How an OECD tax proposal would reallocate international taxing rights more fairly by Simeon Djankov published by PIIE (8/2021)
“As of July 9, 132 countries have agreed to support the Organization for Economic Cooperation and Development’s (OECD) two tax reform proposals. The global minimum corporation tax (explained here) dominated international headlines, but a second part of the proposal that reallocates some taxation rights to countries where revenues are made has received less attention.
Under the current system (explained here), multinational firms are only taxed in locations where they have operations, not in the jurisdictions where they sell their products. For example, if an American company makes its products at a plant in Mexico, the company pays taxes to the Mexican government, and its total profits are taxed in the United States. If it then sells those products in France, it pays no taxes to the French government, because although it makes money from sales there, it does not maintain a physical presence in that country…”
