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Business Income (Article 7 OECD MC)

18 Pages Posted: 27 Sep 2007  

Reuven S. Avi-Yonah

University of Michigan Law School

Kimberly A. Clausing

Reed College - Department of Economics

Date Written: Sept. 30, 2007

Abstract

The 2006 OECD Report on attribution of profits to permanent establishments states that its recommendation "was not constrained by either the original intent or by the historical practice and interpretation of Article 7." Moreover, the Report recommends a redrafting of both the Article itself and the Commentary. Given this, it seems appropriate to begin by asking: If we were working on a clean slate, what would be the best way to tax MNEs at source in the light of 21st century business practices?

The beginning point has to be that a modern MNE does not operate as if its constituent units, either subsidiaries or branches, deal with each other as if they were separate enterprises. Instead, a modern MNE is generally a single, unified enterprise, managed from a central location by managers who are responsible to their shareholders for the results of the MNE as a whole.

Keywords: permanent establishment, tax treaties

JEL Classification: H25, H26

Suggested Citation

Avi-Yonah, Reuven S. and Clausing, Kimberly A., Business Income (Article 7 OECD MC) (Sept. 30, 2007). U of Michigan Law & Economics, Olin Working Paper No. 07-016; U of Michigan Public Law Working Paper No. 91. Available at SSRN: https://ssrn.com/abstract=1017515 or http://dx.doi.org/10.2139/ssrn.1017515

Reuven S. Avi-Yonah (Contact Author)

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States
734-647-4033 (Phone)

Kimberly A. Clausing

Reed College - Department of Economics ( email )

3203 SE Woodstock Boulevard
Portland, OR 97202-8199
United States
503-517-7388 (Phone)
503-777-7776 (Fax)

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