Anti$-$Avoidance Measures and Regulations in International Taxation:

As globalization has increased, so has the complexity of international taxation. To counter tax avoidance and evasion, countries around the world have implemented anti$-$avoidance measures and regulations. These measures are designed to prevent individuals and businesses from exploiting gaps in tax laws to reduce their tax liabilities artificially. Anti$-$avoidance measures typically target aggressive tax planning strategies that may comply with the letter of the law but violate its spirit, leading to erosion of the tax base. There are several key anti$-$avoidance measures in international taxation:

General Anti$-$Avoidance Rules $($GAAR$)$: Many countries, including the United States, have GAAR to counteract tax avoidance schemes. GAAR allows tax authorities to disregard transactions or arrangements that are deemed artificial or lack economic substance.

Transfer Pricing Regulations: Transfer pricing refers to the pricing of transactions between entities within the same multinational group. Countries have implemented regulations to ensure that transactions between related entities are conducted at arm's length prices, preventing profit shifting between jurisdictions.

Controlled Foreign Corporation $($CFC$)$ Rules: CFC rules are aimed at preventing taxpayers from shifting income to low$-$tax jurisdictions by attributing the income of a foreign subsidiary to the parent company for tax purposes.

Thin Capitalization Rules: Thin capitalization rules limit the amount of debt a company can have in relation to its equity, preventing excessive interest deductions that may lead to erosion of the tax base.

Country$-$by$-$Country Reporting $($CbCR$)$: $CbCR$ requires multinational enterprises to report detailed financial and tax information for each jurisdiction where they operate. This allows tax authorities to assess transfer pricing risks and potential profit shifting.

Limitation on Benefits $($LOB$)$ Provisions: LOB provisions are often found in bilateral tax treaties and aim to ensure that the benefits of the treaty are granted only to those who meet specific eligibility criteria, preventing treaty shopping.

Anti$-$Hybrid Rules: These rules address hybrid mismatch arrangements that exploit differences in the tax treatment of financial instruments or entities between two jurisdictions.

Common Reporting Standard $($CRS$)$: CRS is an international standard for the automatic exchange of financial account information between tax authorities, enhancing transparency and combating tax evasion.

Question:

To prevent profit shifting between jurisdictions, countries often implement transfer pricing regulations, ensuring that transactions between related entities are conducted at prices.

A$)$ Market

B$)$ Arm's length

C$)$ Preferential

D$)$ Book value