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Hugh J. Ault and Brian J. ArnoldOn an initial examination, these issues seemed to be of mostimportance to developing countries. Countries can, of course, dealwith some of these issues unilaterally and a number have alreadybegun to do so. In order to respond effectively to some of the challengesthat base erosion and profit shifting pose, however, it is essential thatactions be taken forward in a coordinated manner. Countries shouldbe more aware both of how their tax systems affect other countries’systems and how their domestic system is impacted by another country’stax rules. These results can be achieved only through increasedinternational dialogue and cooperation.The basic goal of the FfDO project is to complement and supplementthe work of the OECD project on BEPS and the United NationsCommittee of Experts by providing additional insight into the issuesidentified in the OECD project on BEPS when viewed from the perspectiveof developing countries. It will also supplement the OECD work byconsidering issues involving tax base protection, which are of particularimportance to developing countries but are not included within theOECD focus. In addition, the OECD work has quite short deadlines forits initial assessments and recommendations. It will clearly be a longertermmatter for these insights to be evaluated and implemented.The final outcome of the FfDO project is the present publicationon the selected topics listed above. The chapters have been developedby individual authors, informed by the OECD work on the topics anda review of the existing literature. Most importantly, the work reflectsthe input of developing countries both through various activities of theUnited Nations Committee of Experts and through workshops heldspecifically to catalogue the experience and concerns of developingcountries with the overall problem of base erosion and profit shifting.2. Neutralizing the effects of hybrid transactions2.1 What are hybrid transactions?In many cases, the same cross-border transaction may be treated differentlyin two jurisdictions. Domestic tax rules are typically developedwithout significant consideration of how the transaction maybe treated in another jurisdiction where a foreign party is involved.8