handbook-tb

Peter A. Harristhe payer or payee. So there may be multiple jurisdictions that mightbe considered the payer jurisdiction or the payee jurisdiction, or theremight be none. It is not clear how the rules are intended to operate inthese eventualities.Problems with the scope of what “deduction” or “including inordinary income” mean were discussed in section 2.1 above. In particular,there are issues regarding amounts included in the cost ofan asset and the classification of consideration received on the disposalof an asset. “Ordinary income” is a peculiar phrase that willhave independent meaning in only a few jurisdictions. The definitionrefers to “income that is subject to tax at the taxpayer’s full marginalrate.” There is no definition of “full marginal rate” and in the contextof countries with schedular systems, it may make little sense. Manycountries, especially developing countries, tax some types of income,such as dividends, interest and certain rents, at final flat rates on thegross amount.In any case, there seems little use in identifying a D/NI or DDoutcome if the arrangement does not fall within the scope of the provisions.It is more intuitive to focus on the second column of table 1of the OECD Action 2 — 2014 Deliverable and consider whether thearrangement is one of the target arrangements, and then considerwhether it gives rise to a D/NI or DD outcome. Focusing on categoriesof arrangements requires consideration of the definitions of “financialinstrument” and “hybrid transfer” (recommendation 1, paragraph2), “hybrid payer” (recommendation 3, paragraph 2 — but defineddifferently in recommendation 6, paragraph 2), “reverse hybrid” (recommendation4, paragraph 2), “dual resident” (recommendation 7,paragraph 2) and “imported mismatch arrangement” and “hybriddeduction” (recommendation 7, introduction and paragraph 2).There is no overarching coordination between these definitionsand there is thus no indication of any relationship between them. Thisdislocation is greater in the OECD Action 2 — 2014 Deliverable thanin the OECD Public Discussion Draft on BEPS Action 2 — DomesticIssues. Further, the definition of each of these concepts raises difficultinterpretation issues. For example, the definition of “financial instrument”refers to “debt, equity or derivatives,” but these terms are notdefined. The relevance of the definition of “equity interests” is not clear.228