Toward a 21st-Century International Tax Regime

“Toward a 21st-Century International Tax Regime,” Tax Notes International, Aug. 26, 2019, pp. 839-849.

U of Michigan Public Law Research Paper No. 656

U of Michigan Law & Econ Research Paper No. 20-001

13 Pages Posted: 4 Dec 2019 Last revised: 13 Feb 2020

See all articles by Reuven S. Avi-Yonah

Reuven S. Avi-Yonah

University of Michigan Law School

Kimberly A. Clausing

Reed College - Department of Economics; UCLA School of Law

Date Written: August 26, 2019

Abstract

The OECD has been struggling to respond to countries that wish to tax large US technology companies on the basis of where their consumers live. The current OECD work program on digitalization is unlikely to produce a stable consensus or prevent countries from following the lead of France, India, Italy and the United Kingdom toward digital services taxes. The United States response should not be to target French, Indian, Italian or British companies for retaliation. Instead, the United States should consider adopting a sales-based formulary apportionment (SFA) solution that would apply to all large enterprises. Such a move is more likely to lead to a stable outcome than the OECD proposals. SFA also has important advantages relative to other proposals such as Residual Profit Allocation by Income (RPA-I) or the Destination Basis Cash Flow Tax (DBCFT).

Keywords: international taxation, formulary apportionment, base erosion, profit shifting

JEL Classification: H25

Suggested Citation

Avi-Yonah, Reuven S. and Clausing, Kimberly A., Toward a 21st-Century International Tax Regime (August 26, 2019). “Toward a 21st-Century International Tax Regime,” Tax Notes International, Aug. 26, 2019, pp. 839-849. , U of Michigan Public Law Research Paper No. 656, U of Michigan Law & Econ Research Paper No. 20-001, Available at SSRN: https://ssrn.com/abstract=3488779

Reuven S. Avi-Yonah

University of Michigan Law School ( email )

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

Kimberly A. Clausing (Contact Author)

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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