The authors give you the big picture by classifying international tax planning into three species. The first is the ‘no or lower double taxation’ category, generally considered as non-harmful and in line with both the aims of the European Community and the OECD (Organisation for Economic Co-operation and Development).

The second type is ‘double non-taxation,’ considered harmful. Which explains why “an increasing number of countries incorporate specific provisions in their network of double tax treaties to prevent double non-taxation in precisely described situations.”

The final specie is a relatively rare one — ‘negative taxation’. This covers ways in which ‘a taxpayer may be able to obtain a refund from the tax authorities that is higher than the amount that was originally paid.’ Can that happen, you may wonder? In answer, the book gives a simple example of how the ‘excess’ can accrue to a taxpayer when the interest rate used by tax authorities is higher than the bank interest rate.

“Consequently, it may be beneficial for taxpayers to pay the tax authorities more than the amount of tax due. The taxpayers use the tax authorities in fact as a depository for excess funds because the rate provided by the government is higher than the rate earned in a normal bank account.”

The authors have discussed in depth the essentials of international tax planning in highly informative chapters devoted to: sources of international tax law, guiding concepts in this sphere of professional practice, avoidance versus evasion, goals of multinational enterprises, holding activities, financing mechanisms, tax issues behind derivatives and intellectual property, and anti-avoidance rules.

Of special interest should be the chapter on SCM (supply chain management), which opens by stating that increased economic openness in many countries, together with developments in technology and contractual freedom, have made it far easier than it has been in the past to shift functions, assets and risks from one company to another and from one location to another.

SCM has a direct effect on the allocation of taxable income among the different entities of a multinational group, the authors observe. “For example, an MNE (multinational enterprise) based in country A, that manufactures a product that sells both in country A and in country B, may decide that, instead of exporting the product from country A to country B, it will instead contract with a third party in country B to make the product there on its behalf.”

Such manufacturing may happen either through the contract or the toll route.

D. MURALI

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