Auditorium A2, Maison de la paix, Geneva
For most of the last hundred years, countries have largely agreed on where income earned by multinationals in their cross-border business should be taxed. But this longstanding regime is coming apart.
Professor Grinberg will explore policy options that may help rewrite the international tax regime.
For most of the last hundred years, countries have largely agreed on where income earned by multinationals in their cross-border business should be taxed. But this longstanding regime is coming apart. The risks this development creates for the broader international economic order are at least as significant as those created by the ongoing trade war. Without the international tax regime, cross-border trade and investment would be critically threatened, because anyone trying to do business across borders would face the risk of being taxed again and again and again on the same quantum of income.
Recently, however, something changed. International tax matters have been discussed at almost every G20 meeting this decade. Every large-economy government now believes that either a) there is something wrong with the taxation of the “digital economy,” or b) that there is something more fundamentally wrong with the basic architecture of the international tax regime. There are many reasons for the change in sentiment. These include technological changes that make it easier to participate meaningfully in the economic life of a jurisdiction with no or limited physical presence in that jurisdiction, the growing importance of services and intellectual property in the global economy, the increased economic heft of China, India, and other significant emerging markets, and the rebirth of old-fashioned mercantilism. But the result is that for the first time in almost a hundred years, we lack an international tax status quo.
International tax considerations play a major role in cross-border business and investment decisions. If a large fraction of cross-border income were subject to double or multiple taxation, the result could be a major pullback in cross-border trade and investment by and through multinational corporations.
A multilateral project organized by the OECD and involving over 130 countries is attempting to defy the international economic zeitgeist and reach consensus agreement on what would constitute a fundamental rewrite of the international tax regime. If the project fails, however, it could lead to a series of retaliatory measures that would threaten the global economy just as much as the ongoing trade war does.
Professor Grinberg will explore policy options that may help rewrite the international tax regime