This paper highlights the disconnect between the modern global economy and an outdated international tax framework and provides some suggestions for how tax policy could better promote sustainable and inclusive global value chains (GVCs). The authors explain that, in theory, MNEs have a greater ability to avoid taxation on their residual profits in the context of GVCs, or even to deflate source-country profits while inflating GVC-produced residual profits. However, there is a risk that uncoordinated and unilateral over-implementation of anti-Base Erosion Profit Shifting (BEPS) measures could be detrimental to the operation of GVCs. Consistency and cooperation are required.

This paper is part of the Global Value Chain Policy Series.

Report by the World Economic Forum