Worldwide Tax Reform: Reversing the Race to the Bottom

4 Pages Posted: 13 Mar 2013

See all articles by Jeffery M. Kadet

Jeffery M. Kadet

University of Washington - School of Law

Date Written: March 11, 2013

Abstract

The OECD Base Erosion and Profit Shifting Project is now under way, its mission being to suggest ways that countries can work together and amend their domestic laws to combat the corporate profit shifting that has so affected the tax bases of many countries.

The only way to truly eliminate corporate profit shifting is to eliminate the strong motivation multinational enterprises have to achieve "double nontaxation" by engaging in profit shifting. By being subject to current home-country taxation on its worldwide earnings, a multinational cannot achieve double nontaxation. That will eliminate or significantly reduce its motivation to engage in complicated structures that shift profits into tax havens from countries where operations, sales, and services take place.

This article describes a worldwide full-inclusion approach that can eliminate the current strong motivation to shift profits. Any suggestions that the BEPS Project makes that are less than this will likely leave a strong motivation for profit shifting so that such suggested actions will only have the effect of a band-aid. The only way to really solve the problem is to eliminate the motivation.

Keywords: international tax reform, territorial, full-inclusion

JEL Classification: H21, H25, K34, E62

Suggested Citation

Kadet, Jeffery M., Worldwide Tax Reform: Reversing the Race to the Bottom (March 11, 2013). Available at SSRN: https://ssrn.com/abstract=2231915 or http://dx.doi.org/10.2139/ssrn.2231915

Jeffery M. Kadet (Contact Author)

University of Washington - School of Law ( email )

William H. Gates Hall
Box 353020
Seattle, WA 98105-3020
United States

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