Towards a Neutral Formulary Apportionment System in Regional IntegrationGebonden Engels 2023 9789403532769
Towards a Neutral Formulary Apportionment System in Regional Integration is a crucial and foresighted book demonstrating how formulary apportionment (FA) – an approach by which a multinational corporation pays each jurisdiction’s corporate tax based on the share of its worldwide income allocated to that jurisdiction – can achieve the much-sought goal of aligning value creation and taxation. Through intensive analysis of the European Union’s (EU’s) Common Consolidated Corporate Tax Base (CCCTB) Directive Proposal(s) and comparison to the United States (US’s) formulary apportionment experience, the author elucidates how the perceived problems with an FA system can be overcome and lays out the necessary elements for its feasibility.
Delving deep into the debates around formulary apportionment and its theoretical foundations, the book furnishes a prototype for reconstructing the normative framework for the EU’s tax reform by clearly analysing the implications of the following and more:
- theorising public benefits to be represented by taxation;
- reorganising different economic theories about tax neutrality and tax justice;
- advancing the comparative legal research methodology to analyse law reform by combining the functional - approach and the problem-solving approach;
- designing the logical formulary apportionment system for digital economy;
- ensuring the removal of the incentive for multinationals to shift reported income to low-tax locations;
- reducing the tax system’s complexity and the administrative burden it imposes on firms;
- eliminating transfer pricing complexity for intra-firm transactions;
- achieving equal weighting of the sales factor, the labour factor, and the asset factor in the formula;
- application of ‘destination-based’ rule for attributing the sales factor; and
- replacing the traditional permanent establishment nexus with a ‘factor presence nexus’.
The book comprises an in-depth comparison of the EU’s formulary apportionment tax reform option and FA systems existing in the United States (US) at state level, including reference to relevant US case law and legislation.
Formulary apportionment is gaining increasing acceptance and attention as a possible option to address the problem of base erosion and profit shifting. This book will prove indispensable to taxation authorities, tax practitioners, and scholars in its deeply informed and systematic guidance on good practices and prevention of problematic experiences in constituting and executing an effective and market-neutral FA system.
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List of Tables
List of Abbreviations
Chapter 1 Introduction
Chapter 2 The Normative Framework: Implementing the Benefit(s) Principle to Achieve Market Neutrality
Chapter 3 An Overview of Policy Options Towards a Benefit-Based Market-Neutral Formula: Putting Old Wine in a New Bottle
Chapter 4 Towards the Market-Neutral Sales Factor: A Customer-Centred Destination-Based Sales Factor
Chapter 5 Towards the Market-Neutral Labour Factor
Chapter 6 Towards the Market-Neutral Asset Factor
Chapter 7 Towards Market-Neutral Industry-Specific Formulas: Rediscovering the Roots of Formulary Apportionment
Chapter 8 The Procedural Weapon Towards a Market-Neutral Apportionment Result: The Safeguard Clause
Chapter 9 Conclusions
Table of Legislation
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