Proposal for a Global Taxation System
– DAGTVA truth table –
DAGTVA® – Distribution of MNE profits
|No.||Problems exposed, requests, constraints and subjects||Origin||Pg||Li||Doc|
|88||Ap – agreement on method of calculating ‘w‘.||Pillar 1||15||23||RBAmw|
Quote : Appendix – Detailed proposal on profit allocation
Amount A (RBAag)
55. This simplified approach may be illustrated by an example. Assume that the proportion of profits to revenues (i.e. profit margin), derived from the consolidated financial statements as suggested above, is z%. A portion of that percentage may be regarded as representing routine profits. If that portion is x%, then x% would be ignored for the purposes of the calculation of the profits reallocated to market jurisdictions, with only the excess (z%-x%) being the subject of further consideration. In the discussion below, that excess is assumed to be y%.
59. Returning to the example above, if the profit margin is z% from which x% is deducted on the basis that it represents the deemed routine profits, then the balance, assumed to be y%, would be regarded as representing the group’s deemed non-routine or residual profits. Under this third step, the amount of the non-routine profits – the y% – would then need to be allocated between the profits attributable to market jurisdictions (assumed here to be w%) and the profits attributable to other factors such as trade intangibles (assumed here to be v%). Again, a crucial aspect of the “Unified Approach” would be to determine and agree the method through which w% is determined (RBAmw), and whether this percentage should vary by industry.
If to quote « Assume that the proportion of profits to revenues (i.e. profit margin), derived from the consolidated financial statements as suggested above, is z%. A portion of that percentage may be regarded as representing routine profits » ,this is what will appear logically during the general meetings of the group, but it will be the result of a concatenation of results by jurisdictions of activity. With DAGTVA this profit margin is what will remain after the accounting balances have been previously taxed, transaction by transaction and the same for intra-group transactions locally. These realized profits, of which MNEs will have full financial enjoyment, is an indisputable property legally acquired after proportional taxation with the DAGTVA calculation of the transfer prices applicable in each State where the EMN trade. It is now out of question for MNEs to return a part of these legal margins in a second and double taxation (see all the sections dealing with the double taxation (RBPpi – RBNdi – RBQdd – RBQme – RBQrd – RBAbr – RBMcd ).
As stated in the section RBMap , it must first preamble to consider obtaining fiscal legal certainty by wanting to retrocede to a market State profits of any kind, legally acquired, is neither the problem nor the business of a MNE, but that of a State which is aware about the turnover achieved locally by these MNEs and has not properly taxed companies operating in its territory in order to need the returnded of all or a part of the taxes collected elsewhere, to balance its own incomes.
It is not the role of an MNE to return a profit margin legally acquired in another jurisdiction. How and by what right would it do it?
The MNE could argue, that with DAGTVA, it was taxed proportionally in each jurisdiction in its transactions and that if it had to pay a second time in a double taxation on its personal margins, the MNEs would pass on this new tax right on the selling prices. It is exactly what the GAFAs have done following the arbitrary taxation of certain countries including France. It followed that it was the French companies and consumers who paid this GAFA’s tax and not the GAFAs themselves!If taxation in each jurisdiction is proportional to economic activity, there is no need to levy additional wealth from what MNEs have earned to bail out State finances, this is what DAGTVA proposes and which promotes international trade!
If taxation in each jurisdiction is proportional to economic activity, there is no need to levy additional wealth from what MNEs have earned to bail out State finances, this is what DAGTVA proposes and which promotes international trade!
As we have seen that MNEs could not be called upon in this area, it will be the States which will do so with the new system of international aid allocated according to a possible transactional imbalance observed.