– DAGTVA truth table –
DAGTVA® – Distribution of MNE profits
|No.||Problems exposed, requests, constraints and subjects||Origin||Pg||Li||Doc|
|68||Qe – overlaps of the three types of taxable profits (A, B and C).||Pillar 1||10||30||RBQct|
Quote : 2.5. Pending key questions
Elimination of double taxation
37. In addition, approaches to address any risk of double counting or duplications between the three possible types of taxable profit (Amounts A, B and C) (RBQct) that may be allocated to a market jurisdiction would need to be considered, in particular interactions between the new taxing right under Amount A and current profit allocation rules. Similarly, specific rules would need to be considered for the treatment of losses under Amount A (e.g. claw-back or “earn out” mechanism) (RBQrc).
As specified in the RBMap headings for « Amount A » , RBMbr for « Amount B » , and RBMcs for « Amount C » , with DAGTVA there is no taxable profit that can be returned to a market jurisdiction before one could actually with accuracy quantify the profits made in each jurisdiction. This is what the DAGTVA transfer pricing calculation does, quantifying the profits generated locally.
It seems that we must first be concerned with having a simple consensual basis for calculating the profit made before tackling what should be shared between States. And in order to obtain this result, it is first necessary to know how a transfer price could be defined simply and which would give the information allowing, by way of logical consequence, to define the taxation which would be applied to the transaction. This is what will be presented to you in the Microsoft ® Excel speadsheet : egalisation_des_taxes.xls (preferably opened after download by saving the file on your computer) with the explanatory comments pages that define how a transfer price could be calculated with the resulting taxation, both for the MNE, but also in each State.
Afterwards, we must consider that wanting to obtain fiscal legal security by wanting to retrocede profits, of any kind, is not the problem or the business of an MNE, but that of a State which has perceived these benefits in the taxation. It is for it to properly taxing enterprises carrying on its territory in order to repay all or part of its perceived benefits at destination a market State (because at the moment where the indirect taxation is defined at the end of the e-invoice and transmited with the IT statment, the monetary value of this taxation is already the property of the State which claim this taxation).
It is not the role of an MNE to return a taxation which is not its property in another jurisdiction. How and by what right would she do it?
Under these conditions, wanting to find an international agreement with 137 States which have divergent interests on the subject, then becomes a challenge and starting with these States, all in debt, which will refuse to return funds that they have already had. more ! It would be better to find an agreement approaching and improving the decision in United States on the WSTAX (modified DAGTVA) by bringing a standardization in United States which is not acquired today, as can be seen in the document the MTC where a part of states have chosen the narrow definition with treatment – direct collection / indirect payment by MPF (page 12) and the other roughly equal to a broad definition with direct – indirect processing / collection of payment where a business may not have access to the details of the sales transaction (page 13-15).
It is important to note, all thresholds or number of transactions which define the substential nexus and the taxation are suppressed in the DAGTVA process. This improvement concerning the Wayfair Law open the way to apply it at the first $ in the transaction made by the seller.
It could be argued that what has just been explained only applies, with Wayfair Sale Tax to the indirect taxation, however it is indeed the knowledge of this tax to be returned to the market State in the DAGTVA procedure which will provide knowledge of the turnover achieved by jurisdiction and MNE with the possibility, if it is justified, to return a part of the direct taxation made in the production’s country.