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Designing a business profit tax fit for the 21st century

The complexities and vulnerability to abuse of the international corporation tax system, and the distortions it creates, have long been a concern to many observers in both advanced and developing economies. In the wake of significant public disquiet, particularly following revelations that companies such as Starbucks, Google and Amazon pay very little corporation tax in countries such as the UK, these issues have now come to attract the attention of policy makers. In June 2014, the G8 and G20 asked the OECD to prepare an action plan for reform of Base Erosion and Profit Shifting (“BEPS”). The OECD subsequently announced a two-year review of the existing international framework for taxing corporate profit. Without a solid conceptual basis, however, reforms will be piecemeal and arbitrary, and it is not clear what the reforms will be a transition to.

We believe that a deeper review of fundamental issues of principle and practice in the allocation of profits amongst different countries for the purposes of taxation is required, paying attention to the interests and circumstances of advanced and developing countries. The Oxford University Centre for Business Taxation (CBT) has set up a group of world-leading economists and lawyers, primarily consisting of academics but also, crucially, with involvement from the International Monetary Fund  and from practice. Members have been selected as individuals for their expertise.

The CBT Group will address fundamental issues of principle and practice in the allocation of profits from cross border activity for the purposes of taxation, paying attention to the interests and circumstances of advanced and developing countries. It will:

  • analyse the conceptual basis of the existing OECD framework, including the basic allocation of taxing rights, the treatment of interest and royalties, and the methods used in determining transfer prices
  • evaluate potential reforms within the existing framework, especially whether they can be justified on the basis of a clear conceptual basis, rather than as ad hoc measures
  • consider more radical methods of allocating taxing rights, including those based on residence, destination and formula apportionment. This will involve not only analysis of the conceptual basis of such taxation, but also the extent to which such methods can be implemented in practice, and whether there is a feasible path of transition
  • make recommendations for reform into the short- and long-term

Research outputs

Oxford University Centre for Business Taxation

Duration

August 2014 - September 2016