Document Type

Article

Publication Title

Brooklyn Journal of International Law

Abstract

This article is about a fairly discrete issue of topical importance demanding immediate attention, but is also about a much more open-ended problem that will likely take many years to resolve. The discrete issue is: What is the appropriate way to handle so-called “location savings” under arm’s length transfer pricing? Specifically, when an affiliate realizes cost savings specific to its local market, to what extent should its compensation under an arm’s length standard reflect such savings? Should the affiliate earn some premium to reflect the cost savings it is contributing to the overall enterprise? The longerrange problem relates to how international double taxation conventions will have to evolve in order to deal with the pressures of globalization, particularly regarding both the right and ability of countries to impose source-based tax. Double taxation conventions will likely have to evolve to also deal with pressures on residence-based taxation, as reflected, for example, in the fluidity of corporate residence. But, this specific issue is beyond the scope of this article.

First Page

1107

Volume

41

Publication Date

2016

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