By Professor Sara L. McGaughey, Griffith Business School & Professor Pascalis Raimondos, QUT Business School
The current international company taxation system goes all the way back to 1923 and a ‘Report on Double Taxation’ solicited by the League of Nations. It was a time when the word “wireless” described radio communication and air travel was still not a regular means of transport. Most firms were national, and value chains were concentrated in one place.
The two core principles outlined in the report granted each country the right to tax profits accrued within its own borders, and to enforce arm’s length rules that restrain profit shifting. Nowadays – with more complex ownership structures for multinational enterprises (MNEs), finely-sliced global value chains and production networks, and global firms selling goods from the ‘cloud’ – the effectiveness of these two principles is in doubt.
Nevertheless, they remain the basis of our world-wide corporate income tax system
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