Towards A Neutral Formulary Apportionment System In Regional Integration
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Towards a Neutral Formulary Apportionment System in Regional Integration
Author: Shu-Chien Chen
language: en
Publisher: Kluwer Law International B.V.
Release Date: 2023-03-09
International tax regimes and practices are heavily criticized for failing to fairly levy corporate tax on giant multinational taxpayers in the current globalized and digitalized world. This important and far-seeing book demonstrates how formulary apportionment (FA) – an approach by which a multinational corporation pays each jurisdiction’s corporate tax based on the share of its worldwide income allocated to that jurisdiction – can achieve the much-sought goal of aligning value creation and taxation. The author, through an intensive analysis of the European Union’s (EU’s) Common Consolidated Corporate Tax Base (CCCTB) Directive Proposal(s) and comparison to the United States (US’s) formulary apportionment experience, shows how the perceived problems with an FA system can be overcome and lays out the necessary elements for its feasibility. With detailed attention to the debates around formulary apportionment and its theoretical foundations, the book provides a blueprint for rebuilding the normative framework for the EU’s tax reform by clearly analysing the implications of the following and more: theorising public benefits to be represented by taxation; reorganising different economic theories about tax neutrality and tax justice; advancing the comparative legal research methodology to analyse law reform by combining the functional approach and the problem-solving approach; designing the logical formulary apportionment system for digital economy; ensuring the removal of the incentive for multinationals to shift reported income to low-tax locations; reducing the tax system’s complexity and the administrative burden it imposes on firms; eliminating transfer pricing complexity for intra-firm transactions; achieving equal weighting of the sales factor, the labour factor, and the asset factor in the formula; application of ‘destination-based’ rule for attributing the sales factor; and replacing the traditional permanent establishment nexus with a ‘factor presence nexus’. The presentation incorporates extensive comparison between the EU’s formulary apportionment tax reform option and FA systems existing in the United States (US) at state level, including reference to relevant US case law and legislation. As a possible option to address the problem of base erosion and profit shifting (BEPS), formulary apportionment is gaining increasing acceptance and attention. This book will prove invaluable to taxation authorities, tax practitioners, and scholars in its deeply informed and systematic guidance on good practices and prevention of problematic experiences in establishing and implementing an effective and market-neutral FA system.
Towards a Neutral Formulary Apportionment System in Regional Integration
The traditional international tax regime faces challenges in the digital economy and is criticised for not fairly allocating taxing rights over the profits of multinational enterprises (MNEs)' cross- border economic activities. Allocating taxing rights based on value creation is an urgent reform imperative. OECD's Base Erosion and Profit Shifting (BEPS) project in 2015 is a reform effort to address this problem.Since 2021, OECD's Pillar One has established the “new” taxing rights of the market jurisdiction. OECD's Pillar One uses a formula approach to decide the profit allocation. Such development shows that “formulary apportionment” (FA) could be a feasible option for tax reform. However, the core question remains: How should a fair FA be designed to allocate taxing rights? The article especially discusses the FA system in the European Union (EU). The full text is at https://pure.eur.nl/ws/portalfiles/portal/83033157/Towards_a_neutral_formulary_apportionment.pdf.
Are uniformity and Legal Certainty in EU Tariff Classification Really Two Sides of the Same Coin?
Author: Emma van Doornik
language: en
Publisher: Kluwer Law International B.V.
Release Date: 2025-03-25
Goods imported to any EU Member State are subject to tariff rates determined by a multilayered classification sys-tem that challenges both uniformity and legal certainty in the EU. The thorough research undertaken in the book – the first incisive, in-depth treatment of EU tariff classification – uncovers situations where the application of the rules prioritizes uniformity at the expense of legal certainty and proposes viable measures that can be undertaken to mitigate and/or effectively remedy the consequences of this imbalance in the EU. Aspects of EU tariff classification such as the following are discussed: the problematic nature of the EU’s Binding Tariff Information (BTI) system; financial interests of the EU, Member States, and traders in tariff classification; difficulty of tariff classification due to the abundance of sources; role of the CJEU in uniform tariff classification; grounds for the revocation of a BTI; post-clearance recovery of duties; right of access to court in case of tariff classification disputes; and potential establishment of an EU tariff classification Appeal Body. The author clearly describes potential improvements to EU tariff classification measures and procedures that could effectively remedy infringements of legal certainty and at the same time could increase uniformity. Of value to practitioners and policymakers in tax law and customs law, as well as to academics in those fields, the book’s comprehensive description of the layered structure of tariff classification and its extensive discussion of taxpayers’ rights in EU customs law will greatly assist in presenting customs-related cases before national and EU courts with awareness of the legal remedies available. Customs officials will benefit from its thorough guidance on EU tariff classification practices and the BTI system.