Excuse me, but is it me being dim here or what?
Europe could also lead on curbing transfer pricing abuse. Current international tax rules treat multinationals as if they were a collection of unrelated entities, with each part taxed by the jurisdiction where it is resident. This OECD-led system makes no sense, because multinationals are integrated global operations.
A better alternative, Unitary Taxation, would involve taxing multinationals based on what they do in the real world, rather than on the artificial offshore constructions its tax advisers can cook up. Under unitary taxation a multinational is considered as a whole, and its profits are allocated to different jurisdictions under a formula based on wages, turnover or capital value in each place. Jurisdictions can set whatever tax rate they want, but if a company runs a one-person booking office out of Bermuda, say, then only a tiny portion of its profits will be allocated there and subjected to its zero-tax rate. Some U.S. states already operate this system successfully; a European project called the Common Consolidated Corporate Tax Base (CCCTB) currently being considered would be a step towards this system. It must be driven forward in the face of howls of protests from tax havens, multinational corporations and the powerful accountancy and law firms that support them.
Europe should also lead on rules for corporate reporting. Multinationals are currently not required to break down their profits and other important data by country, but can instead report them by region or even for the world as a whole. Neither the citizens of the countries where they operate, nor their tax authorities, can unpick this published data to find out what these corporations are really doing on their territories. A new proposal for so-called Country by Country reporting, under which results would be broken down for each jurisdiction, is starting to get a worldwide civil society coalition behind it. Europe can lead the world in pushing this forwards.
Aren\’t these two proposals entirely contradictory?
We must tax multi-nationals as if they are one organism, spread over different jurisdictions, but we must tax corporations as if they are, under country by country reporting, separate organisations in different jurisdictions all dealing with each other at arms length transaction prices?