Allocating Business Profits for Tax Purposes: A Proposal To Adopt a Formulary Profit Split

Written by: Reuven S. Avi-Yonah, Kimberly A. Clausing, Michael C. Durst I. Introduction[4] The current system of taxing the income of multinational firms in the United States is flawed across multiple dimensions. The system provides an artificial tax incentive to earn income in low-tax countries, rewards aggressive tax planning, and is not compatible with any common metrics of efficiency. The U.S. system is also notoriously complex; observers are nearly unanimous…