– DAGTVA truth table –
DAGTVA® – Distribution of MNE profits
|Problems exposed, requests, constraints and subjects
|Ap – fraction benefits non-standard attribute to the market and % international.
Quote : Appendix – Detailed proposal on profit allocation
Amount A (RBAag)
58. Given the practical difficulties of using conventional transfer pricing rules for this step, the proposed approach assumes that a share of the deemed non-routine profit attributable to the market jurisdiction would be determined in accordance with a simplifying convention, such as non-routine profit multiplied by an internationally-agreed fixed percentage (RBAbi – RBAbs), though it is possible that different percentages might be applied to different industries or business lines.
The justice of taxation being applicable to all with the same precision, the word « presumed » which is mentioned in the OECD document sounds bad and should not have its place in a document like this one. Likewise, wanting to multiply the non-standard profit by a fixed percentage determined at international level, « Amount B » option, when these benefits are not quantified and to join the actuality with the US at the begining of 2021 which want an international flat tax rate for MNEs at 21%, this directive imposes before to determine with a great accuracy the turnovers realised in each jurisdiction where the MNE trade! It is understandable then an agreement between States on assumptions does not obtain their assent on an uncertain common solution! Consequently, this sentence also implies that one could have precisely quantified the standard and routine benefits before considering whether to find a residual benefit. This can only exist if all the benefits have been calculated and may be withdrawn. The DAGTVA transfer pricing calculation liquidates direct taxation on the transaction jurisdiction by jurisdiction, the international level is acquired by default in this case but it does not seem possible that this kind of fixed percentage directive can be applied with the « Amount B » option (RBMbo) is rejected by DAGTVA to a group or an MNE which will be taxed locally and with great precision on each entity.
For the taxation of a branch of activity, this remains the responsibility of each jurisdiction and cannot be subject of an international tax agreement.