Professor Sol Picciotto has a guest post over at TJN today, in which he talks about the viability of unitary taxation for multinationals and why detractors are too pessimistic because they are too wrapped up in transfer pricing. Excerpts:
The main response to my paper on unitary taxation published last week has been that it would take too long or be impossible to agree. ... Not so.
.. people have spent too long labouring in the salt mines of the OECD's Transfer Pricing Guidelines: They need to get out and look at the real world.
... The trouble is that the OECD approach starts from the wrong end [by treating offshore subs as independent from their onshore parent companies]. ... A unitary approach would do what any sensible person would, as even the M.P.s on the PAC did, and compare the profits shown in the UK with the share of the companies' worldwide business actually done in the UK. If they are seriously out of line, as they have been shown to be, the UK companies' taxable profits should be adjusted accordingly.Sol goes through the history of arms' length and how the world has evolved past the principles. He concludes that yes, agreeing cooperatively on a measurement and allocation regime will take time, but --
In the meantime, tax authorities could use the weapons already at their disposal much more vigorously. ...Perhaps now that they all are beginning to understand that public opinion will no longer find this acceptable, they will see the need for a new approach.More at the link.
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