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

As globalization has expanded, so too has the complexity of international tax systems. In response to concerns about tax avoidance and erosion of tax bases, governments around the world have implemented various anti$-$avoidance measures and regulations. These measures are designed to prevent taxpayers from exploiting gaps, mismatches, and loopholes in tax laws to minimize their tax liabilities unfairly. Anti$-$avoidance measures aim to promote tax fairness, protect tax revenues, and ensure compliance with the spirit of tax laws.

Types of Anti$-$Avoidance Measures:

General Anti$-$Avoidance Rules $($GAAR$)$: GAAR provisions empower tax authorities to disregard transactions or arrangements that lack economic substance or are primarily undertaken for tax avoidance purposes. GAARs target abusive tax planning strategies and provide authorities with the discretion to re$-$characterize transactions or deny tax benefits.

Transfer Pricing Rules: Transfer pricing rules require multinational enterprises to establish arm's length prices for transactions between related entities in different jurisdictions. These rules prevent taxpayers from shifting profits to low$-$tax jurisdictions by manipulating transfer prices for goods, services, or intellectual property.

Thin Capitalization Rules: Thin capitalization rules limit the deductibility of interest expenses on loans from related parties, preventing taxpayers from artificially inflating interest deductions to reduce taxable income in high$-$tax jurisdictions.

CFC $($Controlled Foreign Corporation$)$ Rules: CFC rules attribute income earned by foreign subsidiaries under the control of a domestic taxpayer to the taxpayer's own income, ensuring that income generated offshore is subject to taxation in the taxpayer's home jurisdiction.

Limitation on Benefits $($LOB$)$ Provisions: LOB provisions restrict the availability of tax treaty benefits to prevent treaty shopping, where taxpayers exploit differences in tax treaties between jurisdictions to minimize their tax liabilities.

Application and Effectiveness:

Anti$-$avoidance measures are applied by tax authorities through audits, investigations, and enforcement actions. These measures have become increasingly important in combating aggressive tax planning schemes and ensuring that taxpayers pay their fair share of taxes. However, the effectiveness of anti$-$avoidance measures depends on their design, implementation, and enforcement by tax authorities. Moreover, the complexity of international tax systems and the evolving nature of tax planning strategies pose ongoing challenges for policymakers and tax administrators.

Question:

Transfer pricing rules aim to prevent taxpayers from shifting profits to low$-$tax jurisdictions by manipulating

A$)$ Interest expenses

B$)$ Royalty payments

C$)$ Transfer prices

D$)$ Dividend distributions