Prunenko M.A.Russian Foreign Trade Academy of Ministry for Economic Development of Russian Federation, Moscow, Russian Federation prunenkomar@yandex.ru
Subject Imperfect tax legislation of many countries presents the State with a trade-off between budget replenishment and investment attraction in the economy. Therefore, the country's investment attractiveness impairs and tax revenues decrease. To solve the problem, the State should take measures and develop mechanisms for international cooperation, including those with the involvement of the OECD, in order to minimize the impact of offshore jurisdictions on companies' tax base erosion. Objectives The objective of the study is to make recommendations for improving the situation with tax minimization and companies' profit shifting taking into account the interests of investors and the State. Methods The main methods we applied were the analysis and the synthesis. Results We emphasize that under the existing taxation, large corporations are able to legally reduce their tax liabilities to the State. Companies use transfer pricing that allows them to relocate net profit or loss before taxes to low-tax jurisdictions acting as 'tax havens'. The States, through international cooperation (in particular through the OECD), are coordinating their policies to minimize the impact of offshore zones on tax base erosion and profit shifting, and prevent budget loss. The developed system of measures for fiscal policies coordination intends to align tax rates in different States and to eliminate double taxation. Conclusions and Relevance We conclude that solving the problem of tax minimization and profit shifting affects the interests of both the State and investors. The OECD's Base Erosion and Profit Shifting (BEPS) report and action plan are an important step in the global tax cooperation. The disadvantage of the action plan is underestimation of the complexity of tax procedures and transfer pricing. The States want to increase tax revenues and, at the same time, they need to attract foreign and domestic investors using competitive tax rates. Therefore, the measures proposed by the OECD, may have long-term implementation. Russia actively participates in the global tax cooperation and considers de-offshoring of the economy as one of its priorities.
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