Malaysia And Thailand Repeal Tax Breaks

By Global Tax Weekly

There are plenty of things in this life that can do us harm. One of them can be taxation. But not, as conventional wisdom might have it, because taxes are too high, and too difficult to work out. No, in the world of BEPS and uber-transparency, taxes become harmful when they are too low. Or, as the European Union’s Code of Conduct Group (Business Taxation), a body tasked with rooting out harmful tax regimes, puts it, when tax measures “unduly affect the location of business activity.” Which is quite ironic really, given that the mysterious and shadowy Code Group has itself been accused of operating in a less-than-transparent fashion.

However, despite the time and resources devoted to this matter, the war against harmful taxation has yet to be won. Although, if recent OECD figures are anything to go by, the final push must be just around the corner, with the harmful tax brigade in full retreat. As of May 2018, of the 175 preferential tax regimes assessed in more than 50 jurisdictions since the creation of the BEPS inclusive Framework in 2016, only four were considered as having harmful or potentially harmful features. Moreover, 31 regimes have been changed and 81 regimes required legislative changes which were in progress at the time of the report, with 12 regimes under review. The remainder were not deemed to pose a BEPS risk.

Recent battles won include the suspension of Malaysia’s ‘MSC Malaysia’ tax regime for domestic and foreign information and communication technology-related businesses, and last month, the partial repeal of Thailand’s International Headquarters tax system. But will the playing field ever be truly level? More to the point, can it ever be level? As jurisdictions continue to compete on tax, a level playing field is looking more and more like and unobtainable goal. Furthermore, it seems there’s another irony here, in that by suspending these tax breaks, Malaysia and Thailand may have provided reasons for business activity, to repeat the Code Group’s observation, to be located elsewhere.

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