The best approach to profit-shifting would involve all countries agreeing on certain taxation principles, a project on which the Organization for Economic Cooperation and Development works with more than 100 jurisdictions. But in a world where the U.S. prefers to take unilateral action and even fight trade wars, its multinationals are vulnerable to all kinds of one-sided tax actions.
Both Zucman and Serrato believe it could be reasonable to tax profits according to where they were earned, not where the accounting department decided to book them. If the European Union, whose economies, according to Zucman and collaborators, lose the most tax revenue thanks to profit shifting, applies this approach unilaterally, U.S. tech and pharmaceutical firms could experience a shock similar to that of the §936 repeal. Then, their U.S. investment and job creation would suffer, contrary to the intentions behind President Donald Trump’s tax and trade policies.
This article was provided by Bloomberg View.