Unitary Taxation System for Multi-National Enterprises
- 28 Sep 2019
- 3 min read
Recently, the United Nations Conference on Trade and Development (UNCTAD’s) in its Trade and Development Report 2019 has recommended for the adoption of a unitary taxation system for the Multi-National Enterprises (MNEs).
- The theme of the report was ‘Financing a Global Green New Deal’.
- The report stated that such an approach would simplify the global taxation system and is expected to increase tax revenues for all countries.
- The report took cognizance of the fact that the profits of MNEs are generated collectively at the group level. Hence, unitary taxation should be applied by combining it with a global minimum effective corporate tax rate on all MNE profits.
- There was a dire need for this change, as the current international corporate taxation norms consider affiliates of MNEs as independent entities and treat taxable transactions between different entities of MNEs as unrelated.
- This move facilitates the tax-motivated illicit financial flows.
- According to the report, the tax-motivated illicit financial flows of MNEs are estimated to deprive developing countries of $50 billion to $200 billion a year in terms of the fiscal revenues.
- The report also highlights that the fiscal revenues of a country could be augmented through fair taxation of the digital economy. The rapid digitalization of economic activities is changing the way how values are created, measured and distributed, adding new challenges to the international tax framework.
United Nations Conference on Trade and Development (UNCTAD)
- UNCTAD is a permanent intergovernmental body established by the United Nations General Assembly in 1964.
- Its headquarters are located in Geneva, Switzerland.
- It is part of the UN Secretariat.
- It reports to the UN General Assembly and the Economic and Social Council, but UNCTAD has its own membership, leadership, and budget. It is also a part of the United Nations Development Group.
- It supports developing countries to access the benefits of a globalized economy more fairly and effectively. Along with other UN departments and agencies, it also measures the progress made in the Sustainable Development Goals, as set out in Agenda 2030.
- Some of the reports published by UNCTAD are:
- Trade and Development Report
- World Investment Report
- Technology and Innovation Report
- Digital Economy Report