International double taxation of interest: from arm's length, and thin capitalization to comprehensive interest barriers.

Traditionally, corporate income tax has evolved on the basis of a different tax treatment of debt and equity. The problem dealt with in this doctoral thesis stems from the rule that interest is deductible (and dividends are not) in calculating taxable income, unless the interest is caught by thin capitalization or anti-abuse rules. Recently, new analysis has shown that multinational groups can plan their worldwide leverage to minimize their overall tax liability, highlighting the risk of base erosion. This has led some countries and international institutions to introduce or recommend the introduction of new rules, commonly referred to in this study as “Comprehensive Interest Barriers”.

This dissertation consists of a comparative study of the domestic regimes that have adopted this new trend of Comprehensive Interest Barriers, namely New Zealand, Australia, Italy and the United Kingdom, as well as of the OECD recommended approach under BEPS Action 4 and the interest limitation rule adopted under the Anti-Tax Avoidance Directive. On the basis of the examination of these Comprehensive Interest Barriers and the development of a case study, we expect to conclude that these rules are not in line with basic international tax principles, that they create international double taxation, and that they re-align the taxing powers regarding the taxation of cross-border interest. On the basis of these conclusions, this study will investigate possible solutions to relieve double taxation and to present ways to reform the taxation of cross-border interest, which could entail either a partial or a radical tax reform.