Multinationals from shifting their profits to low or no tax jurisdictions. this study is whether the newly established GAAR provisions.