LOCATION SAVINGS ADJUSTMENT TO PROFITS

摘要

MNE income taxes in developing countries are determined by profit rates from enterprise-level comparables in developed countries. Unless a location saving adjustment is made, corporate income taxes collected in developing countries are under-reported because wage and salary shares (unit labor costs) don't converge. We develop a simple formula to correct this systemic error that, if left uncorrected, adds to the persistent poverty of most of the world's population.