Sophisticated Financial Engineering and Tax Arbitrage

This chapter delves into the inner sanctum of corporate organization in order to find evidence of rise or decline in the use of techniques of tax arbitrage by the corporate sector within the EU region. We follow then with an analysis of the use of sophisticated financial instruments in tax mitigation techniques in the EU to assess the impact of finance-oriented tax mitigation techniques. Our conclusion is not positive. It appears to us that in comparison with the US (and possibly China), the European fiscal regime failed to address a core political issue. These political conditions encourage the use of those diverging rules and regulations one against the other and affect jurisdictional arbitrage with the overall aim of tax mitigation. Europe is emerging as the playground for international corporations’ tax arbitrage and financial techniques of tax mitigation.