The growing international tax competition leads high tax countries to reinforce anti-avoidance rules, in order to counter the erosion of national tax bases. Several countries have focused their anti-avoidance rules on international transactions, given that tax arbitrage and tax avoidance are more easily pursued through jurisdictions that do not allow an effective exchange of information for tax purposes.
The ways to counter non-cooperative jurisdictions - including "tax havens" - were examined during the G20 summit held in London on April 2, 2009, in the context of the possible measures to reinforce the financial system. Governments agreed to take actions against tax havens, including economic sanctions, in order to protect the integrity of their tax revenues. In parallel with the London meeting, the OECD released a report on progress made by countries in the implementation of effective information exchange in tax matters.
During the last two decades, Italy adopted several "international anti-avoidance rules", i.e. rules in the field of income taxes that provide for a different tax treatment of transactions made with companies or other entities resident in low-tax countries. These provisions include: the Controlled Foreign Companies (CFC) legislation; the presumption of tax residence in Italy for foreign-resident individuals; the rules limiting tax deductibility of expenses paid to foreign suppliers; the tax treatment of outbound and inbound financial proceeds (interest, dividends and capital gains).
When implementing these rules, the Italian legislator followed a jurisdictional approach, taking into account the residence of the foreign counterparty in a tax haven or, on the contrary, in a "reliable" country. The two categories of countries are identified by closed lists ("black" and "white" lists, respectively) prepared by the tax legislator. This approach has the advantage of certainty for taxpayers, but determines rigidity and the risk of obsolescence. When deciding which countries include in each list, the level of transparency of the foreign tax system, the degree of cooperation in tax information exchange and the level of taxation in the foreign country are taken into account. The transparency and cooperation criteria are used to avoid both round-tripping (fictitious foreign ownership of assets actually belonging to Italian taxpayers) and complexities when trying to ascertain the actual foreign taxes paid.
International anti-avoidance rules act as a deterrent to the improper use of tax provisions. However, in the design of such provisions the Italian tax legislator has to take into account both the fundamental freedoms of the European Treaty and the need to limit the compliance burden for taxpayers, as underlined by the European Commission. In view of these needs, the structure of some international anti-avoidance provisions should be partly reviewed, especially to make them more consistent with the principle of proportionality between the national interest to protect tax revenues and the need to limit taxpayers' compliance burden.
For some of these provisions, the direction to be taken seems quite straightforward; for instance, the tax treatment of outbound financial proceeds (interest, dividends and capital gains) appears consistent with the principle of proportionality between the protection of tax revenues - which has to take into account the extreme mobility of such proceeds - and the need to limit the tax burden for foreign investors (that only have to present tax statements). For other provisions the evaluation is more complex, particularly as regards how to best implement the proportionality principle. In these cases, it is important to take into account the deterrence effect of anti-avoidance provisions: a widespread taxpayers' awareness that the tax administration can effectively detect tax evaders represents a strong deterrent of non-compliance.
