Introduction to international business taxation Flashcards
Direct taxation
The taxpayer bears the burden of the tax, is liable to pay the tax and cannot pass on the incidence of the tax
Indirect taxation
The incidence of the tax is shifted (the tax is passed on the consumer)
Consumption taxes
Taxing the consumer on his or her spending on goods and services
Personal income tax
Salaries, wages, rent received from leasing property and proceeds of business operations
Capital gain
Profit resulting from the increase in value of assets that are not part of the inventory (stock)
Double taxation
Corporate income tax and personal income tax are taxed seperately –> Double taxation
Full Integration system
Company is owned by shareholders
Company is a mere conduit and company income is taxed in the hands of the shareholder
CIT is a prepayment of individual income tax (all profit allocated to the shareholders)
Good system to tax profit according to “ability to pay” principle of the shareholders
Partial integration
Grant relief either at the level of company or at the level of the shareholder
SEVERAL OPTIONS:
Dividend deduction – company deduct dividend distribution
Plit-rate system - different rate to distributed/retained profit
Exemption method (the dividends are expempted in the hands of shareholders
Dividend imputation (gross-up = the amount dividend received + the company tax attributable to that dividend) + tax credit
Juridical double taxation
The same income (dividends) is taxable in the hands of the same taxpayer (ACo) by more than one state (state a and b)
Goals of DTC
1) foster commercial relationship between two countries
2) prevention juridical double taxation + economic double taxation
Tax neutrality
Taxation should not, or at least as possible, influence an efficient allocation of production factors
Capital import neutrality (relief double taxation)
Neutrality in the source of investment (all firms of all nations pay the same rate of tax)
No discrimination foreign investors and domestic investors
Determining tax residence of individuals (Factors)
1) Time spent in a particular country
2) Connection with a particular country
3) Other rules, such as citizenship (US)
–> Combination of different rules to determine tax residence
Resident state
Where you are a tax resident and pays tax to the state
Tax residents worldwide income (income from resident state and foreign state; worldwide tax system) eg. US
Source state
Where you are not a tax resident (non-resident) but generates income from the states territory and pays tax to the state
Tax non-residents income derived from its territory; territorial tax system
E.g. most EU countries
Mismatch of tax law
Different countries have different rules to determine their own tax residence
Double tax convention
Model developed convention for bilateral tax treaties
Main effect: allocating taxes rights
Priority of DTC over domestic law
Tie breaker rule
Determine one state to tax
Place of effective management
Where key management and commercial decisions that are necessary for the conduct of the business as a whole are in substance made
Mutual agreement procedure
Taxpayer: Corporation
Dual residence: double taxation
Apply for MAP from its tax authority
Tax authorities of two states of the DTC
Make an agreement on the residence of the corporation
Exemption method (methods for mitigating double taxation)
Resident state does not tax the foreign income of its tax residents
Foreign income is exempt
Effect on tax base (foreign income is excluded from tax base
Reduce tax base
Credit method (methods for mitigating double taxation)
Resident state gives a credit for the foreign tax paid at source state
Taxpayer still pays total tax at resident state
No effect on tax base
Corporation
Independent legal person
Shareholders are separate/independent from the corporation
Legal personality
Own assets and income
Can directly enter into legal relations
Partnership
No independent legal personality
Partners share ownership and are responsible for all the debts and legal responsibilities
Non-transparent entity vs Transparent entity
non-transparent entity:
Tax corporation: The corporation is non-transparent for tax purposes
Transparent entity:
Partnership; Tax partners: The entity is considered as transparent for tax purpose No tax at partnership level
Hybrid entities
Entities that are treated as transparent for tax purposes in one state and non-transparent in another state
Permanent establishment
Tax concept – doing economic activities at source with sufficient presence that entitle the source country to leva a tax + no legal personality
Types of PEs in the OECD MC allowing taxation at source state
Physical base PE
Construction PE
Agency PE
service PE
Dependent agent
A permanent establishment without the need to a fixed place of business
Independent PE (Definition
No independent agent: Person who acts exclusively or almost exclusively on behalf of one or more closely related enterprises
Not required to comply with detailed instructions from the enterprise
No control of enterprise
Anti fragmentation rule
Enterprises cannot fragment a cohesive operational activity into several small operations in order to argue that each is merely of a preparatory or auxiliary character
Relevant business activity
Use of a formula to split between head office and PE
Relevant business activity
Use of a formula to split between head office and PE
functionally separate entity
PE - is a separate and independent enterprise (functions, assets and risks)
Profit allocation steps
Step 1: Functions, assets and risks
A functional analysis has to be carried out before transactions within various parts of a single enterprise have to be priced at arms length giving rise to a profit element
Step 2: The arms length method
Determination of the PE remuneration by reference to the functions performed, assets used and risk assumed by the enterprise
Interests vs Dividends
Interests: Income for lender from money that is offered to the borrower
Interest should be paid even if there is no profit
Must be paid
Fixed rate
Dividends:
Income offered to the shareholders of a company
dividends can only be paid when there are profits made by the company
Can be optional. The company can decide when to pay
Depends on companys plan to calculate
Debt vs equity financing
Debt:
Money raised by a company from borrowed capital
Loan and bonds
Obligation
Comparatively short term
Less risk
Return in interest
Fixed return
Equity:
Money raised by a company issuing shares
Shares and stock
Ownership
Long term
HIgh risk
Return on dividend
Variable return
Tax treatment of debt vs equity
Debt – Interest – Payments:
For borrower: tax deductible, not taxed
for lender: taxed
Equity – dividend – payments
For company: Not tax deductible
Taxed
For shareholder: exempt (usually)
Interest arising in source state and paid to a resident of resident state may be taxed in resident stae
Source stat ecan also tax the same interest with limitations; Interest may also be taxed in source state but if the beneficial owner of the interest is a resident of resident state, the tax so charged shall not exceed 10% of the gross amount of the interest
Royalty (definition)
Any payment of any kind received as consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinema tographic films, patents, trademarks, designs, or models, plans, secret formulas or processes, or the information concerning industrial, commercial or scientific
Royalty - import source of revenue for developing countries versus residence countries
Exclusive taxing rights for the residence state OECD MC
Article 12 UN MC:
Shared taxing rights
Limited taxing rights for source state (example 10% + double taxation relief at the residence state (credit)
Broad concept also royalty (leasing industrial, commercial or scientific equipment) - they were eliminated from the OECD MC within the definition of royalty
In the case of software; is the licensee entitled to commercial exploitation of the product? can the purchaser introduce modifications in the software (substantive rights) limited period of time/geographic zone?
–> no royalty, thus article 7 OECD MC
Distribution agreements of a product
Distribution agreements, commercialization of a product does not entail the right of use of the trademark
Exclusive distribution right of a product is not a royalty (exclusive right to sell branded t-shirts - no right to use the trademark)
BUT if the distributor purchases raw materials that are subject to transformation and sold by the distributor under, for instance, the trademark of the foreign company
Crucial distinction: Business profits and technical services
Specific provision
Sometimes within the definition of royalty
withholding tax
a tax deducted at source, especially one levied by some countries on interest or dividends paid to a person resident outside that country.
Technical services
Usually the same WHT (withholding tax) for royalty
The term fees for technical services means any payment in consideration for any service of a managerial, technical or consultancy nature (broad meaning). Difficult to determine in many cases
Be aware: you need domestic law to tax (DTCs only allocate taxing rights)
Mixed contracts (royalty, service, sale)
CDI canada-peru (article 12 does not cover technical services)
Break down the contract
But if one part (principal purpose and the other parts are ancillary - the tax treatment of the principal should generally applied to the whole amount
Difficulties in aggregation/disaggregation
Transfer of ownership (different su-allocation rule)
Gains from the alienation of any property, other than that referred to in paragraphs 1,2,3,4 shall be taxable only in the contracting state of which the alienator is a resident
Transfer of shares - company resident in canada sell the shares of its subsidiary in colombia / only canada can tax the capital gain
Alienation of shares:
Sale of house: capital gain (taxation at source)
Sale of shares - capital gain (taxation at residence)
Indirect transfer of shares:
Mauritius company sell shares of a US company.
Can india tax the capital gain?
Capital gain taxable in india if mauritius company sales shares in indian company NOT THE CASE
No covered indirect transfer of shares
No tax in india
new business model - main features
Technology and hyper-connectivity
Heavy reliance on data (data mining) and users
would be difficult, if not impossible, to ring-fence the digital economy from the rest of the economy. Attempting to isolate the digital economy as a separate sector would inevitably require arbitrary lines to be drawn between what is digital and what is not
No physical presence is required to obtain profits - source countries do not perceive getting a fair share
General Anti-avoidance rules (GAARs)
A GAAR is a provision of last resort that is capable of being invoked by a tax authority to strike down unacceptable tax avoidance practices that would otherwise comply with the terms and statutory interpretation of the ordinary tax law.
Indicators for an inappropriate legal structure:
If a third party, on considering the economic facts and effects of the structure, would not have chosen the same legal structure without the generated tax benefit;
The interposition of relatives or other closely related persons or companies soley for tax purposes; or
The transfer or shifting of income or capital assets to other legal entities solely for tax purposes
Article 6 general anti-abuse rule
1) for the purposes of calculating the corporate tax liability a member state shall ignore an arrangement or a series of arrangements which, having been put into place for the main purpose or one of the main purposes of obtaining a tax advantage that defeats the object or purpose of the applicable tax law, are not genuine having regard to all relevant facts and circumstances. An arrangement may comprise more than one step or part
2) For the purposes of paragraph 1, an arrangement or a series thereof shall be regarded as non-genuine to the extent that they are not put into place for valid commercial reasons which reflect economic reality
3) Where arrangements or a series thereof are ignored in accoance with paragraph 1, the tax liability shall be calculated in accordance with national law.
the GAAR tests
Artificiality: not genuine having regard to all relevant facts and circumstances
Motive: Put into place for the main purpose or one of the main purposes of obtaining a tax advantage
Defeat object and purpose of corporate tax law: What is the object and what is the purpose of tax law
Burden of Proof:
Where to find it
Beps action 6 and OECD model tax convention article 29
A set of objective tests
A more subjective general anti-avoidance test
A specimen wording
Removal of some tiebreaker rules for companies
SAARS examples
Legislation on controlled foreign companies
Thin capitalization rules
Transfer pricing rules
What is a CFC
A corporate entity that is registered and conduct business in a different jurisdiction or country than the residency of the controlling owners
What is wrong with CFC’s
It is wrong if the CFC structure was created for tax avoidance, which is done by setting up offshore companies in jurisdictions with little or no tax, such as bermuda and the Cayman islands
The CFC regime applies to the following types of income (netherlands)
Interest or other benefits from financial assets
Royalties or other benefits from intangibles
Dividends and capital gains derived from the sale of shares
Benefits from finance lease activities
Benefits from insurance, bank or other financial activities
Invoicing activities which add little or no economic value
Thin capitalization rules
An investor is free to choose to finance the business activities
Financing has economical, legal and tax consequences
use of debt has some tax and non-tax advantages
Interest expense is tax deductible
Dividends are taxed twice
Debt financing avoids other taxes
Free to chose the currency
Debt and equity difference
Equity capital shares in the reward of the business
Involves entrepreneurial risks
The company does not owe money to shareholders
Shareholder receives income when the company distributes
Loan capital is different
The loan provider does not share the risks
The capital lent is liability for the company and repayable + interest
The lender expects regular payments
What is thin cap
Hidden equity capitalization through excess loans
It is an artificial use of interest bearing debt instead of equity by shareholders with the sole or primary motive to benefit from tax advantages
Transfer pricing
Due to the fundamental differences in dealing with group companies and with independent parties, it is extremely difficult to arrive at an arms length principle (ALP)
Transactions involving transfer pricing issues
Transfers of tangible property
Transfers of intangible property
Provisions of services
Provisions of finance
Transactional Price Methods
1) Comparable uncontrolled price method (CUP)
2) Resale price method (RPM)
3) Cost plus method (CPP)
Transactional Profit Methods
1) Transactional nnet margin method (TNMM)
2) Profit split method (PSM)
What is exchange of information?
Exchange of information is basically transparency and exchanging the information as is foreseeably relevant for carrying out the provisions of the DTT or to the administration or enforcement of the domestic laws concerning taxes of every kind and description imposed on behalf of the contracting states
Elements of information exchange
The duty to exchange
The mechanism by which information shall be exchanged
The duty to protect information received
The acceptable grounds for declining to exchange requested information and
The unacceptable ground for declining to exchange information
Which information to be exchanged and which information not to be exchanged: Four fundamental questions that seek to adress
1) Who can request information
2) About whom can information be requested
3) what information can be requested
4) When can a request for information be denied
Limits on exchange of information
Compliance with the request would conflict with the requested states domestic laws and administrative practice
Requesting state cannot acquire information under its own domestic laws
Compliance with the request would divulge trade secrets
Obligation to notify taxpayer of request
Public policy
Three types of exchange of information
1) on request
2) Spontaneous
3) automatic
Treaty abuse is
A guiding principle is that the benefits of a double taxation convention should not be available where a main purpose for entering into certain transactions or arrangements was to secure a more favourable tax position and obtaining that more favourable treatment in these circumstances would be contrary to the object and purpose of the relevant positions
What is treaty shopping
Treaty shopping is an analysis of tax treaty provisions to structure an international transaction or operation so as to take advantage of a particular tax treaty
The DDTs apply only to the residents of the contracting states. It is viewed as being a form of tax avoidance which can be tackled at domestic or international level
How to tax profits in a MNE
The MNE is treated as a unitary entity
The profit is divided among the individual entities based on several indicators - apportionment formula
Difficult agreement for tax share - weight indicators between countries + tax planning opportunities
The arms length - intercompany prices should be adjusted as if they were between un-related parties!
The arms length method/pricing adopted by most countries in the world in transfer pricing
Arms length principle
Treat your group entities as if they were stand-alone (independent/non-related companies
Separate entity principle
Every entity as if it were non-related (standalone company)
Comparability: We need to allocate profit to the entities of the group. Example: I.E profit of a g roup company providing legal services to the whole group. How do we remunerate this group company:
- Identification of the commercial and financial relations between the associated enterprises in order to establish an accurate delineation of the controlled transaction
- Comparison of the conditions and economically relevant circumstances of the controlled transaction with the conditions of comparable transactions between independent enterprise
Internal comparables
Problem of availablility but also: not always more reliable than external comparables
External comparables:
Usage of commercial databases. exact coparables are very rare (i.e. royalty for roasing coffe)
One sided methods (comparability)
Resale price method, cost plus method and transactional net margin method
They apply only to one party of the transaction
As a general rule: party with the less complex functional analysis
Two sided methods:
Comparable uncontrolled price and profit split method
Apply two or more parties of the transaction
CUP transaction method (Comparability)
Compare uncontrolled transaction with controlled transaction (independent enterprise sell the same product as it is sold between associated enterprises)
Difficult to find the same product, risks, market
RPM transaction method
One company (a) sell a product to a company of the group (B) that sell to final customers (minimum of processing/no added value)
Search for comparable - determine price paid by B to A
Resale price - gross margin (selling expenses leaving a net profit) = intercompany price
Cost Plus -transaction method (comparability)
Cost of production plus an appropriate mark up to make an appropriate profit in light of the funcions performed
Low risk, routine-like activities (manufactured products)- no intangibles
TNMM - Transactional profit method
It looks to net profits on transactions
Compare earning before interest and tax between related and unrelated company
Profit split -transactional profit method
Intangibles
Split the total profit by all the group companies
Use of a formula by studying comparables
Thre fraud traingle:
Opportunity
Realization
Pressure/Motivation
It is illegal practices commited by for or against corporations by insiders or outsiders to achivev a gain or to avoid losses
New business model - main features
Technology and hyper-connectivity
heavy reliance on data (data miners) and users
It would be difficult, if not impossible, to ring-fence the digital economy from the rest of the economy. Attempting to isolate the digital economy as a separate sector would inevitably require arbitrary lines to be drawn between what is digital and what is not
No physical presence is required to obtain profits - source countries do not perceive getting a fair share
The benefit theory
The current consensus - demand creates value Thus the market jurisdiction has the right to tax profits
Benefit theory - pay taxes for access to infrastructures ( taxes should be considered as payments for services rendered by the state to the taxpayers )
Is value created in the virtual marketplace? i.e. in local communities where firms establish high-end exchange platforms and users share valuable information in order to receive valuable services
The economic allegiance
A taxpayer, who is economically connected to a jurisdiction, ejoys benefits arising in that jurisdiction in particular public goods - and is therefore liable to tax
BUT
US - $$$ (tax revenue of digitalized profit)
(i) the digital economy as a whole is a product of the internet + (ii) Digital companies are located in US
Value creation - Market jurisdiction
The market, when it comes to business decisions, is a prerequisite for the creation of value, but is not a component of it. It needs a company with the capabilities of expoiting the potential
I.e.
Servers, algorithmms can be located anywhere (no country)
Cloud computing (no geographical sense)
Everybody uses internet to egt more customers
The company has invested in this market and expects a return!! Not simply because it is a market with customers
Value created at the level of the customer and not at the level of the firm should be taxed
How to give tax responses to the digitalization
Proposal Digital PE:
If an enterprise resident in one contracting state provides access to (or offers) an electronic application, database, online market place or storage room or offers advertising services on a website or in an electronic application used by more than 1000 individual users per month domiciled in the other contracting state such enterprise shall be deemed to have a permanent establishment in the other contracting state if the total amount of revenue of the enterprise due to the aforementioned services in the other contracting stae exceeds XXX (currency) per annum
The tax solution in the pillars:
countries levy unilateral “digital service tax” like google tax (france span hungary etc) (us protests)
Pilar 1: attribute residual profit to market jurisdiction
Pilar 2: Eliminate tax competition through a minimum tax
Pilar 1:
Scope: In-scope companies are the multinational enterprises with global turnover above 20 b euros and profitability above 10%
Carve-out for extractive and financial services
No limitation to automated digital services or consumer face business
Nexus for the market jurisdiction
–> at least 1 million euros in revenue from that jurisdiction
Quantity to distribute:
25% of residual profit defined as profit in excess of 10% of revenue will be allocated to market jurisdictions
Pillar two
Introduction of a global minimum tax (a sort of super CFC rule) if states levy taxes below 15% + top-up tax
Effective tax rate (15%) in the jurisdiction
Two rules: The GloBE (income inclusion rule + undertaxed payment rule) will apply to MNEs that meet the 750 million euros threshhold
The subject to tax rule (STTR) that allows source jurisdictions to impose limited source taxation on certain related party payments subject to tax below a minimum nominnal rate (9%)
Accounting principles:
Financial statements must represent a true and fair view of financial position and income of the company
and be produced in accordance with generally accepted accounting principles
Audit standards
Auditor must verify inventory, talk with creditors, debtors etc
External auditors had to be chosen by board members not engaged in the companys management
Report directly to the shareholders
Internal controls
Introduced the obligation to disclose and audit the internal controls to all listed companies in the USA
Independency of auditors
Harsher penalties for frauds
C-level must:
Sign off the financial reports
Present their conclusions over the internal controls of the company
Report significant deficiencies in the internal controls
Independent auditor must attest the CEO/CFO assessment of the internal
What are internal controls
Processes, procedures, rules put in place to assure that objectives of the company are accomplished
Corporate governance
A system by which companies are directed and controlled
Regulatory framework –> self regulation
The management (C-level) is accountable for the proper treatment of the risks
Tax governance
A system by which taxes are directed and controlled within the company
Tax control framework
The section of the internal controls dedicated to control the tax risks derived from compliance, reporting and operations, and to ensure that such risks are aligned with the tax strategy of the company
Objectives of the tax control framework
To assure copliance with tax regulations
To assure reporting of taxes
To assess the operation
Tax assurance
Processes designed to assure that the tax positions expressed in the financial statements are reliable, free from material misstatements
Tax assurance comprises all tax results, derived from all tax-related processes within the company, and assess if those tax results are reliable, free from material mistakes
Cooperative tax compliance
Fosters a relationship between taxpayers and tax administration based on transparency, trust and cooperation
Tax competition inbound
As the CEO of a big company, you plan to invest abroad
Options:
A tax rate 20%
b tax rate 10%
What if A gives tax exemption for the first three years if you set up a company there
What if B gives tax return for foreign investment
A and B can compete for foreign direct investment by tax measures
Tax competition - outbound
As the minister of finance in a country A you want to encourage domestic companies to invest abroad
Country A –> tax reduction vs country B
Options:
What if country C gives tax exemption for outgoing domestic companies
In country B:
Companies with A’s tax reduction Vs C’s tax exemption
A, C can compete to increase its domestic companies competitiveness by tax measures
Tax competition
The reduction of tax burden by a state via tax incentives in order to attract foreign investments and/or increase competitiveness of domestic business
(Good tax competition) Tiebout hypothesis
Households and firms can vote with their feet – leave the country if the tax burden is too high
Competition: states can provide better public goods/lower tax rate
Increase efficiency
Good tax competition (better allocation of resources)
Correcting market failures & support infant industries
Resources go to places where market does not favor
Increase equity
Increase domestic competitiveness – attract investment & export
Distortion of resource allocation (harmful tax competition)
Selective tax advantages to certain companies or regions
Tilt the level playing field
Government failures: lobby and rent-seeking, protectionism
Harm tax neutrality: capital moves only for tax reasons
Decrease efficiency and equity
Race to the bottom (harmful tax competition)
States compete to give lower tax rate
Governments are forced to give similar tax incentives
Without coordination, everyone ends poorer
Portfolio investment
Investment in financial asset such as stock, bond, securities, to gain return or grow
Passive income
Parent can bring large amount of cash into the subsidiary with portfolio investment
Teaty haven (tax havens)
Has broad and favorable treaty networks
Suitable for intermediary holding companies
Due to DTT, low witholding tax on money in and out
EU measures to tax havens
No tax benefits given
Non deductibility of costs incurred in a listed jurisdiction
Controlled foreign company (CFC) rules to limit artificial deferral of tax to offshore, low taxed entities
Withholding tax measures (WHT) to tackle improper exemptions or refunds
Limitation of the participation exemption on shareholders dividends
Tax challenges arising from digitalization
No physical presence in a country, but with many customers –> source tax is difficult
Pillar 1 and 2
Tax measures can fall in the scope of state aid regulations –> four criteria
1) by a state or through state resources
Tax reduction means less tax revenue received by the state
2)advantage in any form
Tax exemption tax credit, tax deduction
3) selectivity
Certain tax advantage to specific enterprises or regions
4) affect competition and trade:
Affect fair trade competition
States have tax sovereignty: can decide their own tax measures
how do they solve double taxation?
Unilaterialism:
Solve the problem by the state itsself
E.g. Us foreign account tax compliance act
Requires foreign financial institutions to gather and disclose information regarding the foreign financial assets of US resident
E.g. Digital service tax
UK, italy france austrai (no need for physical presence)
Bilateralism
Allocation of taxing rights between source and resident state to prevent double tax convention (DTC)
Always between trade partners
Over 3000 bilateral tax treaties worldwide
Some countries have broad treaty networks, some do not
OECD model tax convention: favors developed countries (resident state)
Un model tax conventions: favors developing countries (source state)
Multilateralism
States have common patterns of conduct through the organization of institutes
Background: globalization and digitalization
Tax avoidance by MNEs
Global inequality
Sustainability and environment
Budget crisis
BEPS minimum standards
Action 5: Harmful tax practices
Action 6: Prevention of tax treaty abuse
Action 13: Country-by-country reporting
Action 14: Mutual agreement procedure
If countries are expected to implement minimum standards
There is still variation in each countries implementation practice
OECD: Global forum on transparency and exchange of information for tax purposes
163 members
International standards
Transparency and exchange of information
Target: banks
Offshore tax evation
Bank secrecy
Information on financial accounts and details of account holders
Between tax authorities
World trade organization (WTO)
Deals with rules of trade between nations
Objective: Open and non-discriminatory multilateral trading system
Level playing field for all the members to do trade and business
Subsidy
A financial contribution made by a government or any public body, which confers a benefit that is specific
Tax incentives as subsidies
Case law
Dispute settlement body
Call for tax experts
More detailed rules on tax subsidy
Other tax measures
Role of UN in taxes
UN: represent more for developing countries
But limited role on tax cooperation
UN tax committee does not get substantial support from developing countries
Lack of support by developed countries in UN
Difficult to reach consensus so far
Can play a better role considering its large membership
Does OECD/G20 have taxing rights
Can they represent nonmembers and developing countries
Although there is inclusive framework it is difficult for developing countries to join the rule making and decision-making process
Developing countries:
Lack of power capacity and expertise
They can only choose agree or not
Participation and representation???
Fairness??
Effectiveness of tax incentives
To reduce harmful tax competition
Tax incentives have limited effect on the attraction of direct investment
Why not focusing more on competitiveness of the country
Highly skilled and well-educated workers, good infrastructure, efficient public transport, stable political economy
Local savings
India and china:
Factory of the world
Market of the world: preference for foreign products
Local savings:
Lower costs for MNEs
e.g. Raw materials, labor, rent, transportation and infrastructure
However, india and china did not get most profits
They work as manufacturers
Claim: allocation of profits to the country of location saving s
True inclusion framework
Include more countries esp developing countries in the decision making process
Legitimacy of the OECD
better institutional mechanism to guarantee trust between different parties
Who grants relief in case of double taxation? (resident vs source state))
Resident state
