– DAGTVA truth table –
DAGTVA® – Distribution of MNE profits
|No.||Problems exposed, requests, constraints and subjects||Origin||Pg||Li||Doc|
|28||Respect of arm’s length principle “Unified approach”.||Pillar 1||5||45||RBNac|
Quote : The three alternatives set out in the Programme of Work under Pillar One have a number of significant commonalities:
- (1) they all go beyond the arm’s length principle (RBRpc – RBNac) and depart from the separate entity principle;
• New Profit Allocation Rule going beyond the Arm’s Length Principle. It creates a new profit allocation rule (RBSju) applicable to taxpayers within the scope (CACag), and irrespective of whether they have an in-country marketing or distribution presence (permanent establishment or separate subsidiary) or sell via unrelated distributors. At the same time, the approach largely retains the current transfer pricing rules based on the arm’s length principle (RBDpx – RBNac – RBRpc) but complements them with formula based solutions in areas where tensions in the current system are the highest.
The proposed “Unified Approach” would retain the current rules based on the arm’s length principle (RBRpc – RBNac) in cases where they are widely regarded as working as intended,
In the French version :
- (1) elles s’écartent toutes du principe de pleine concurrence (RBRpc – RBNac) et dérogent au principe de l’entité distincte ;
That can be translate in: « • they splay from the arm’s length principle and deviate from the separate entity principle; »
With this interrogation, where is the good version, in English or in French?
About the quotes: Between the first two assertions of the Pillar 1 text, above, which deviate from and go beyond the arm’s length principle and the “At the same time” which contradicts them a few lines below by asserting that: « The proposed “Unified Approach” would retain the current rules based on the arm’s length principle » . Indeed, one cannot be in a principle of arm’s length principle and at the same time deviate from it and be beyond this principle. The last precision translated of the French phrase: « mostly » ,which not exist in the English version, leaves room for doubt and one could do everything and its opposite! It would be necessary to know which version will be retained! Even if it’s probably a translation problem of the document, we will have to choose!
It seems impossible that OECD propose a solution about a global taxation system which deviate from the arm’s length principle and the separate entity principle. This will not promote clear negotiations about an international tax system with 137 States with different interests.
As specified in the previous section RBRpc , you will see in the study of this proposal for a global taxation system, with the DAGTVA calculation of transfer prices , the DAGTVA tax system never deviates from compliance with the arm’s length principle. Never it goes « beyond » . Just it automatically calculating a theoretical transfer price to strengthen it, in order to avoid any fiscal manipulation aimed at derogating from this principle of healthy competition.
The DAGTVA system also participates through its structure and its functioning in the distribution a better distribution of profits within MNEs as is explained in the different situations of the DAGTVA calculation of transfer prices.