Proposal for a Global Taxation System
– DAGTVA and development aid –
– World Single Taxation –
Development aid, today, is paid so that a State can financially face the ambitions of various economic programs and, although there are voluminous reports produced on the use of the funds allocated to them, there is an ‘evaporation’ of this aid in the administrative machinery of the beneficiary States.
In general, these are global funding envelopes and however precise controls they may be by the part of donor organizations, these controls do not always make it possible to know whether the allocated funds have the expected return in the actions for which they were allocated.
It follows an ill-considered enrichment of those who have recovered, not to say misguided this aid with the insufficient impact observed on the assisted program and the economic development sought.
The promotion of a consensual tax solution within the framework of Pillar 1 & Pillar 2 of the OECD, with the DAGTVA proposal, this aid would no longer be provided in a global manner by a State or group of States which decide to grant a aid envelope a recipient State.
First, the search for a shared solution between States requires that they have economic and fiscal compatible behavior with each other with the principles of fairness and healthy competition. We have seen in the Pillar1 & Pillar2 documents of the OECD, that a particular attention was granted to the taxation of MNEs and that an acceptable solution in this area should, as far as possible, not impact international trade.
The DAGTVA proposal, in this study, focused on how to ‘force’ states to close their fiscal disparities. Explanations, in the different situations, will show you that the procedures towards the MNEs, without constraining them, incited them to have economic behaviors going in the direction of sound decisions which would be by way of penalizing consequences for the fiscally non-cooperative States.
In the proposal set out in the cases of DAGTVA’s excel file: ‘egalisation des taxes.xls’, States that do not play the tax equality game will be severely tested, but the already binding result of the DAGTVA process may not be not enough to get some of these rogue States to abandon unacceptable tax behavior.
We will now have to force these non-cooperative States to go under the Caudine Forks of: United Nations, OECD, European Union, where international aid would be allocated on the basis of mutual respect for tax laws.
The DAGTVA proposal for development aid
How does it work?
In the always transactional mode of DAGTVA, the fact that the taxation applied to a cross-border transaction would, in theory, settled at the end of the fiscal statements between States, implies that we can know what would been perceived by each State, if the payment happends instantly about this transaction, compared to a reference transactional model presented in the third column of the Excel file: ‘ egalisation des taxes.xls‘. We have seen in the study of different conditions in transfer prices, that tax informations were widely exchanged between States, if we refer to the slide show in reference slides: 13-15-21. This will also make it possible to know very precisely the turnover achieved in each jurisdiction by each entity of MNEs..
If each State has a global aid envelope that it allocates to other States for development or cooperation. The donor State today chooses to which destination it directs the allocated aid. It is voluntary following political decisions taken by mutual agreement between the donor State and the assisted State. It may also be the consequence of international agreements such as the CAP in Europe.
With DAGTVA the aid allocated would systematically accompany a cross-border commercial transaction but would come in subtraction of the overall envelope of this aid, but may not be allocated at all if the State to which it is directed does not comply with a healthy international competition or according to other criteria.
The fact of acting at the level of the transaction will induce a first consequence which is to note that the destination of the aid will indeed be directed towards the economic activity linked to this transaction and not diluted or reallocated in another economic sector which may be an uncontrollable corrupt support.
Before going into the details of how development aid works with DAGTVA, two actions must be differentiated: the action of what shapes the environment of possible aid, this is what DAGTVA does, and the aid action proper which is not the subject of this study.
A first action is at the level of indirect taxation
The question must be asked within the framework of Wayfair Sale Tax : ‘Why a tax on a purchase must be refunded in the State of consumption‘?
The answer below is given as explained in the ‘ideal’ transfer pricing calculation setup : « Why have a WSTAX(1 )? »
It is originally the expression of a % used to calculate the amount of what must be returned as sale taxes to obtain the correct splitting of the TAX/VAT to be collected which will be affected in the transfer price and fix the returned taxation at the market State. Applied to export, this WSTAX is essential because it is what will allow the creation, regulation and standardization of the Wayfair Sale Tax in the United States where we saw in the MTC document that many divergences persist on the application of this law. If the DAGTVA system should not process this WSTAX, as we will see in all tabs of the Excel file, the desire to obtain a balanced global taxation system would be recalled into question by its obvious inapplicability in the fifty federated states of the United States which represent the first but also nearly a quarter of the world economy. What would not be conceivable either, is that the world’s largest economy should be excluded from a shared taxation system over the world when they were precisely at the origin of the possible tax system, with what the OECD and the United States are looking for, in first instance, to see the sales taxes returned in consumption States.
The Wayfair Sale Tax, it will be the heart of the new global tax system associated with the DAGTVA transfer pricing calculation and the slideshow in reference. This set could be the future base of the World Single Market. The subject will be commented on in detail as the presentations progress and in different pages of the DAGTVA website.
The obvious answer to the solution of a buyer in a country other than his own is that this buyer has not found a local production that can satisfy him! It is therefore necessary to have financial means to promote local production that will provide a positive response to the consumption of this buyer and without discrimination on the State of production. We have also seen in the various examples that it will in all cases be necessary to respect the rigor of this Wayfair Sale Tax which by definition will becam an international law, since it will already apply into nearly fifty States with independent behaviors in taxation for each, even if they are federated and compose the United States.
It is obvious that the first logical and binding reaction, as stipulated for the amount C, will be to return to a State considered as a tax haven, in order to respect the law and not to slow down its economic development too much, that the share that he could have levied himself according to his fiscal parameters. The law is respected but the tax haven punishes itself for what it will not collect! But that’s not finish, it will have to comply the same obligations towards other States which expect their sale taxes to be returned at the level of their taxation, taxes which the tax havens do not always levy on their productions on international tax criteria!
After all, this tax-uncooperative state is what it is already doing and this does not seem to hamper its economic activity too much, so the constraint is insufficient!
With the first punishment of being forced to return sales taxes at the fiscal level to the buyer’s state and not his own level, with the consequences that he no longer perceives international aid at the same level as other states. These two measures, together, will create a development and growth differential that is not trivial for the tax haven in the long term!
The second action concerns aid from other states.
With DAGTVA, States which evolve in their economic relations with identical fiscal relationships, which do not penalize each other as we have seen in the case of the ‘Transac-base EN – 6‘ tab in the Excel file , where the reference transaction is perfectly balanced with production and consumption environments.We have seen in these different situations of the MNE that this Wayfair Sale Tax was linked to a production tax splitted in order to produce a sale tax that could be transferred and collected in the market state with a correct value.
Percentages of balancing on the income of the EMN are proposed with the WSTAX for example at 4%, but may be with a higher value if necessary.
With this parameter, We can realize that the closer fiscal parameters between States can approach for reach the 50% distribution or production taxation and thus distribute the fiscal efforts.
In any event, the creation of this added tax, which I repeat, is not levied in addition on the accounts of the MNE, should produce a fair balance between the total levied on production and what must be returned.
In fact, in the event of perfect fiscal equality between States, we have splitted in two:
Origine production tax = 50% of local tax to keep + 50% WSTAX to return. These values are in this case in a fair taxation and may be adapted in front of differences and levels in taxation finded between States.
This value can reach 100% with a rate of WSTAX equal to the rate of TAX/VAT if the State of production decides to give up all its indirect revenues on the transaction to help the State of market of modest economy (RLEmo) to honor a development program. This additional aid, 50% for example, is deducted from an overall aid package from the State or a group of States. We then see that the aid is indeed allocated to a specific transaction on a local production deficit finded by the transaction. All embezzlement then becomes difficult, because it will suffice to accumulate sectoral aid through transactions and see if the investment programs reflect the sums allocated in the sector considered.
This control can be done through the use of OECD – BEPS exchanges (see the slideshow in reference) without having to enter the administration of the assisted State. We can therefore monitor development programs internationally, in real time and not a posteriori after annual results of MNEs and administrations.
With regard to international aids, it is quite obvious that in the examples presented and as it is written above, the low-tax States could no longer receive these aids in the same way so easily, whether they are on the distribution or production side and sometimes for some States in developpement, may be it is not their fault if they cannot align on the international fiscal plan , as it is explained in this section (RLEmo), it will be necessary to have a special attention for them and these States and not should not be penalized by the process.
For the most recalcitrant rich States, international sanctions could then take a more coercive form by decision of the United Nations Organisation, by the complete sequestration of sale taxes intended for them, as explained in this article on taxation as New World Governance by the taxation of which the subject is only one possible example.
(1) – Wayfair Sale Tax transformed into Wayfair State TAX – either WSTAX .