Abstract

http://ssrn.com/abstract=2310882
 


 



Tax Base Erosion: Reformation of Section 482’s Arm’s Length Standard


Bret Wells


University of Houston Law Center

Cym Lowell


McDermott Will & Emery

August 15, 2013

15 Florida Tax Review 737 (2014)
U of Houston Law Center No. 2014-A-7

Abstract:     
The United States has repeatedly attempted to stop tax base erosion for almost the entire post-World War I era, and yet the same problems exist today. The need for fundamental tax reform is front-page material in the major newspapers with the US transfer pricing rules and US multinationals portrayed as public enemy #1. This year, the OECD issued a report entitled “Addressing Base Erosion and Profit Shifting” and last month it issued a “Action Plan” for how it plans to proceed to address base erosion and profit-shifting. In a competing fashion, several important developing countries have initiated their own pact to develop cooperative strategies on these issues outside of the framework of the OECD and UN. It is fair to say that a solution to the base erosion and profit-shifting practices of multinational corporations is the “holy grail” of international tax policy.

The attached manuscript proposes a solution to the base erosion and profit-shifting phenomenon in what many believe is an unlikely place: within the arm’s length standard itself. The article analyzes the historic US transfer pricing cases and regulatory developments that have lead to the profit-shifting abuses that plague the US tax system. After isolating the flaws that create the current transfer pricing mistakes in the multinational corporation context, the article then sets forth reforms to the U.S. transfer pricing rules that, if enacted, would correct these mistakes and in the process would solve the base erosion and profit-shifting problems that plague the existing US tax system. The article adds to the existing literature by providing a straightforward and unique cure to a problem that has plagued our nation since the end of the post-World War I era.

Number of Pages in PDF File: 61

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Date posted: August 16, 2013 ; Last revised: May 1, 2014

Suggested Citation

Wells, Bret and Lowell, Cym, Tax Base Erosion: Reformation of Section 482’s Arm’s Length Standard (August 15, 2013). 15 Florida Tax Review 737 (2014); U of Houston Law Center No. 2014-A-7. Available at SSRN: http://ssrn.com/abstract=2310882 or http://dx.doi.org/10.2139/ssrn.2310882

Contact Information

Bret Wells (Contact Author)
University of Houston Law Center ( email )
100 Law Center
Suite 230 BLB
Houston, TX 77204-6054
United States
Cym Lowell
McDermott Will & Emery ( email )
3811 Turtle Creek Boulevard
Suite 500
Dallas, TX 75219
United States
972-232-3063 (Phone)
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