Avi-Yonah: Tax Competition and the Trend Toward Territoriality

Reuven S. Avi-Yonah (Michigan), Tax Competition and the Trend Toward Territoriality:

Tax competition is with us to stay, and the drive toward territorial taxation of multinationals will continue. Ultimately, it makes sense to tax corporations on a source basis because corporate residence is not very meaningful. But if the correct reforms to CFC rules are undertaken together with enhanced transfer pricing enforcement (e.g., by combining the arm's length standard with formulary solutions, as I have suggested elsewhere), such trends are not necessarily harmful to maintaining a stable corporate tax base.