Article by Frans Vanistendael

Article: An Octogenarian on Value Creation

18 July 2018

Frans Vanistendael is one of IFA’s Honorary Members and professor emeritus at KU Leuven in Belgium. In his article "An Octogenarian on Value Creation" he takes a closer look at the panel presentation and discussion during the 80th anniversary of IFA in Rotterdam:

"On May 18 the International Fiscal Association celebrated its 80th anniversary in Rotterdam, the city of its headquarters. The plat de résistance of this celebration was a panel presentation and discussion under the title “Tax in a New Universe: The Role of Value Creation.” The panel was experienced and well balanced, including representatives from North America (Peter Blessing), Europe (Wolfgang Schön), and Asia (Porus Kaka) under the neutral chairmanship of Robert Danon of Switzerland.

The presentations and debate raised many questions and criticisms on the role of value creation, a topic that has been dominating international discussions on tax policy and legislation since the release of the base erosion and profit-shifting reports. Basically, two questions were debated: (1) What is the function of the concept of value creation in international taxation; and (2) What is value creation?

Although concern over double taxation was thick in the air, one issue that was not extensively debated was how the use of value creation as a tool to allocate income across tax jurisdictions will affect double taxation.

The chair started by pointing out a kind of contradiction within the concept of value creation. To the extent that it is indirectly relied upon to change the traditional allocation of taxing rights, value creation complicates the traditional distinction between residence and source. Initially the BEPS action plan stated that: “While actions to address BEPS will restore both source and residence taxation in a number of cases where cross-border income would otherwise go untaxed or would be taxed at very low rates, these actions are not directly aimed at changing the existing international standards on the allocation of taxing rights on cross-border income.” However, it now appears that the post-BEPS international tax system has become more “hybrid” and less coherent.(...)"

The full article was published by Tax Analysts in Tax Notes International on 18 June 2018, p. 1385

Join IFA and be part of the world’s independent fiscal network!