Emphasizing Inter-Nation Equity in the New Digital Economys Taxing Rights Allocation Scheme

Abstract

Efforts to quell the challenges of taxing the digital economy have shown significant progress. The phase has narrowed down to agreeing on broader allocation of taxing rights to market jurisdictions. However, various groups still have differing views regarding the scheme of new taxing rights allocation (Amount A) contained in the proposal OECD/G20 Pillar One. The issue of fairness mounts mainly in the formula for reallocating profits to the eligible jurisdictions. This study aims to examine areas in the proposal related to the principle of inter-nation equity. We apply a qualitative study by conducting literature analysis and document review. The result shows that several areas need to improve inter-nation equity, particularly in the mechanism for reallocating MNE group profits to jurisdictions entitled to Amount A. We identify the stages in the mechanism where the principle of equity amidst countries becomes essential as a point of consideration. These are residual profit terms, profitability threshold, and the percentage of reallocation. Consensus needs to consider the favored percentage formula to improve inter-nation equity before the scheme is fully implemented.

OECD/G20 Two-Pillar Solution: Does It Promote Inter-Nation Equity?

“…Concerning the investigation of fairness issues in the design of the Two-Pillar solution, limited research has focused on inter-nation equity. Lubis and Rahayu (2021) identify the three areas of profit allocation under Pillar One that should embrace inter-nation equity, which are the terms of residual profit, the threshold for profitability, and the percentage for reallocation purposes. In terms of profit allocation, Ozai (2020) asserts the unclear distributive impacts of the "unified approach" (later developed as Pillar One), having regard to the use of a formulaic approach, which seems in favour of countries with larger markets.…”

“…de la Feria, 2022; Latif, 2022;Kanervo, 2021;Apriliasari, 2021;Vella, et al, 2021;Rootsma, 2021;Voorhoeve, 2021;Castro, 2020). However, only a limited number of which has also evaluated the internation equity aspect, which mostly turned out to focus on Pillar One by focusing on the aspect of entitlement to tax (Navarro, 2021;Lubis & Rahayu, 2021;Sydänmaanlakka, 2021). While also focusing on Pillar One, Ozai (2020) has made valuable contributions by revisiting the inter-nation equity concept that comprises two normative components, the entitlement approach and the differentiation approach.…”

Integrēta pieeja nodokļu optimizācijai Latvijā. Promocijas darba kopsavilkums

“…Neraugoties uz globalizācijas procesiem, kas skaidri iezīmējas kopš XX gadsimta, termins "reģions" tiek plaši izmantots dažādos akadēmiskās kopienas līmeņos. 46,47,48 Ansi Paasi un Džonatans Mecgers apstiprina: "Tādējādi reģioniem, šķiet, ir noturīga nozīme un pievilcība gan akadēmiķiem, gan politikas speciālistiem. Arī izpratne par to, kas ir reģions un ko tas ietekmē, gadu desmitu laikā ir ievērojami mainījusies.…”