Tutorial Question Interest limitation regimes

The case study on Chevron highlights the problems of the current thin capitalisation regime in Australia, as well as the best practice approach recommended by the OECD in Action 4 of its BEPS project.

Answer the following questions:

(1) What are the tests in Australias thin capitalisation regime?

(2) Explain why this thin capitalisation regime is not effective to address BEPS using interest deduction.

(3) Explain why the best practice approach does not address effectively the BEPS risks arising from interest deduction.

(4) Why are governments often reluctant to implement a strong anti-BEPS regime to limit interest deductions?

(5) How can the current thin capitalisation regime be improved to address the BEPS risks arising from interest deduction?

(6) How can the best practice approach be improved to combat BEPS?