Corporate tax 2019

Multinational corporations and profit shifting: Problems and policy options

Source: Australian Tax Forum Journal Article

Published Date: 1 Jul 2019


Multinational corporations have opportunities, and face competitive pressures, to shift profits from high corporate tax rate to low corporate tax rate countries. Reasons behind the growth, and likely further growth, of profit shifting to reduce global corporate tax paid are explored. The adverse revenue, efficiency and equity effects of profit shifting provide arguments for reforms to the current system of autonomous country corporate income taxation. Four reform options are described, and their pros and cons are assessed: maintain individual country profit measures and augment regulations and international cooperation as proposed by the OECD; all countries adopt a common corporate income tax rate; form a measure of global profit and apportion the global profit to individual countries; and replace the source base income tax with a destination base cash flow tax. Each has some advantages and disadvantages, and none is a silver bullet or an obvious choice.

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Corporate tax 2019

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