Tax Resources

The PRI has been working with a global investor taskforce to produce guidance on engagement with companies on corporate tax issues. The document is available here. It includes an overview of the current tax landscape, the case for engagement, practical examples of how to conduct dialogue and good company practice.

The resources below are an additional online supplement (Appendix 4: Additional Resources) to the guidance document for those wishing to further explore the subject of tax. It contains publicly available information in the form of reports, briefings, research, articles and company examples from a wide range of sources.

Guidance & Principles

Author Name Description Date
ActionAid Tax responsibility: an investor guide Guide which looks at the business case for tax responsibility. This includes the risks of aggressive tax practices, steps companies can take to reassure investors and seven criteria to help assess tax responsibility (including questions that can be asked to determine risk and performance). 2013
ActionAid, FairFood and FairPensions Tax responsibility: The business case for making tax a corporate responsibility issue Report that aims to facilitate dialogue between business and tax campaigners by examining the business case for tax responsibility and providing an action plan for companies. 2011
CBI Statement of tax principles CBI’s proposed seven principles on tax that it encourages all UK businesses and companies operating in the UK to follow. 2013
Corporate Citizenship Tax: Time for action A guide for companies on responding to the tax debate. Looks at corporate tax responsibility, identifying issues, drafting principles/policies and how to communicate on tax. 2014
EITI Business Guide: How companies can support EITI implementation Guide for business managers with information on how to promote and improve transparency in the extractives industry. 2013
EY Tax transparency: seizing the initiative Guide for companies, looking at how they can prepare for the possibility of substantive tax transparency for the first time or to improve their existing reports by enhancing data collection processes and other disclosures. 2013
Henderson Global Investors Responsible Tax Paper that sets out conclusions derived from discussions with heads of tax at a number of FTSE100 companies regarding their approach to tax. These take the form of a set of principles that guide tax decision-making, propose improved disclosure and suggest a framework companies can use to assess their approach to tax. 2015
ICAEW Ten Tenets for a better tax system Set of guiding principles that should underpin the UK tax system. The paper suggests that all tax legislation (existing and future) should be judged against these tenets and exposed when it fails to live up to them. It also recommends that a new Code for Fiscal Simplicity be drawn up. 1999
ICGN ICGN Viewpoint: Tax arbitrage Statement explaining ICGN’s view and how investors should contribute to the ‘responsible tax’ debate by engaging with and holding companies accountable. 2014
ICRICT The Independent Commission for the Reform of International Corporate Taxation The ICRICT are a group of leaders from government, academia and civil society who aim to reform the international corporate tax system. Their declaration contains a statement of principles and recommendations for reform. 2015
PwC Building Public Trust: Responding to the Tax Transparency debate Review of the quality of companies’ tax reporting (using PwC’s Tax Transparency Framework), as well as the questions that are being asked of companies on their tax affairs, and examples of disclosures made by the leaders in tax reporting to show what they are doing in practice. 2014

OECD and Public Authority initiatives

Author Name Description Date
Business Roundtable BEPS letter to US Treasury Letter sent to US Department of Treasury highlighting concerns over the impact BEPS will have if some governments use the project to impose extraterritorial taxes on US business income. 2014
European Commission Public consultation on further corporate tax transparency Consultation aims to find out whether requiring companies to disclose more information about the taxes they pay could help tackle tax avoidance and aggressive tax practices in the EU. The document sets out a number of tentative options and also seeks views on the potential impact of further tax transparency. 2015
IMF Spillovers in International Corporate Taxation Paper that explores the nature, significance and policy implications of spillovers in international corporate taxation—the effects of one country’s rules and practices on others. 2014
KPMG Country by Country Reporting: An overview and comparison of initiatives Review of BEPS, Capital Requirements Directive IV, EU Accounting Directive, Dodd Frank Section 1504 and EITI initiatives. 2014
OECD Action Plan on Base Erosion and Profit Shifting (BEPS) 15 point action plan that identifies the actions needed to address BEPS, sets deadlines to implement these actions, and identifies the resources needed and the methodology to implement these actions. 2013
OECD Tackling aggressive tax planning through improved transparency and disclosure Report that provides an overview of disclosure initiatives introduced in certain OECD countries and discusses the experience with such initiatives. 2011
OECD Comments received on public discussion draft: Follow-up on BEPS Action 6 (prevent treaty use) Feedback from investors, companies and other stakeholders 2015
UK House of Commons Public Accounts Committee: Tax avoidance by multinational companies Minutes from House of Commons hearings noting that HMRC is not taking sufficient action against multinationals who are not paying their fair share of tax in the UK. Evidence is heard on Google, Amazon and Starbucks. 2012
UK House of Commons Public Accounts Committee: Tax avoidance: the role of large accountancy firms Minutes from House of Commons hearings, highlighting the concerns of the role of tax advisors in tax avoidance schemes for multinationals. Evidence is provided from Deloitte, Ernst and Young, KPMG, and PwC on the nature of their schemes. 2013
US senate investigation Offshore Profit Shifting and the U.S. Tax Code – Part 2 (Apple Inc.) Hearing on how multinationals use loopholes in the Tax Code to move profits to offshore tax havens and to avoid paying US taxes. Case study – Apple 2013
US senate investigation Offshore Profit Shifting and the U.S. Tax Code – Part 1 (Microsoft and Hewlett-Packard) Hearing on how multinationals use loopholes in the Tax Code to move profits to offshore tax havens and to avoid paying US taxes. Case study – Microsoft and Hewlett-Packard 2012

Stakeholder commentary & reports

Author Name Description Date
ActionAid Responsible Tax Practice by Companies: A Mapping and Review of Current Proposals Review of recommendations for responsible tax practice by multinationals (from companies, NGOs, investors, tax advisers, CSR specialists, governments, legal bodies and other initiatives). Areas covered include tax planning, transparency, governance, authority relations, policy, lobbying and tax incentives 2015
ActionAid, Oxfam, Christian Aid Getting to Good: Towards Responsible Corporate Tax Behaviour A discussion paper examining why and how approaching tax responsibility beyond legal compliance benefits companies and the developing countries in which they operate 2015
CBI Building trust in the international tax system Policy briefing setting out recommendations for Government policy priorities for international tax, primarily with regards to the OECD’s BEPS project. 2015
CBI The UK corporation tax system: 12 misunderstood concepts Document to support and inform the public debate on the corporate tax system and the importance of maintaining a competitive tax regime which promotes growth. Covers issues including tax base, transfer pricing, tax havens, as well as complex accounting issues and conventions. 2013
Centre for Business Taxation Transparency in reporting financial data by multinational corporations This report, commissioned by the OECD Informal Task Force on Tax and Development, examines the case for greater transparency in financial reporting as veing potentially important in heloping development efforts in lower income economies. 2011
Christian Aid Country by Country Reporting: A survey of FTSE 100 companies’ views Survey that shows the majority of FTSE 100 companies do not outright object to the BEPS Action Plan and Country by Country Reporting. However only a handful are willing to disclose voluntarily. 2015
Citizens for Tax Justice The Use of Offshore Tax Havens by Fortune 500 Companies Study which examines the use of tax havens by Fortune 500 companies, with more than 358 holding more than $2.1 trillion in accumulated profits offshore for tax purposes. 2015
Congressional Research Service Corporate Tax Base Erosion and Profit Shifting (BEPS): An Examination of the Data Analysis of the extent and impact of profit shifting, FDI positions and discussion of policy options for addressing this. 2015
CoVi, Responsible Tax Re-building a social compact on responsible tax Paper that summaries the results and findings from a project on “responsible tax for the common good.” It covers a wide range of tax issues and recommendations for policymakers, businesses, investors and other stakeholders 2015
Deloitte Responsible Tax: Tax transparency developments Report discusses the developments in the reporting of taxes in the financial statements across the FTSE 100; comments on trends in how large corporates are responding to increasing demands for information; and looks ahead to how the reporting environment may yet evolve. 2014
Eurodad Financing for development: Key challenges for policy makers Paper showing that the international economic and monetary system is stacked against developing countries, with losses of financial resources by developing countries proving to be more than double the inflows of financial resources since the 2007-08 global financial crisis. 2015
EY Bridging the divide: highlights from the 2014 Tax risk and controversy survey Results show that companies (81%) agree that tax risk and controversy will become important for them in the next two years. Many wish to consider enhancing their preparations and their tools in order to bridge the divide between current and future risk management frameworks 2014
EY Center for Board Matters Board oversight of tax risk: Understanding the global focus on base erosion and profit shifting Overview of the OECD’s BEPS project and the board’s role. Includes questions for the board to consider. 2015
FEE The Tax Policy Debate: A Matter for Society as a Whole Publication bringing together a broad array of stakeholders’ views based around the belief that the future of tax policy really is a matter for society as a whole. Insight into current and future challenges for taxation policy in Europe 2015
IBA Tax Abuses, Poverty and Human Rights International bar Association HRI Task Force Report which focuses on the human rights and poverty impacts of tax abuses. It looks at the obligations of states, businesses and the legal profession to deal with these abuses. 2013
IBIS A brie on tax and corporate responsibility Explores the issue of tax from a corporate responsibility angle, however highlights that no international norm has yet emerged to give corporations adequate guidance on what responsible tax behaviour entails. 2012
Kepler Cheuvruex Tax me if you can: game over – Turning grey areas into red flags for investors Report that looks at the issue of aggressive tax minimisation on long-term shareholder value. It covers the themes of regulation and tax reform, social impacts, sector impacts and tax transparency. 2014
MSCI The ‘Tax Gap’ in the MSCI World Briefing on corporate tax issues and the vulnerabilities (reputational and regulatory) facing companies with significant tax gaps (difference between reported rate of tax and weighted average the countries where they generate revenue). 2013
Nordea Responsible corporate tax practices Paper that researches corporate tax practices in terms of companies’ policies, strategies, management practices and transparency. The conclusions are meant to provide guidance as an investor as well as recommendations to companies. 2014
Oxfam Business among friends – Why corporate tax dodgers are not yet losing sleep over global tax reform Report on tax dodging and the impact it has on the ability of governments to tackle inequality, particularly in developing countries. It also highlights concerns over current reform (e.g. BEPS) and the risk that this will be dominated by lobbyists and favour MNCs over ordinary people. 2014
Reuters Google’s tax-friendly sales pitch Google defends its low UK tax bills by saying its arrangements are within the law. An examination of its British activities raises questions about that. 2013
Sustainalytics Multi-National Corporations and Tax Transparency: issues for Responsible Investors Report that focuses on the risks related to the tax practices of MNCs in the consumer sector, how these practices have become more aggressive over time, and how investors can engage companies on their tax strategy and performance. 2013
Taxand Global Survey 2015: Caught in the crossfire: MNCs prepare for the post-BEPS world Insight into the outlook and concerns of multinationals in relation to corporate taxation. Topics include tax planning, legislation, international tax reform and the board view. 2015
UNCTAD World Investment Report (ch 5) – International Tax and Investment Policy Coherence Report on the following themes: the contribution of MNEs to government revenues (particularly in developing countries); the link between investment and tax considerations; tax avoidance schemes; and policy conclusions from an investment perspective. 2015
VBDO Tax Transparency Benchmark A comparative study that ranks 64 Dutch listed companies on the transparency of their responsible tax policy and its implementation. 2015
VBDO Good Tax Governance in Transition: transcending the tax debate to CSR Looks at the issue of responsible tax from various angles (with input from NGOs, investors, and the consulting industry). Topics include the idea of tax within CSR, the extent of transparency required, the ethical elements, what is a fair tax and how companies take stakeholder interests into account. 2014

Academic Research

Author Name Description Date
Amrstrong, S., Blouin, J.l., Jagolinzer, A.D. and Larcker, D.F. Corporate Governance, Incentives, and Tax Avoidance The paper examines the link between corporate governance, managerial incentives, and tax avoidance. The results suggest that corporate governance tends to decrease extremely high levels of tax avoidance and increase extremely low levels of tax avoidance, which may be symptomatic of over- and under-investment, respectively, by managers. 2014
Belz, T., Robinson, L., Ruf, M., Steffens, C. Tax avoidance as a driver of mergers and acquisitions Paper looking at how following a merger or acquisition, a target firm’s effective tax rate decreases. This decline is furthered when the acquiring firm is tax aggressive. 2013
Carey, K.H. Stateless Income’s Agency Problem: Are Multinational Corporations Acting in the Best Interest of Shareholders through the Creation of Stateless Income? The article looks at the concept of stateless income and how it leads to a lock-out of income earned in foreign markets, as well as the arguments supporting and countering the claim that stateless income is in the shareholders’ best interests. It concludes that shareholders should be part of the tax reform conversation to have their position articulated. 2012
Deveruex, M., de la Feria, R. Designing and implementing a destination-based corporate tax The paper discusses the legal and practical issues which would arise in the implementation of a destination-based tax, namely how it could be effectively designed and implemented. 2014
Dyreng, S., Hoopes, J., Wilde, J. Public Pressure and Corporate Tax Behaviour The paper looks at whether public scrutiny leads to changes in firms’ disclosure and corporate tax avoidance behaviour. Using evidence from ActionAid on FTSE 100 companies, the results suggest that public pressure from outside activist groups can exert a significant influence on the behaviour of large publicly-traded firms. 2015
European Tax Policy Forum (ETPF) ETPF – Research ETPF’s objectives are to commission independent academic research which will be published and made available to all to educate and inform the public understanding and to provide European governments and others making decisions on tax policy with independent data and research on the effects of tax policy. N/A
Forstater, M. Can stopping ‘tax dodging’ by multinational enterprises close the gap in finance for development? Paper that offers a framework and a set of process recommendations to enhance shared understanding of the emerging evidence on the magnitude of international tax arbitrage. 2015
Furman, J. The Concept of Neutrality in Tax Policy Testimony from the US Senate to discuss tax neutrality 2008
Institute of Fiscal Studies Taxing Corporate Income Lays out a framework for characterising different options for taxing corporate income and how international developments have impacted where and how firms locate their profits. The paper goes on to assess different options for reform, suggesting a destination-based tax. 2008
Powers, K., Robinson, J., Stomberg, B. You get what you pay for: How earnings and cash flow performance metrics differentially affect CEO behaviour Research on how different performance metrics used for determining annual bonuses affect CEO behaviour. The findings show that after-tax earnings metrics encourage tax accrual manipulation (window dressing) whereas cash flow metrics motivate reductions in cash payments (real tax avoidance). 2014

Reporting Examples

Author Name Description Date
Diageo Diageo Global Tax Policy “We support the adoption of international best practices and governance standards in fiscal and other policies in those countries. We believe that a fair and effective tax system is in the interests of tax-payers and the society at large and can contribute to the fight against poverty and corruption.” 2015
Npower Tax report & commentary Report which aligns with the Confederation of British Industry’s (CBI’s) seven tax principles. 2013
Rio Tinto Report on Taxes Paid This report on taxes paid by Rio Tinto in 2014 shows the payments they make to governments in each of the main countries in which they operate, the taxes and net earnings of their business units, and other Group tax information. 2014
SAB Miller Our approach to tax Report contextualises tax paid in the broader context of economic development. Also includes a useful diagram sketching out the brewing supply chain and the points at which government levies are charged. 2015
SSE Improving tax transparency “Improving the communication and transparency of SSE’s tax affairs is important to the Group and something SSE has increasingly focused on in recent years. Through 2014, SSE has worked closely with the Fair Tax Mark to improve the quality and quantity of the information it discloses about its tax liabilities and policies.” 2014
Tullow Oil Transparency Report Publishes tax data in line with both the EITI and the payment categories specified in the EU Accounting Directive. 2013
Unilever Global Tax Principles “We believe these Principles illustrate good corporate practice in the area of tax management and tax transparency, balancing the interests of our various stakeholders.” 2013
Vodafone Tax and our total contribution to public finances Detail tax section regarding its tax policy, transparency and economic contribution. 2014

WEBSITES

Name Description
Action Aid: tax justice Research & publications on tax justice
Christian Aid: tax justice Tax campaign resources
European Commission: Platform for Tax Good Governance Assists the Commission in developing initiatives to promote good governance in tax matters in third world countries, to tackle aggressive tax planning and to identify and address double taxation.
Fair Tax Mark The Fair Tax Mark is the label for good taxpayers. It is for companies and organisations that are proud to pay their fair share of tax.
ICRICT The Independent Commission for the Reform of International Corporate Taxation (ICRICT) is a group of leaders from around the world who aim to promote the reform debate of the international corporate taxation system.
OECD – BEPS reports Website where reports on BEPS (Base Erosion and Profit Shifting) are published
Responsible Tax Consultation exploring the meaning and purpose of responsible tax for the common good and what responsible tax behaviour and advice looks like.
Tax Journal Tax Journal is a leading tax publication for the UK corporate and business community.
Tax Justice Network An independent international network that pushes for systemic change on a wide range of issues related to tax, tax havens and financial globalisation.

Useful terms and definitions

Term Definition
Aggressive Tax Planning Taking advantage of the technicalities of a tax system or of mismatches between two or more tax systems for the purpose of reducing tax liability. See also: Tax Planning
Arm’s Length Principle (ALP) The condition or the fact that the parties to a transaction are independent and on an equal footing. Often used in the context of transfer pricing to ensure a fair division of taxable profits and to prevent profits being systematically deviated to lowest tax countries.
Bank Secrecy Provisions Provisions which require that a bank refuse to disclose information about its customers to third parties, including the tax authorities.
Base Erosion and Profit Shifting (BEPS) Tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid.
Captive (Bank / Insurance Company) A wholly owned subsidiary of a multinational group of companies (usually a bank or insurance company) whose purpose is to provide financial services to the group and those with whom the group deals. A captive is generally located in a tax haven in order to avail itself of the low capital requirements and freedom from exchange control.
Civil Society Organisation A non-profit organisation whose legal structure is one that will often have taxation implications, particularly where the non-profit seeks income tax exemption.
Common Consolidated Corporate Tax Base (CCCTB) A European Commission proposal for common corporate tax rules across the EU. It seeks to simplify the EU’s corporate tax framework and to reduce opportunities for multinational companies to avoid corporate tax.
Controlled Foreign Corporation (CFC) Companies, usually located in low tax jurisdictions that are controlled by a resident shareholder. CFC legislation is usually designed to combat the sheltering of profits in companies resident in low- or no-tax jurisdictions. An essential feature of such regimes is that they attribute a proportion of the income sheltered in such companies to the shareholder resident in the country concerned. Generally, only certain types of income fall within the scope of CFC legislation, i.e. passive income such as dividends, interest and royalties.
Country by Country Reporting (CbCR) Part of the OECD’s BEPS project, country-by-country reporting requirements will require MNEs to provide aggregate information annually, in each jurisdiction where they do business, relating to the global allocation of income and taxes paid, together with other indicators of the location of economic activity within the MNE group. This also includes information about which entities do business in a particular jurisdiction and the business activities each entity engages in.
Deferred Taxation The postponement of tax payments from the current year to future periods. This arises from temporary differences between the carrying amount of an asset (or liability) within the balance sheet and its tax base. Taxable temporary differences are those on which tax will be charged in the future when the asset (or liability) is recovered (or settled). See Deferred Tax Asset/Liability
Deferred Tax Asset (DTA) The amount of income tax recoverable in future periods in respect of taxable temporary differences (i.e. carrying value < tax base). DTAs can only be recognised up to the amount that is expected to be recoverable in the future.
Deferred Tax Liability (DTL) The amount of income tax payable in future periods in respect of taxable temporary differences (i.e. carrying value > tax base).
Double Taxation The levying of tax by two or more jurisdictions on the same declared income (in the case of income taxes), asset (in the case of capital taxes), or financial transaction (in the case of sales taxes). This double liability is often mitigated by tax treaties between countries.
Effective Tax Rate (ETR) The rate at which a taxpayer would be taxed if his tax liability were taxed at a constant rate rather than progressively. ETR = actual tax liability / total taxable income.
Exchange of Information (EOI) Most tax treaties contain a provision under which the tax authorities of one country may request the tax authorities of the other country to supply information on a taxpayer. Information may only be used for tax purposes in the receiving country and it must be kept confidential
Foreign Direct Investment (FDI) An investment made by a company or entity based in one country, into a company or entity based in another country. In order to attract this investment countries often offer tax incentives which can take the form of lower tax rates, tax holidays or other types of tax concessions.
Foreign Tax Relief / Credit Also known as Double Tax Relief, is a method of mitigating international double taxation as part of tax treaties. If income received from abroad is subject to tax in the recipient’s country, any foreign tax on that income may be credited against the domestic tax on that income. This credit is often limited to the amount of tax attributable to foreign source income.
Formula Apportionment (FA) A method of allocating profit earned (or loss incurred) by a corporation or corporate group to a particular tax jurisdiction in which the corporation or group has a taxable presence. See also: Unitary Tax System
Fronting The practice of interposing a third party in a transaction as a type of alternative risk transfer, often in order to circumvent transfer pricing legislation. It’s a risk management technique mostly notably used by insurance companies to underwrite a policy to cover a specific risk, but then cede the risk to a reinsurer (or Captive).
Intellectual Property (IP) Literary, dramatic, musical, artistic and scientific works are intellectual property which is protected by copyright, patent, registered design, trade mark, etc. A common tax optimisation strategy is to transfer ownership of IP rights to an affiliate which manages intragroup licensing (often through a conduit in a country with extensive tax treaties) to ensure royalty payments are not subject to withholding taxes.
Limitation of Benefits Tax treaty provisions designed to restrict treaty-shopping opportunities by limiting treaty benefits to persons who meet one of several enumerated tests, which may require minimum level qualifications, e.g. local ownership.
Loss Relief Most income tax laws provide some form of relief for losses incurred, either by carrying over the loss to offset it against profits in previous years (carry-back) or in future years (carry-forward) or by setting off the loss against other income of the same taxpayer in the year in which the loss was incurred.
Multi-National Enterprises (MNE) Company or group of companies with business establishments in two or more countries.
Permanent Establishment (PE) Term used in double taxation agreement to refer to a situation where a non-resident entrepreneur is taxable in a country; that is, an enterprise in one country will not be liable to the income tax of the other country unless it has a “permanent establishment” through which it conducts business in that other country.
Tax Arbitrage The practice of profiting from differences between the ways transactions are treated for tax purposes. The complexity of tax codes often allows for many incentives which drive individuals to restructure their transactions in the most advantageous way in order to pay the least amount of tax. Some forms of tax arbitrage are legal while others are illegal.
Tax Anticipation Note (TAN) A short-term debt security issued by a state or local government to finance an immediate project that will be repaid with future tax collections. State and local governments use tax anticipation notes to borrow money, typically for one year or less and at a low interest rate, in order to finance a capital expenditure such as the construction of a road or school. The government then uses the following year’s tax revenue to repay the TANs.
Tax Attribute A type of loss or tax credit that must be reduced as a result of the exclusion of debt cancellation from a taxpayer’s gross income. Tax attributes are adjusted when a taxpayer declares bankruptcy.
Tax Avoidance The arrangement of a taxpayer’s affairs in a way that is intended to reduce his or her tax liability through legal methods (although often in contradiction with the intent of the law it purports to follow).
Tax Base The assessed value of a set of assets, investments or income streams that is subject to taxation.
Tax Burden For public finance purposes the tax burden, or tax ratio, in a country is computed by taking the total tax payments for a particular fiscal year as a fraction or percentage of the Gross National Product (GNP) or national income for that year.
Tax Efficiency An attempt to minimise tax liability through a financial process. There is a wide variety of tax-efficient vehicles, including tax-efficient mutual funds, irrevocable trusts and tax-exempt commercial paper.
Tax Evasion Illegal arrangements where the liability to tax is hidden or ignored. This implies that the taxpayer pays less tax than he or she is legally obligated to pay by hiding income or information from the tax authorities.
Tax Gap The difference between a company’s Effective Tax Rate (ETR) and the Weighted Average Statutory Rate (geographic sales mix * local tax rates). Although there may be non-tax related reasons for this gap, large and persistent tax gaps are often the result of profit shifting and tax optimisation.
Tax Incidence The person who bears the tax burden in economic sense, which could be different from the person paying the tax.
Tax Harmonisation The process of making taxes identical or at least similar in a region. In practice, it usually means increasing tax in low-tax jurisdictions, rather than reducing tax in high-tax jurisdictions or a combination of both. The best example is the European Union where all countries must have a value added tax of at least 15%.
Tax Haven A country which imposes a low or no tax, and is used by corporations to avoid tax which otherwise would be payable in a high-tax country.
Tax Holiday A government incentive program that offers a tax reduction or elimination to businesses. Tax holidays are often used to reduce sales taxes by local governments, but they are also commonly used by governments in developing countries to help stimulate foreign investment.
Tax Lien A legal claim by a government entity against a noncompliant taxpayer’s assets. Tax liens are a last resort to force an individual or business to pay back taxes.
Tax Planning Also known as Tax Optimisation, it encompasses any arrangements with the attempt to minimise tax liability. See also: Aggressive Tax Planning, Tax Efficiency
Tax Ruling Any communication or any other instrument or action with similar effects, by or on behalf of the Member State regarding the interpretation or application of tax laws
Tax Shelter A legal method of minimising or decreasing an investor’s taxable income and, therefore, his or her tax liability. Tax shelters can range from investments or investment accounts that provide favourable tax treatment, to activities or transactions that lower taxable income.
Tax Shield A reduction in taxable income for an individual or corporation achieved through claiming allowable deductions such as mortgage interest, medical expenses, charitable donations, amortisation and depreciation. These deductions reduce taxpayers’ taxable income for a given year or defer income taxes into future years.
Tax Treaty An agreement between two (or more) countries to resolve issues involving double taxation. A tax treaty may be titled a Convention, Treaty or Agreement.
Tax Umbrella The use by a company of the losses it sustained in previous years to offset taxes on the profits it achieves in future years. Individuals can also use a tax umbrella so that their investment losses in previous years offset their investment gains in future years. A tax umbrella takes advantage of a tax law provision to reduce tax liability.
Transfer Pricing The setting of the price for goods, services or intangible property sold between controlled (or related) legal entities within an enterprise. Abusive transfer pricing occurs when income and expenses are improperly allocated for the purpose of reducing taxable income.
Underlying Tax The rate of overseas corporation tax applied to overseas company’s profits, from which foreign dividends are paid. Such relief may be given either under a tax treaty or in accordance with unilateral provisions.
Unitary Tax System A system by which profits of the various branches of an enterprise or the various corporations of a group are calculated as if the entire group is a unity. A formula is used to apportion the net income of the whole group to the various parts of the group. Usually a combination of property, payroll, turnover, capital invested, manufacturing costs, etc. are formula factors.
Unrecognised Tax Benefit (UTB) Also known as “Uncertain Tax Positions”, it is a liability for income-tax-related positions that may be challenged on audit and ultimately disallowed in whole or in part.
Value Added Tax (VAT) Specific type of turnover tax levied at each stage in the production and distribution process. Although VAT ultimately bears on individual consumption of goods or services, liability for VAT is on the supplier of goods or services. VAT normally utilises a system of tax credits to place the ultimate and real burden of the tax on the final consumer and to relieve the intermediaries of any final tax cost.
Withholding Tax (WHT) Also known as ‘border tax’, this is charged on overseas income as it is remitted back to the country of origin. Withholding taxes are found in practically all tax systems and are widely used in respect of dividends, interest, royalties and similar tax payments. The rates of withholding tax are frequently reduced by tax treaties.

Further terms and definitions can be found on the OECD website.