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|
|79||Ap – tax income from activities physically carried out in the territory.||Pillar 1||13||42||RBAir|
Quote : Appendix – Detailed proposal on profit allocation
Amount A (RBAag)
51….First, it would permit the isolation of the deemed non-routine profits earned by a business (RBAin). This is important because, by introducing a threshold based on profitability and targeting deemed non-routine profit, the proposed method is designed to materially limit the disruption of the conventional transfer pricing that is applied to routine activities (RBAsr). This would reduce the practical complexity of the proposal and also facilitate the goal of reaching consensus among the members (RBAsm – RLSrl) of the Inclusive Framework (on the basis that no jurisdiction would be required to give up taxing rights over income generated by routine business activity physically located within its jurisdiction) (RBAir).
Second, the use of simplified conventions would facilitate the administration of the new profit allocation approach alongside the current transfer pricing rules (RBDpx – RBPpi – RBPpt – RBMbp – RBMbm) and reduce the scope for disputes – a feature contemplated by all Pillar One proposals.
As explained in many sections, with the DAGTVA transfer pricing calculation, the indirect taxation within MNEs is neutral with the knowing of turnovers realised in each jurisdiction and for direct taxation, the jurisdictions they will not be able to depart from having a fair fiscal environment which permit for the EMNs to maintain themself inside a market of the arms length principle competition under penalty of multiple binding actions under the « Amount C » option and inside the new DAGTVA allocation of international aid according to specific criteria in the event of fiscal disparity between States.
And to quote : « 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 recipient. »