For multinational businesses, one of the most controversial reports from the OECD BEPS project focused on limiting base erosion involving interest deductions and other financial payments. The report’s departure from the arm’s-length standard and adoption of mechanical approaches to limiting interest deductions aroused a great deal of concern. On the other hand, it was widely recognised that interest deductions offered the most straightforward option for those seeking to achieve base erosion and profit shifting. Although the OECD report characterised its recommendations as a best-practice approach rather than a minimum standard, there was an expressed expectation that domestic rules regarding interest limitations would “converge through the implementation of the agreed common approaches.” Recognising that domestic law continues to evolve, Subject 1 of the 2019 Cahiers analysed 40 branch reports and aimed to determine whether this convergence expectation has borne out to date.
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