Research team

A sustainable value theory for the international tax system 01/01/2021 - 31/12/2024


Ongoing global negotiations on a new design for the international tax law framework to cope with the digital economy depart from the assumption that coordinated reform efforts should ensure that cross-border business income is taxed in accordance with the idea of value creation, as a proxy for each countries' contribution to global wealth production. Because the existing rule set tends to assign most profits of multinationals to where hard-to-value intangibles like intellectual property are located, nations around the world have endorsed a series of technical proposals at the level of the Organisation for Economic Co-Operation and Development (OECD), the aim of which is to shift a portion of tax revenues to so-called "market jurisdictions". Yet, consumer markets are not the only places where value is being created but not properly recognized by global tax rules. Countries with high development deficits that suffer with the costs associated with mass production, extraction of natural resources, the use of cheap labour and so on have not seen their contributions to international commerce and trade appropriately reflected in interjurisdictional tax allocation methods. This is partially because the underlying value theory that informs discussions does not account for the negative impacts of various corporate actions that are currently externalised and omitted from market prices. In applying a value theory that ignores these externalised costs in the income generating process, the OECD's or any other approach – traditional transfer pricing and profit attribution rules to permanent establishments or new tax nexuses and formulas for fractional apportionment – will maintain, rather than resolve, long-standing and well-known issues of sustainability. As long as the extraction of value from human and natural resources remains undetected by the international tax system, technical rules will always reveal value that is inaccurate in financial terms, thus rewarding unsustainable business and investment practices, while sustainable activities are priced out of the market. This project aims to close this knowledge gap by proposing a sustainable theory of value for the distribution of tax revenues among countries.


Research team(s)

Project type(s)

  • Research Project