Hanging Together: A Multilateral Approach to Taxing Multinationals
Reuven S. Avi-Yonah
University of Michigan Law School
August 4, 2015
U of Michigan Public Law Research Paper No. 364
U of Michigan Law & Econ Research Paper No. 15-012
The recent revelation that many multinational enterprises (MNEs) pay very little tax to the countries they operate in has led to various proposals to change the ways they are taxed. Most of these proposals, however, do not address the fundamental flaws in the international tax regime that allow companies like Apple or Starbucks to legally avoid taxation. In particular, the Organization for Economic Cooperation and Development (OECD) has been working on a Base Erosion and Profit Shifting (BEPS) project and is supposed to make recommendations to the G20, but it is not clear yet whether this will result in a meaningful advance toward preventing BEPS. This paper will advance a simple proposal that will allow OECD member countries to tax MNEs based in those countries without impeding their competitiveness. The key observation is that in the 21st century unilateral approaches to tax corporations whose operations span the globe are obsolete, and a multilateral approach is both essential and feasible. The paper therefore proposes that each OECD country commit to taxing its multinationals fully on a current basis, since such a multilateral approach eliminates all the usual arguments against current taxation.
Number of Pages in PDF File: 33
Keywords: multinationals, OECD, BEPS
JEL Classification: H25
Date posted: October 25, 2013 ; Last revised: August 26, 2015
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