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|
|44||Possible provisions – transfer pricing & double taxation.||Pillar 1||8||53||RBPpi|
Quote : New and revised profit allocation rules (RBRge)
29. The new rules, taken together with existing transfer pricing rules (RBDpx – RBPpt), will need to deliver the agreed quantum of profit to market jurisdictions and do so in a way that is simple, avoids double taxation (RBPpi) – RBNdi), and significantly improves tax certainty (RBRsj – PLSju) relative to the current position. It is also important that the new rules are reconciled with existing rules. That is, the new rules should not create distortions and should be effectively applicable to both profits and losses (RBAtb).
DAGTVA proposes a new calculation of transfer prices. As stated in many pages of this study, no fraction of the profits will be attributed to a market jurisdiction until they have been quantified and if, once quantified, there will still be a valid reason to tax them. It is a better distribution of these benefits between the States, during the process of the transaction, that will provide for this. There is therefore nothing to modify on direct taxation, nothing to negotiate in this area to obtain an agreement in an World System Tax as we can read in the RBMap page below :
“Regarding the distribution of profits:
As clarified on the RBSju page , the DAGTVA transfer pricing calculation takes into account in the « Amount A » mechanism, not only residual profits, but also profits: standard, routine and intangible, from the moment when they are invoiced, except that these résidual profits will not be returned to the market jurisdiction. They are treated fiscally during the same time of the transaction, this is the advantage of the DAGTVA transactional system where the totality of the taxation is definitively affected for the respective shares in each State where the commercial activity takes place.
And we speak here about the direct taxation which can be levied, as today, without modifying existing local taxation laws.
There is therefore nothing to renegotiate in this area of responsibility of each sovereign State, there is no new right to impose and modify direct taxation, with the ease of having a majority international agreement accepted in this area and with the probable consent of the United States, which has already legislated internally in this area.
« Need to deliver the agreed quantum of profit to market jurisdictions and do so in a way that is simple, avoids double taxation (RBPpi) – RBNdi), and significantly improves tax certainty (RBRsj – PLSju) relative to the current position » . As you will see in the new DAGTVA transfer pricing calculation, and in the slide show in reference, the transactional taxation not change the tax laws in each State and at no time it is impossible to see the possibility to have a double taxation. The DAGTVA process only do the dispatch and the return of a share indirect taxation by effecting a better distribution of production taxes in each jurisdiction of activity.
You will also see the double taxation is avoided, as explained above, and with regard the B²B transaction within an MNE, the indirect taxation which is levied in a jurisdiction is refunded in the other, with no impact of this indirect taxation in the MNE. For the direct taxation nothing changes as written above until it is decided to do otherwise in the second phase of negotiations of an international taxation system, if return profits are justified by the results of the DAGTVA tax process.
It emerges from the DAGTVA transfer pricing calculation the international trade within MNEs is not affected by indirect taxation. It is a new form of VAT benefits which would be applied transnationally within a MNEs,
« That the new rules be reconciled with the existing rules » . If there is nothing to renegotiate, it is necessarily compatible with what currently in application.
« The new rules should not create distortions and should be effectively applicable to both profits and losses (RBAtb). » With the transactional taxation as is explained in the new calculation DAGTVA transfer pricing, States will be encouraged to move closer to a fiscal standard that, by definition, would be required in a global taxation system. All States in this agreement would be winners, it will be a “winners – winners” system for the majority of them. For others, those who derive their income by using the tax avoidance that is not paid, to the detriment of others, these tax havens will very quickly have to comply with new regulations imposed by a majority of States by a statement mandatory of each transaction towards the market jurisdiction which they are robbing today.
With transactional taxation as is decribed in DAGTVA, losses are taken into account as much as profits but, as is specified in several pages, with a count that will be done by jurisdiction and not in a global manner.