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4.2. Disguised profit distribution through transfer pricing flows of income and the Primarolo Committee Report which contains measures to prevent the possible negative effects of The “Disguised Profit Distribution through Transfer Pricing” tax competition. (Code of Conduct)[4] application stipulated in the article 13 of the Corporate Tax Law is one of the measures taken against harmful tax competition. 5.3. Other measures and FATCA, CRS and BEPS applications Transfer pricing is a method provided essentially in order to overcome the difficulties in performing international profit The United Nations also prepared a report for the establishment and money transfers resulting from strict foreign exchange of the “International Tax Organization” covering developing regimes, which were encountered in previous periods. Each countries in 2001 (The Zedillo Report). Apart from these state would like to have the taxes on gains generated within efforts, the Financial Action Task Force, which was established the country paid and transferred to the treasury within their within OECD by the G8 countries in Paris in 1989 and which own boundaries. However, transfer pricing has become an includes Turkey among its 33 members as well, conducted instrument used among “related parties” except for purposes studies to detect and prevent the laundering of black money in of profit and money transfer today. Enterprises have thus all countries. attempted to partially or wholly avoid the taxes they are obliged to pay. This situation has raised the “disguised profit The application implemented by OECD after FATCA is the distribution” practice, demonstrating the necessity to focus “Common Reporting Standard” (CRS) which is of international on the “arm’s length principle” stipulated in the article. nature. The difference between CRS and FATCA is that CRS The article contains provisions stipulating that the profits requires reporting to multiple countries. BEPS (base erosion and determined to be distributed through transfer pricing shall be profit shifting), which is another application, aims to establish considered as “dividends distributed” and “amounts distributed a comprehensive action plan through intergovernmental to the headquarters” for Turkish residents and non-residents cooperation. The BEPS regulation is comprised of 15 articles respectively. and involves plans to take action between September 2014-December 2014 for “a more effective fight against 4.3. Withholding tax application in payments made to tax harmful tax competition practices” under the 5th article. In havens addition, it is planned to take action by September 2014 for “enhancing controlled foreign corporation arrangements” under The “Withholding Tax Application in Payments Made to Tax the article 3.[5] Havens” practice stipulated in the 7th paragraph of the article 30 of the Corporate Tax Law is a specific provision which 6. Conclusion contains measures against creation of harmful tax competition by tax havens. The article states that 30% tax withholding shall A consensus has not been reached since countries implement be applied to the payments made or accrued in cash or on their own tax systems and measure mechanisms and the account to corporations resident or operating in the countries measures considered are not binding. Measures that can included in the list of tax havens to be announced by the Council be taken against tax havens in terms of international tax of Ministers. Since the Council of Ministers has not yet published competition could include application of reasonable levels of this list, the tax withholding is not applied for the time being. tax rates, efforts to prevent unregistered capital, ensuring information exchange with tax havens and the transparency of 5. International measures taken against harmful their tax systems. tax competition 5.1. Measures taken by the OECD Many international institutions have conducted various researches and published reports to demonstrate the harmful effects of tax havens on international competition. In the report titled “Harmful Tax Competition: An Emerging Global Issue” published by OECD in 1998 regarding harmful tax competition practices, it is stated that tax havens have four determining factors. These factors are the lack of tax application or tax References application at low rates, lack of information exchange, lack [1] Aktan Coşkun Can ve Vural İstiklal, “Vergi Rekabeti”, Erciyes Üniversitesi of transparency in tax laws and lack of an obligation to be İktisadi ve İdari Bilimler Fakültesi Dergisi, S.22, January-June 2004, pg.11-12. actually active. In the light of this report, progress reports were [2] Yetkiner Erkan, “Vergi Cennetlerinin Sunduğu Bazı Vergi ve Yatırım published on 2000, 2001 and 2004.[3] Avantajları”, Vergi Dünyası, S. 237, May 2001, pg.79. [3] Öz Ersan ve Yaraşır Sevinç, “Global Bir Kavram: Vergi Rekabeti”, İstanbul 5.2. Measures taken by the EU Üniversitesi İktisat Fakültesi Maliye Araşma Merkezi Konferansları, S.52, 2009, pg.140. The efforts devoted by the EU against harmful tax competition [4] Armağan Ramazan ve İçmen Murat, “Vergi Rekabeti ve Türkiye’ye include the Rome Convention, the founding convention of the Yansıması”, Süleyman Demirel Üniversitesi İİBF Dergisi, C.17, S.2, 2012, pg.51-53. union which rather addresses commercial activities with the aim of a single market, the Ruding Committee Report which [5] Çiçekdağı Nazlı Ebru, “Vergi Rekabetine Karşı Yeni Kozlar: FATCA, CRS ve contains measures against the double taxation of cross-border BEPS”, Vergide Gündem Dergisi, “FATCA” Özel Sayısı, May 2014, pg.11-13. Kasım 2014 Kasım 2014 11