Tackling non-taxation: harmonisation vs linking rules

Senior tax officials from OECD member countries met in Canada this month to discuss the most effective methods of combating double non-taxation arising from hybrid mismatch arrangements, and there was broad consensus that the use of so-called linking rules is the most realistic approach.

In its Hybrid Mismatch Arrangements report, endorsed by all 34 member countries, the OECD advocates the introduction – or revision of existing – targeted rules denying tax benefits in certain cases of hybrid mismatch arrangements as one of the most important tools to address unintended non-taxation.

Achim Pross, of the OECD’s Centre for Tax Policy and Administration, said linking rules, which have already been adopted in a number of countries such as Denmark and the UK, link the tax treatment of an instrument, entity or transfer with the tax treatment in the other country, therefore avoiding at...