Book Chapter•
Unitary Taxation of the Finance Sector
01 Nov 2014-
TL;DR: In this article, the authors proposed a unitary tax and a formulary apportionment for multinational banks in the developing nations, which they termed as the International Taxation Unitary Taxation.
Abstract: international tax; unitary taxation; formulary apportionment; multinational banks; developing nations.
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TL;DR: This article examined taxation of domestic and foreign-owned banks and found that the profitability of foreign banks is found to rise relatively little with their domestic tax burden, perhaps reflecting the availability of foreign tax credits and profit shifting opportunities.
126 citations
TL;DR: In this paper, the U.S. tax base for multinational corporations would be calculated based on a fraction of their worldwide incomes, which would be the sum of a fixed return on their expenses in the United States and the share of the worldwide sales that occurred in United States.
Abstract: The current system of taxing the income of multinational firms in the United States is flawed across multiple dimensions. The system provides an artificial tax incentive to earn income in low-tax countries, rewards aggressive tax planning, and is not compatible with any common metrics of efficiency. The U.S. system is also notoriously complex; observers are nearly unanimous in lamenting the heavy compliance burdens and the impracticality of coherent enforcement. Further, despite a corporate tax rate one standard deviation above that of other OECD countries, the U.S. corporate tax system raises relatively little revenue, due in part to the shifting of income outside the U.S. tax base. In this proposal, we advocate moving to a system of formulary apportionment for taxing the corporate income of multinational firms. Under our proposal, the U.S. tax base for multinational corporations would be calculated based on a fraction of their worldwide incomes. This fraction would be the sum of (1) a fixed return on their expenses in the United States and (2) the share of their worldwide sales that occur in the United States. This system is similar in significant respects to the current "residual profit split" method of the U.S. transfer pricing regulations and the OECD Guidelines, as well as to the current method that U.S. states use to allocate national income across states.
119 citations
TL;DR: In this article, the authors re-examine the formulary alternative to transfer pricing by inquiring whether partial integration of formal concepts into current practices would offer a reasonable alternative to the traditional transfer pricing rules.
Abstract: This paper seeks to re-examine the formulary alternative to transfer pricing by inquiring whether partial integration of formulary concepts into current practices would offer a reasonable alternative to transfer pricing rules. We believe that the key to achieving an equitable and efficient allocation of MNE income is to solve the problem of the residual, i.e., how to allocate income generated from mobile assets and activities whose risks are born collectively by the entire MNE group. These assets and activities generate most of the current transfer pricing compliance and administrative costs, as well as tax avoidance opportunities. A limited formulary tax regime that allocates only the residual portion of MNE income may therefore offer significant advantages. Furthermore, such a regime would not require significant deviations from current practices, or substantial modifications of the international tax regime.
42 citations
Posted Content•
TL;DR: In this paper, the authors explored the drivers and consequences of foreign bank participation in developing countries and paid particular attention to the differences observed across regions both in the degree of foreign banks participation and in the impact of this process.
Abstract: Foreign bank participation has increased steadily across developing countries since the mid-1990s. This paper documents this trend and surveys the existing literature to explore the drivers and consequences of this phenomenon, paying particular attention to the differences observed across regions both in the degree of foreign bank participation and in the impact of this process. Local profit opportunities, the absence of barriers to entry, and the presence of mechanisms to mitigate information problems have been the main factors driving foreign bank entry across developing countries. In general, foreign bank participation has been shown to exert a positive influence on banking sector efficiency and competition. The weight of the evidence suggests that foreign bank presence does not endanger, but rather enhances banking sector stability. And although some case studies suggest that foreign bank entry limits access to finance, many cross-country studies offer evidence to the contrary.
27 citations
Book•
11 Oct 2008
TL;DR: In this article, the authors present an overview and critique of existing transfer pricing methods, alternative and supplementary approaches to transfer pricing, as well as some alternative approaches to Transfer Pricing and case studies.
Abstract: Economic and Accounting Rates and Concepts Should Not be Conflated.- Economic vs. Accounting Profit Rates.- Overview and Critique of Existing Transfer Pricing Methods.- Alternative and Supplementary Approaches to Transfer Pricing.- Some Alternative Approaches to Transfer Pricing.- Case Studies.- Intercompany Sale of Diamonds.- Intercompany Sale of Medical Devices.- Performance of Intercompany Services.- Replication of Internet-Based Business Model.- Sale of Assets with Embedded Intellectual Property.- Provision of CDN Services to Third Parties.- Global Trading of Commodities.- Decentralized Ownership of Intellectual Property.- Conclusions.- Concluding Observations.
23 citations