– DAGTVA truth table –
DAGTVA® – Distribution of MNE profits
|Problems exposed, requests, constraints and subjects
|Ap – increase in the amount of profit attributed to market jurisdictions.
Quote : Appendix – Detailed proposal on profit allocation
50. The way to address profit allocation under the proposed “Unified Approach” described in outline earlier in this paper proposes three possible types of taxable profit that may, according to the circumstances in any particular case, be allocated to a market jurisdiction (which, in some instances, is the location of the user). The three types of profit are described further below. The new taxing right (through the profit that is referred to here as Amount A) would generally increase the amount of business profit allocated to market jurisdictions, including in the absence of physical presence (RBAam).
It is written in the RBMap section quoted below and in all those dealing with the « Amount A » option such as RBMar that there is no new tax right with DAGTVA, it is the action of better distributing the current taxes that will provide the solution:
« But we see that in the DAGTVA calculation of transfer prices , there is no planned retrocession of profits, whether they are residual or not and that the notion of presumed by this fact does not exist and even could not exist due to the accounting accuracy of the cross-border transaction in a transactional tax system. With DAGTVA, there is no retrocession of the direct taxation of MNEs comes from the sharing of this taxation into a tax on profits better distributed in each State concerned by the transaction.
The DAGTVA process makes this retrocession unnecessary in B²B transactions, due to the fact that a permanent establishment recognized in the market jurisdiction where the MNE will be taxed at the level that the local tax authorities have decided, if is required.
The attribution to the market jurisdiction of a fraction of the presumed residual profit which is calculated according to a formula-based approach, i.e. the new right to tax, with what comes from be specified in the previous paragraph, given the high level of taxation which is already applied to MNEs, if we want to introduce a new tax right, we must delete one that exists and if this is not the case, there is a risk that MNEs will add on this new tax right to their selling prices. Which is what GAFAs have done following the arbitrary taxation of certain countries, including France. It follows that it is the French companies and consumers who paid this GAFA tax and not the GAFAs themselves!
This new right to tax is not part of the DAGTVA process by default. As the residual taxable profit above 12%, as suggested by the OECD, being levied on the basis of the transaction, we will see, in the following paragraph, that this will enrich jurisdictions with modest economies. The notion of calculation formula, necessarily approximate and arbitrary, also having no reason to exist in a transactional tax system applied with a great accuracy. »
It may be important to precise that it is the knowlege of the transactions between States in the context of a transactional taxation system which can define the amount of indirect taxation in State of production and define the part to return sale taxes in the market State in the scope of the indirect taxation when the seller has no physical presence in this market. After when all the indirect tax balance is opered between States, if there is a possibity to define a part of direct taxation must be returned in market State.
By consequences it will be impossible for businesses to manage these returns in market States about funds which are already the property of these States when the e-invoice’s declarations were done.