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Peter A. Harrisis part of the purpose of the present chapter to identify that meaning andrelate it to the fundamentals of income taxation.The “hybrid” part of the phrase means that, in a particular case(taken to be an “arrangement”), two countries do not agree on the classificationor characterization of some feature of the arrangement thatis fundamental for income tax purposes. From this perspective, all ofthe fundamentals of income taxation can give rise to hybrid arrangements.In order to understand the scope for hybrid arrangements, itis thus necessary to investigate the fundamentals of income taxation.The “mismatch” feature is different and suggests that the differentways in which two countries view the particular arrangementproduce some sort of inconsistent outcome when looked at as awhole. From this perspective, not all hybrid arrangements give riseto mismatches, because in some cases the differing views of the twocountries do not produce an inconsistent outcome. One of the complexitiesin seeking to establish rules to neutralize hybrid mismatcharrangements is identifying which arrangements give rise to inconsistentoutcomes. By the very nature of a hybrid mismatch arrangement,this means that the countries in question need to look closelyat how the tax law in the other country applies to the arrangement.Historically, countries (especially source countries) have not lookedclosely or sought to understand or apply the tax law in another countryinterested in a cross-border arrangement (see section 4 below). Onecore issue is whether it is realistic, even presuming high levels of crossbordercooperation between tax administrations, to believe that taxtax/beps-2014-deliverables.htm, paragraph 41, defines a “hybrid mismatcharrangement” as “an arrangement that exploits a difference in the tax treatmentof an entity or instrument under the laws of two or more jurisdictionsto produce a mismatch in tax outcomes.” Like the earlier definition in OECDPublic Discussion Draft, BEPS Action 2: Neutralise the Effects of Hybrid MismatchArrangements (Recommendations for Domestic Laws) (Paris: OECD,2014) (OECD Public Discussion Draft on BEPS Action 2 — Domestic Issues),available at http://www.oecd.org/ctp/aggressive/hybrid-mismatch-arrangements-discussion-draft-domestic-laws-recommendations-march-2014.pdf,paragraph 17, this is limited to “entities” and “instruments.” Further, whileno longer referring to “payments,” subsequent discussion in the OECDAction 2 — 2014 Deliverable suggests this is a further requirement.188