Unitary Taxation and Formulary Apportionment: Estimation of Global Revenue Implications and Review of Wider Consequence

Recent international tax reform proposals such as the Pillar One proposal of the OECD or the BEFIT proposal of the European Commission include several aspects of unitary taxation with formula apportionment. The main idea is to view multinational corporations (MNEs) as single taxpayer and calculate the corporate tax base at the group level. In a second step the tax base is allocated to the countries according to the economic activities in each country. This would represent a marked shift away from the existing separate accounting and arm's length principle approach. The aim of this project is to contribute to the understanding of the impact of a switch to unitary taxation. The focus of the study lies on the design of the apportionment factor and how this redistributes taxing rights between countries. The firm-level responses are contingent on the changed tax burden and will only be discussed in the context of an exten-sive literature review.