– DAGTVA truth table –
DAGTVA® – Distribution of MNE profits
|Problems exposed, requests, constraints and subjects
|Amount C – additional benefits.
Quote : Increased Tax Certainty delivered via a Three Tier Mechanism. The approach increases tax certainty (PLSju – PRSju) for taxpayers and tax administrations and consists of a three tier profit allocation mechanism, as follows:
‒ Amount C – binding and effective dispute prevention and resolution mechanisms relating to all elements of the proposal, including any additional profit (RBMcs) where in-country functions exceed the baseline activity compensated under Amount B.
Following United States Supreme Court ruling in the judgment 17-494 South_Dakota / Wayfair Inc. involving a digital marketplace and the State in which it sells its products, I am talking about Wayfair Sale Tax, which will soon be applied to nearly a quarter of the world economy and already to more than forty intra-US States. This law, by obligation by other States to comply with its directives through the digital marketplaces they host, will involve an effective and legally binding procedure for the rest of the world to apply this law and without their being able to really oppose it.
It is basically the implicit application of an international system of taxation that the OECD seeks with sale taxes returned in market States.
Extra-US States will have everything to gain from it, with between them, a better distributed taxation of MNEs, as explained in the DAGTVA calculation of transfer prices.
You will see that the application of this transfer pricing calculation is so precise that it prevents any difference linked to the elements of the proposal and, as explained in the section devoted to « Amount A » , that only a part of the indirect taxation is returned to the market State.
But before the attribution of any additional profit where in-country functions exceed the baseline activity compensated under Amount B, we saw that the « Amount B » option was not retained in the DAGTVA proposal. There is no longer any reason to grant this attribution following a better distribution of direct taxes in each of the States involved in the transaction, but above all how to envisage this restitution if the two States are not informed of the amount to be processed. This is what was presented in the foreword in a calendar which will relegate this possible provision to the end of the talks, in a second time, when the States will know what it is possible to attribute them!
From a pure tax standpoint, the fact of wanting to return an additional profit in a foreign jurisdiction can only be done at the level of the State tax authorities and in no case as explained below by the MNE, which would imply that firstly, this profit was calculated by the local tax authorities, following a tax declaration by the local entity of the MNE (which is not certain) and necessarily over a very long tax period over accounting years which can be fenced. Secondly that this taxable additional benefit identified was notified, by return, to the MNE, with a transfer of it at destination a foreign jurisdiction, where the execution of the latter will be difficult to control, the whole with an impossible approval of the authorities of taxation on the part of the recalcitrant States with the transparency and the shipment of a fiscal windfall to which they are very ‘attached’! If such processes were put in place,MNEs would manage to declare substantial profits to be returned in tax havens with a worse situation than before!
Only a part of the indirect taxation, that which must be paid by the consumer in the market State, is returned to the latter under conditions which may be very restrictive as explained in this article devoted to a new international regulation by taxation, regulation which will be necessarily the counterpart of decisions taken concerning the world taxation system implying in fact a World Single Market.