– DAGTVA truth table –
DAGTVA® – Distribution of MNE profits
|No.||Problems exposed, requests, constraints and subjects||Origin||Pg||Li||Doc|
|61||Qe – benefit to market jurisdictions and digital business model.||Pillar 1||9||51||RBQbj|
Quote : 2.5. Pending key questions
Differentiation for business models
33. It is recognised that some jurisdictions wish to explore the possibility of applying mechanisms to reflect some degree of potential digital differentiation, or some kind of weighting in the amount of profit that would be re-allocated to market jurisdictions (RBQbj), whether under Amount A or by adapting the approach to Amounts B and C. The merits and viability of any such approach (including possible options to deliver this result) would therefore have to be explored.
With the DAGTVA calculation of transfer prices. As it is said in many pages including RBPpi and RBMag of this study, before it can put in place mechanisms that would allow reallocation of benefits according with precise criteria, it would first be necessary to precisely quantify the turnover of business carried out in each jurisdiction concerned by the transaction. Particularly, no fraction of the profits can be attributed to a market jurisdiction before we have been able to quantify these turnover and if, once quantified, there will remain a valid reason to tax them! It is a better distribution of these benefits among the States that will normally provide for this. It is the principal advantage of the DAGTVA global tax system. There is therefore nothing, for the moment, to modify in the process of the direct taxation, nothing to negotiate in the first place in this area as can be read in the RBMap page.
If it is to re-allocate profits at destination the market jurisdictions, it can’t possible to apply such principles without knowing from which jurisdictions the companies operate and they where have a physical presence, in the digital market depend on.
Today a nexus is required to define the legitim taxation by a State toward another. This nexus is provisionaly defined in the US law by two parameters, the amount of transactions in value and the number of transactions realised by the MNE in a market State.
And how to do in a worse situation, in B²C the majority of transactions, when the two tax authorities and principally the one in the market state are not even aware of the existence of the transaction?
It is exactly what is solved by the DAGTVA global tax system.
It must be added that the justice wants that the taxation must be the same for all, companies and consumers. In this case it is impossible to obtain a judjment in a trial in favor the tax autorities if an arbitrary and imprecise taxation against a seller compagny (MNE or not) is applied. In front of States, in case of trial MNEs win in all situations.
DAGTVA provides an answer to what has just been observed with the DAGTVA calculation of transfer prices and also in this section which deals with B²C transactions where a company, which may be an MNE, sells to an ultimate consumer in a market jurisdiction where it has no physical presence. This subject is treated globally in this page by referring to B²C slideshows like this one, but also in sections which make the device applicable in all the conditions of its internationalization but does not authorize, except agreement of the authorities of taxation (slide show in reference – slide 14 ) in accordance with Article 7 of the OECD conventions , to allow an ultimate consumer to export a product he has sold.
In the case of B²C transactions, the DAGTVA system can also require that a company with no physical presence, is obliged to pass the transaction through a regularly declared agent who will be taxed up to the turnover realized. This amounts, through this intermediary, to recovering the seller’s taxation, which we saw in the slide show in reference – slide 14.
This option about profifs reassigned on sales observed in market States could eventually be negotiated in the future when everything else will be in place, used and analyzed during and after several fiscal years, to learn from it and to know if this type of taxation is necessary.
There would be nothing in this domain to negotiate before several years!