The Rise of the Digital Economy: Rethinking the Taxation of Multinational Enterprises
Journal of International Business Studies, Forthcoming
Posted: 24 Aug 2019
Date Written: February 25, 2019
The international tax regime in relation to multinational enterprises (MNEs) is ineffective and a rethink is required. We illustrate that the tax avoidance motive of MNEs can incentivize managers to locate profits in low-tax jurisdictions without affecting the locations of their real operations. We also argue that proposals to tax shareholders and consumers rather than corporate profits face significant theoretical and practical obstacles. Finally, we extend a recently proposed model to tax MNEs using a sales-based allocation of consolidated worldwide profits. This aims to prevent MNEs shifting profits to low-tax jurisdictions and reduces incentives for tax competition between countries.
Keywords: digital economy, multinational enterprises, taxation, value chain, tax avoidance, tax reform
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