General Report on Value Creation and Taxation: Outlining the Debate

There can be no doubt that “taxing income where value is created” has proved to be a powerful rallying cry to instigate a global tax reform effort. A deeper study of the alleged principle’s roots, meaning and compatibility with existing national and international tax rules shows, however, that a catchy slogan does not easily translate into concrete action. Instead, a lack of clarity on the intended meaning has opened a Pandora’s box full of half- baked ideas on how to “improve” on the international tax system. So far, despite many thousands of pages of new guidelines, tax policy proposals, discussion papers, academic analyses and a host of legislative amendments prepared in an uncoordinated fashion, the vision of a significantly “better” tax system cannot be said to be any closer to becoming a reality. This study analyses the theoretical foundations for an idea that almost certainly has not been conceived of in consequence of a deep reflection on such basis. It shows that the concept – despite being less than solidly grounded on a sound theoretical base – should not be dismissed as meaningless. The “true meaning” of value creation will itself be created in the process of its use, if it continues to be invoked by policymakers as real changes find their way into more and more national tax systems and international law norms. Rather than an exogenous transformative principle in its own right, it is an idea that itself is liable to being transformed; as its success as a tool for reaching consensus among more than 100 countries depends on it remaining persuasive, it cannot be shaped into just any form and survive.