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HOW DOES INTERNATIONAL CORPORAYE TAXATION WORK?

Understand how international corporate taxation works, including source country-based taxation, arm's length pricing, and bilateral treaties. Discover the problems created by these principles and explore potential solutions.

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HOW DOES INTERNATIONAL CORPORAYE TAXATION WORK?

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  1. HOW DOES INTERNATIONAL CORPORAYE TAXATION WORK?

  2. SINCE 1920s SOURCE COUNTRY BASED ARM’S LENGTH PRICING BILATERAL TREATIES Subsidiaries are assumed to charge each other market prices for intermediate goods. The system treats national susidiaries as if they were independent companies. Many goods are produced in chains involving different countries. Corporations owe taxes where production happens.

  3. WHY THESE PRINCIPLES CREATE PROBLEMS

  4. Source country based: Corporations are incentivised to move production to low-tax countries

  5. Source country based: Corporations are incentivised to move production to low-tax countries Arm’s length pricing: Corporations can make up prices to shift profits using accounting

  6. Source country based: Corporations are incentivised to move production to low-tax countries Arm’s length pricing: Corporations can make up prices to shift profits using accounting Bilateral treaties: Corporations use inconsistencies to shop between national tax treaties. AMAZON. APPLE. FACEBOOK. GOOGLE. IBM. IKEA. MICROSOFT. ORACLE. STARBUCKS.

  7. Tax avoidance of corporations Tax competition between countries Move actual production Since profits are easily shifted, countries benefit from lowering corporate tax Race to the bottom Making up prices to shift profits via accounting

  8. A RACE TO THE BOTTOM HABEN WIR DA DATEN? https://twitter.com/brankomilan/status/853387569895264256

  9. WHAT CAN BE DONE ABOUT IT?

  10. Proposal: SALES BASED APPORTIONMENT Multiply global profits by share of global sales happening in taxing country Require multinationals to report gobal profits, global sales and sales in taxing country Tax a percentage of this number

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