| dc.description.abstract | The benefit principle constitutes one of the main justifications for states to exercise their tax jurisdiction at the international level. Nevertheless, despite it being a robust part of both residence and source jurisdictional entitlements, as well as of the recently introduced value creation concept, the benefit principle is a construct that presents conceptual and normative deficiencies. Benefits are difficult to measure and locate in a specific jurisdiction, especially in the digitalised economy. More importantly, the benefit principle perpetuates existing inequalities in the allocation of resources among countries (vicious cycle). The same conceptual deficiencies and distribution inequalities are also produced by the value creation concept. These problems are compounded by tax competition practices, as demonstrated by the distortion of the benefit principle, which is either applied selectively to attract investments or mandatorily to nullify the attractiveness of tax incentives. Less developed economies are more severely impacted, while multinational corporations reap benefits from the host countries at the expense of both less mobile domestic taxpayers and other less powerful investors. In this context, I argue that taxation has a role to play to correct inequalities between and within countries and contribute to sustainable development. I therefore introduce the reverse benefit principle, which is normatively founded on inter-nation equity and which supports the allocation of taxing rights according to a country’s needs. Its implementation would require policy makers to introduce sustainability factors in tax allocation formulas and corporations to go beyond mere compliance towards devising business models that contribute to the sustainability of the host countries. These business models would signal the shift to self-regulation which intervenes as a standard and norm setter in the international tax landscape. | en_US |
