Will COVID-19 Highlight How Multinationals Really Conduct Business?

2 Pages Posted: 1 Nov 2020

See all articles by Jeffery M. Kadet

Jeffery M. Kadet

University of Washington - School of Law

Date Written: September 28, 2020

Abstract

This short piece was prepared for a Tax Notes Federal Global Roundtable on “Displaced Employees and COVID-19: The New Tax Obligations”. It points out that the continued success of many U.S.-headquartered MNEs to continue their supply chains and their conduct of internet-based businesses despite the lock-downs and significantly decrease business travel during the COVID-19 pandemic is evidence that significant profits reported by foreign group members due to profit-shifting structures are really earned through business activities conducted partly or wholly within the U.S. This short piece notes:

“Why have MNEs been able to so easily, relatively speaking, maintain and even expand their businesses? In short, modern communication and management tools have allowed their centralized managements and operating personnel, many of them being within the United States, to manage, direct, and conduct their worldwide businesses with little or no interruption.”

The success of these MNEs during these adverse times should cause the IRS to consider whether unintended partnerships have been created and whether the effectively connected income rules should be applied to directly tax shifted profits.

Keywords: Profit Shifting, COVID, Partnership, Effectively Connected Income, International Taxation

JEL Classification: H21, H25, K34, E62

Suggested Citation

Kadet, Jeffery M., Will COVID-19 Highlight How Multinationals Really Conduct Business? (September 28, 2020). Available at SSRN: https://ssrn.com/abstract=3719528 or http://dx.doi.org/10.2139/ssrn.3719528

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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