Demystifying Aggressive Tax Planning: Assessing Costs, Tensions, and Risks Associated with Practicing ATP

Aggressive tax planning (ATP) is frequented in public discussion and extensive legislative measures - such as the OECD BEPS Project and other initiatives - aimed at curbing it are on the rise. Nevertheless, the concept remains vastly ambiguous and partially misunderstood, especially on the taxpayer front. The purpose of this study is to elucidate on the definition of ATP as well as to assess risks and costs associated with practicing it. The paper focuses on the viability of practicing ATP and does not comment on the righteousness of said tax behavior. The paper follows a three-part structure. The first part carves the definition of ATP from surrounding and partially overlapping concepts, the second observes changes in the taxation landscape, and the last analyzes stakeholder relationships in the wake of ATP. It is found, that ATP is distinguished from tax evasion by the substantiality of business purpose when applying tax evasion laws and GAARS, however flexibility in interpretation gives rise to uncertainty over where limits lie. Additionally, the legislative trend focusing on containing ATP is transforming the pool of aggressive tax planning tools and reducing the longevity of adopted aggressive tax strategies. Lastly, the more aggressive forms of tax planning can be in direct conflict with stakeholders’ ideas of reasonable tax savings, resulting in reputational costs and diminished pre-tax cash flows. Based on these outcomes, it is concluded that ATP can merit substantial tax savings and consequently, bears risks - both deliberate and undeliberate – that correspond to potential gains. Also, it is determined that ATP is financially infeasible when in conflict with ethical perceptions of the greater part of stakeholders, despite being lawful