Tax Treaty Shopping: Risk Analysis at the Macro Level (on the Example of the Republic of Armenia)

Milyausha R. Pinskaya (), Nikolai Milogolov () and Suren F. Adamyan ()
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Milyausha R. Pinskaya: Financial Research Institute, Moscow 127006, Russia; Financial University under the Government of the Russian Federation, Moscow 125993, Russia
Suren F. Adamyan: State Revenue Committee under the Government of the Republic of Armenia, Yerevan 0015, Armenia

Finansovyj žhurnal — Financial Journal, 2018, issue 4, 38-52

Abstract: The article analyzes domestic tax legislation of the Republic of Armenia and main countries investing in Armenia in combination with double tax treaties concluded between Armenia and these countries. The aim of such analysis is to find out the riskiest double tax treaties in terms of tax treaty shopping potential. Research approach is based on assessment of indicator characterizing country position in the global investment and capital flows comparing to the main countries investing in Armenia. This indicator is determined as ratio of foreign direct investment to gross domestic product. Based on this assessment countries-investors were divided to two groups according to the level of tax base erosion risk. The article further presents the detailed analysis of national legislation and double tax treaties with these countries. Moreover, the authors discuss international experience of developing legal approaches towards addressing the issue of tax treaty abuse, such as Principle Purpose Test, Limitation of Benefits Rule and Concept of Beneficial Owner of Income. The authors also analyze international experience of formulating the criteria of assessment of necessary conditions for obtaining tax treaty benefits. These approaches can be used for development of international tax policy in the Republic of Armenia with the aim of defending its sovereign tax base and creating certain and sustainable business and tax rules for foreign investors and domestic taxpayers expanding overseas.

Keywords: treaty shopping; tax policy; base erosion; corporate income tax; developing countries; OECD; foreign direct investments (search for similar items in EconPapers)
JEL-codes: H25 H26 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:fru:finjrn:180404:p:38-52

DOI: 10.31107/2075-1990-2018-4-38-52

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