MNE benefit RBAbe

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
84 Ap – benefits excluded from the mass of profits to be reallocated to the markets. Pillar 1 14 28 RBAbe

QuoteAppendix – Detailed proposal on profit allocation

Amount A (RBAag)

54. The second step in calculating Amount A would seek to approximate the remuneration of the routine activities based on an agreed level of profitability (RBAcm). In broad terms, these are profits which, by analogy to the residual profit split method, would be regarded as rewarding routine functions. They are accordingly excluded from the calculation of the pool of profits from which the allocation to market jurisdictions would be made (RBAbe). The level of profitability deemed to represent such “routine” profits could be determined using a variety of approaches, but a simplified approach would be to agree a fixed percentage(s), possibly with variances by industry (RBAas).

First of all, before trying to exclude profits from those that can be reallocated to market jurisdictions, we must ask the question: do we have the precise knowledge of these profits (RBMap)? It should also be remembered that these profits, from the moment they are constituted under local tax laws, are the property of the jurisdiction which taxes the local company which produced them. This is confirmed from the moment when these sells are registered and put in recovery inside the tax authorities, without even having been levied.

We cannot therefore ask a company to share, on benefit an another jurisdiction, residual profits on different criterias when it does not own it. It is a matter between States to calculate the mass of profits to be reallocated not the compagny.

The priority for the moment is to focus on knowing the amount of these profits and where there are made, this is what the DAGTVA calculation of transfer prices does and it will then be possible, in a second phase of the negotiation, if it is necessary, that the two States relocate a part and, probably only the differential of these benefits, from one to the other, to balance, and if this is justified in view of the economy locally generated in these two States.

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