Harmful Tax Competition in the East African Community: the Case of Rwanda with Reference to EU and OECD Approaches

With a focus on Rwanda, this book discusses harmful tax competition in the East African Community with reference to EU and OECD approaches.

Cover -- IBFD Doctoral Series -- Title -- Copyright -- List of Abbreviations -- Chapter 1: General Introduction -- 1.1. Introduction -- 1.2. Research justification -- 1.3. Research context -- 1.3.1. Introduction to Rwanda and EAC -- 1.3.1.1. Introduction to Rwanda and its tax system -- 1.3.1.2. Introduction to the EAC and its law -- 1.3.1.3. Rationale behind the choice of the EAC -- 1.3.2. Why EU and OECD references? -- 1.3.2.1. Brief overview of EU law -- 1.3.2.2. Brief overview of OECD instruments -- 1.3.2.3. Rationale behind the choice of the European Union and the OECD -- 1.4. Problem statement, focal research questions and objectives -- 1.5. Research output and scope -- 1.6. Societal and scientific relevance -- 1.7. Research methodology -- 1.8. Synopsis of chapters -- Chapter 2: Tax Competition General Panorama -- 2.1. Introduction -- 2.2. Conceptual and historical background -- 2.2.1. A triangular conceptual framework -- 2.2.2. Natural background -- 2.2.3. Retaliation background -- 2.2.4. Globalization impact -- 2.3. Principles and practices of tax competition -- 2.3.1. State sovereignty -- 2.3.1.1. General state sovereignty -- 2.3.1.2. State tax sovereignty -- 2.3.2. States' fiscal competition freedom -- 2.3.3. Cycle of tax sovereignty and tax competition -- 2.3.4. Global practices of tax competition -- 2.4. Normative and economic perspectives -- 2.4.1. Economic schools of thought on tax competition -- 2.4.1.1. Public poverty school -- 2.4.1.2. The taming of the Leviathan school -- 2.4.2. Normative perspective -- 2.4.2.1. Impact of regional integration -- 2.4.2.2. Development of international standards -- 2.5. In search of the boundaries between good and bad tax competition -- 2.5.1. Why distinguish "bad" from "good" tax competition? -- 2.5.2. What is "good" and what is "bad" tax competition?.

2.5.3. What is the main concern of lawyers in tax competition? -- 2.6. Conclusion -- Chapter 3: Overview of Favourable Tax Measures under Rwandan Law -- 3.1. Introduction -- 3.2. Benchmark of favourable tax measures -- 3.2.1. Differential treatment -- 3.2.2. Preferential treatment -- 3.3. Historical development of Rwanda's tax competitiveness -- 3.4. Legislative favourable tax measures -- 3.4.1. Preferential tax rates -- 3.4.2. Tax holidays -- 3.4.2.1. Tax holidays under the Rwandan Income Tax Law -- 3.4.2.2. Tax holidays under the Rwandan Investment Law -- 3.4.3. Tax exemptions -- 3.4.4. Profit tax discount -- 3.5. Favourable tax measures through administrative practices -- 3.5.1. Tax rulings -- 3.5.2. Tax agreements -- 3.5.3. Tax settlements -- 3.6. Conclusion -- Chapter 4: OECD and EU Approaches to Harmful Tax Practices -- 4.1. Introduction -- 4.2. 1998 OECD Report on harmful tax competition -- 4.2.1. The 1998 OECD Report in brief -- 4.2.2. Praise and criticism of the 1998 OECD Report -- 4.2.2.1. Praise -- 4.2.2.2. Criticism -- 4.2.3. OECD progress reports and the BEPS Project -- 4.2.4. Components of harmful tax practices -- 4.2.4.1. Tax havens -- 4.2.4.2. Harmful preferential tax regimes -- 4.2.5. The OECD's key factors and their interpretation -- 4.2.5.1. Two common factors -- 4.2.5.2. Factors specific to tax havens -- 4.2.5.3. Factors specific to harmful preferential tax regimes -- 4.3. EU Code of Conduct on business taxation -- 4.3.1. Key aspects of the EU Code of Conduct -- 4.3.2. Location test and derogation test -- 4.3.3. The Code's five criteria and their interpretation -- 4.3.3.1. Lower level of taxation -- 4.3.3.2. Ring-fencing -- 4.3.3.3. Lack of substantial activity requirement -- 4.3.3.4. Non-compliance with OECD rules on profit determination -- 4.3.3.5. Lack of transparency -- 4.4. The EU Code criteria vis-à-vis the OECD factors.

4.4.1. Points of convergence -- 4.4.2. Points of divergence -- 4.5. OECD and EU contributions in regulating harmful tax practices -- 4.5.1. OECD contribution in regulating harmful tax practices -- 4.5.2. EU contribution in regulating harmful tax practices -- 4.6. The merits and demerits of EU and OECD standards for developing countries -- 4.7. Conclusion -- Chapter 5: EAC's Approach to Harmful Tax Practices -- 5.1. Introduction -- 5.2. State of play of tax competition in the EAC -- 5.3. The EAC tax competition agenda -- 5.3.1. The EAC tax harmonization approach -- 5.3.2. Draft Code of Conduct against harmful tax competition -- 5.3.2.1. Key features of the draft Code -- 5.3.2.2. Provisions on transparency and exchange of information -- 5.4. Comparison between EAC and EU Codes of Conduct -- 5.4.1. Similarities between the two codes -- 5.4.2. Differences between the two codes -- 5.5. EAC's contribution to the regulation of harmful tax practices -- 5.5.1. Optimistic view -- 5.5.2. Pessimistic view -- 5.6. Conclusion -- Chapter 6: Dissecting the Rwandan Regime of Favourable Tax Measures -- 6.1. Introduction -- 6.2. Benchmarking -- 6.2.1. Justification of benchmarking -- 6.2.2. Benchmarks -- 6.2.3. Guiding principles -- 6.3. Analysis of the legislative favourable tax measures -- 6.3.1. Preferential tax rates -- 6.3.2. Tax holidays -- 6.3.3. Tax exemptions -- 6.3.4. Profit tax discounts -- 6.4. Analysis of regulatory and administrative tax practices -- 6.4.1. Tax rulings -- 6.4.2. Advance pricing agreements -- 6.4.3. Tax settlements -- 6.5. Quid Rwanda's exchange of information? -- 6.6. A tour d'horizon of the OECD's GloBE proposal and its impact on Rwanda -- 6.6.1. Impact of GloBE on tax competition -- 6.6.2. Impact of GloBE on Rwanda -- 6.6.3. A repeated history of criticism -- 6.7. Conclusion -- Chapter 7: Remedies Towards a Non-Harmful Tax System.

7.1. Introduction -- 7.2. Refining the Rwandan tax system -- 7.2.1. Proposals on preferential tax rates -- 7.2.2. Proposals on tax rulings -- 7.2.3. Proposals on advance pricing agreements -- 7.2.4. Disband tax settlement -- 7.2.5. Recommendation to join the Inclusive Framework -- 7.3. Closing the EAC shortcomings -- 7.3.1. Modalities for the adoption of the Code of Conduct -- 7.3.2. Salient corrections before adoption -- 7.3.3. Proposals on enforcement mechanisms -- 7.4. Demystifying the myth -- 7.5. Developing an EAC model against harmful tax competition -- 7.6. Conclusion -- Chapter 8: Concluding Remarks -- 8.1. Introduction -- 8.2. Book overview -- 8.3. Recapitulation of key findings -- 8.4. Recommendations -- 8.5. Areas for future research -- 8.6. Study contributions -- Annex I: Recapitulation of Assessed Measures -- Annex II: Draft Code of Conduct against Harmful Tax Competition in the East African Community -- Annex III: Overview of the preferential tax regimes examined by the COCG since its creation in March 1998 -- References -- Other Titles in the IBFD Doctoral Series.