Global inequalities in taxing rights: An early evaluation of the OECD tax reform proposals

The current OECD process to reform the international rules governing corporate tax, aimed to achieve a consensus solution by 2020, has finally recognised the need to introduce elements of formulary apportionment to allocate the profits of multinationals and is framed explicitly in terms of redistributing taxing rights between countries. In this paper we provide the first public evaluation of the redistribution of taxing rights associated with the leading proposals of the OECD, IMF and the Independent Commission for the Reform of International Corporate Taxation (ICRICT). The first key finding is that that reallocation of taxing rights towards “market jurisdictions”, as it is currently understood, is likely to be of little benefit to non-OECD countries. Indeed, the proposal is likely to reduce revenues for a range of lower-income countries. Second, all of the proposals deliver a much broader distribution of benefits if some element of taxing rights is apportioned according to the location of multinationals’ employment, and not only of sales.