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I
INTRODUCTION
Ships shall sail under the flag of one state only, and only fly the flag of the state they are entitled to fly.1 Every state is required to effectively exercise its jurisdiction and control in administrative, technical, and social matters over ships flying their flags.2 The flag state, a state whose flag a ship flies,3 is responsible for ensuring compliance with national and international laws and regulations concerning marine pollution and the construction, maintenance, and crewing of the vessel.4 Since the middle of the twentieth century, many global shipping companies have flagged ships in foreign countries intent on, for example, eroding corporate tax, avoiding national regulations on labour, environment, or safety, and hiring crews from low-wage countries.5 Many merchant ships are registered in a state other than that of the ship owner, and the ship that flies the flag of a country other than the country of ownership is called a flag of convenience ship (FOC).6 The flag of convenience is used to describe the flag of a ship whose ownership and control lies outside of the country of the flag.7 The flag of convenience has been beneficial for many developing countries, in particular, for the least developed countries.8 Globalization has helped to accelerate the use of flags of convenience and each new flag of convenience self-promotes by offering the lowest possible fees and the minimum regulation in an increasingly fiercely competitive global shipping market.9 However, ships flying under the flag of convenience are subject to International Workers Federation (ITF) agreements.10
The flag of convenience is one of a multinational corporation's international tax planning strategies. As corporate tax is levied at the domestic level, the interaction of domestic tax systems sometimes leads to 'double taxation' or 'double non-taxation.'11 Multinational corporations often exploit differences in domestic tax rules and international tax standards, which provide them with opportunities to eliminate or significantly reduce taxation, so many multinational corporations use Base Erosion and Profit Shifting ("BEPS") to erode the corporate tax base.12 However, there is a concern that base erosion will constitute a serious risk to tax revenues, tax sovereignty, and tax fairness for many countries.13 Thus, at the 2015 G20 Antalya summit, the BEPS Plan was adopted.14 The BEPS package is designed to restore fairness...