Sharing the Corporate Tax Base: Equitable Taxing of Multinationals and the Choice of Formulary Apportionment

24 Pages Posted: 4 Jun 2020

See all articles by Tommaso Faccio

Tommaso Faccio

Nottingham University Business School

Edmund Valpy FitzGerald

University of Oxford - Department of Economics; The Levy Economics Institute, Bard College

Multiple version iconThere are 2 versions of this paper

Date Written: September 14, 2018

Abstract

Tax avoidance by multinational enterprises (MNEs) is a global problem. Most crossborder trade occurs within MNEs, susceptible to abuse of gaps and loopholes in domestic and international tax law that allow “profit shifting” between fiscal jurisdictions in order to reduce corporate tax liability. A lack of transparency makes this kind of tax avoidance difficult to quantify – let alone to monitor and control. This paper provides a case study of profit shifting using publicly available, unique, country-by-country reporting data for Vodafone Group Plc, the first large MNE to voluntarily publish such data. We show the tax impact of a move to formulary apportionment on a global basis, and under the European Union’s Common Consolidated Corporate Tax Base proposal. We also consider the rationale for the current proposals for apportionment factors and propose an alternative.

Keywords: transfer pricing, formulary apportionment, CCCTB, developing countries, tax avoidance, horizontal equity, vertical equity, equal distribution, taxing rights

Suggested Citation

Faccio, Tommaso and Fitzgerald, Edmund Valpy, Sharing the Corporate Tax Base: Equitable Taxing of Multinationals and the Choice of Formulary Apportionment (September 14, 2018). Transnational Corporations Journal, Vol. 25, No. 2, Available at SSRN: https://ssrn.com/abstract=3617646

Tommaso Faccio (Contact Author)

Nottingham University Business School ( email )

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Edmund Valpy Fitzgerald

University of Oxford - Department of Economics ( email )

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The Levy Economics Institute, Bard College

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