Value Creation: A Constant Principle in a Changing World of International Taxation

Canadian Tax Journal/Revue fiscale canadienne, 2019, Vol. 67, No. 4, p. 1107-1134

28 Pages Posted: 17 Jan 2020

See all articles by Jinyan Li

Jinyan Li

York University - Osgoode Hall Law School

Jin Bao

York University, Osgoode Hall Law School, Students

Huaning (Christina) Li

York University, Osgoode Hall Law School, Students

Date Written: December 27, 2019

Abstract

The authors consider the new nomenclature of value creation in terms of its meaning, theoretical basis, and importance in the context of the international taxation of business profits. The authors' central claim is that the principle of value creation is a profound elaboration of the doctrine of economic allegiance, which is the theoretical basis for the current international tax system; and that international tax norms, such as the arm's-length principle, are meant to give effect to the doctrine of economic allegiance (and now to the principle of value creation). As demonstrated by the Organisation for Economic Co-operation and Development/Group of Twenty base erosion and profit shifting project, there is apparently global consensus that the value-creation principle should guide the development of new rules — not only the rules to protect countries' existing tax bases (for example, anti-avoidance rules) but also the rules to allocate new taxation rights in respect of income derived in a digital and intangible economy. The authors evaluate the most recent tax-reform proposals in the light of the value-creation principle, and they recommend a global profit-split rule as a way of accurately reflecting value creation.

Keywords: BEPS, digital economy, transfer pricing, arm's-length principle, profit-split, global value chains

Suggested Citation

Li, Jinyan and Bao, Jin and Li, Huaning (Christina), Value Creation: A Constant Principle in a Changing World of International Taxation (December 27, 2019). Canadian Tax Journal/Revue fiscale canadienne, 2019, Vol. 67, No. 4, p. 1107-1134, Available at SSRN: https://ssrn.com/abstract=3510268

Jinyan Li (Contact Author)

York University - Osgoode Hall Law School ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada
416-736-5025 (Phone)

Jin Bao

York University, Osgoode Hall Law School, Students

North York, Ontario
Canada

Huaning (Christina) Li

York University, Osgoode Hall Law School, Students

North York, Ontario
Canada

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