Jurisdiction to Tax Corporate Income Pursuant to the Presumptive Benefit Principle

It is well known that multinational corporations are able to report their profits for tax purposes in jurisdictions where their actual business activities are scanty or simply nonexistent. The author of this valuable book seeks to empirically demonstrate the profit shifting phenomenon through a case study (based on the Apple group), show why the OECD's base erosion and profit shifting initiative has failed to accurately identify the deep roots of this phenomenon and finally, put forward specific proposals for reform. Based on the author's doctoral dissertation, which won the European Academic Tax Thesis Award 2018 granted by the European Commission and the European Association of Tax Law Professors, this book provides a disruptive discourse on tax sovereignty in the field of corporate income taxation that endeavors to escape from long-standing tax policy tendencies and prejudices while considering the challenges posed by a globalized (and increasingly digitalized) economy. In this context, the book offers an innovative perspective on certain deep-rooted paradigms historically underlying corporate income taxation: - tax treatment of related parties within a corporate group along with the arm's-length standard;
- corporate tax residence standards; and
- definition of source for corporate income tax purposes, with a particular emphasis in the permanent establishment concept.
The book explores their respective origins, supposed tax policy rationales, structural problems and interactions, ultimately showing how the way tax jurisdiction is currently defined through them inherently tends to trigger profit shifting outcomes. In view of the conclusions of the study, the author suggests the use of a new version of the traditional benefit principle (the presumptive benefit principle) that would contribute to address the profit shifting phenomenon while serving as a practical guideline to achieve a more equitable allocation of taxing rights among jurisdictions. Finally, the book submits a number of proposals de lege ferenda inspired by the aforementioned guideline that aspire to strike a balance between equity, effectiveness and technical feasibility. They include a new corporate tax residence test and, most notably, a reasonably developed proposal on a new remote-sales permanent establishment.
With its clearly documented exposure of the reasons why traditional corporate income tax regimes give rise to profit shifting outcomes, its new tax policy guideline and its proposals for reform, this book makes a significant contribution to current tax policy discussions concerning corporate income taxation in cross-border scenarios. It will be warmly welcomed by all concerned-policymakers, scholars, practitioners-with the greatest tax policy challenges that corporate income taxation is facing in the contemporary world.