Intertax, Vol. 39, No. 2, pp. 62-84, February 2011 - Maarten de Wilde
The international corporate income and capital gains tax (CGT) systems of basically all modern nation states share a common objective. All seek to effectively ‘capture’ multinational enterprises (‘MNEs’) that are economically present within the respective taxing state’s geographical borders for corporate tax purposes. In their operation, however, these systems typically subject groups to different corporate tax treatment dependant on their legal structuring or the question of whether the business operations are performed in a (non-)cross-border context. This affects the corporate tax burden imposed, which in turn influences the distribution of production factors. In addition, this affects corporate tax revenues. In individual cases, things may work out for the benefit or detriment of individual MNEs or tax administrations.
If observed as a whole, it can nevertheless be said that the international tax systems of states distort the functioning of domestic markets, the internal market within the European Union (EU), and the emerging global market. This is problematical for all parties involved in the corporate taxation of proceeds from multinational business operations. The author addresses the question of how states may mitigate the distortions they unilaterally impose when taxing MNEs on the corporate business income earned and the capital gains realized within their respective territories.
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