1. Aligning Taxation and Development Goals: Why and How
Allison Christians
H. Heward Stikeman Chair in Tax Law, McGill University

2. Sustainable vs Non-sustainable Investment
inefficiency
Non-sustainable goods and services externalize social, economic, and environmental costs
tax competition
Governments reduce tax even when revenue is needed to address externalities
market distortion
Cost-internalized goods and services are non-competitive
correction
Level the playing field and develop a virtuous cycle between tax and sustainable development

3. Virtuous Cycle: Tax and Development
uncounted, externalized costs
human and natural resources are highly productive
market produces high profits
tax revenues abound
government invests in physical and social infrastructure
diverted due to waste, crisis, corruption, fraud
diverted due to waste, crisis, inherent risk
BEPS
FATCA/CRS
diverted due to
tax incentives, avoidance, evasion
diverted due to fraud, corruption, lack of capacity

4. Vicious Cycle: Tax and Development
human and natural resources are insufficiently productive
markets produce low profits
tax revenues are scarce
low public investment in infrastructure

5. Locating Value: Acer’s Smile Curve
Higher
prefabrication stage
fabrication
postfabrication stage
Concept/ R&D
Sales/After Service
value
value
location-based cost savings
Branding
Marketing
Value Added
value
value
Design
Distribution
Resources &
Manufacturing
Lower
Production Chain through Time

6. Proposed Solution
Alter the allocation (not the amount) of profit to more accurately reflect where value is created.
Itemized Method
Aggregate Method
aggregate by default; TP may itemize
calculate uncounted and externalized costs saved
calculate aggregate SDG needs as % of GDP
apply differential as transfer price adjustment
apply universal price adjustment
accurate but intricate, expensive
less accurate but simpler, lends certainty
*Detailed background paper available upon request

7. Effect profits in lower income countries overall corporate profits
profits in higher income countries

8. Conclusion
Quantifying SDGs demonstrates development-based cost savings
Transfer pricing adjustment provides a corrective mechanism
follows existing system
follows BEPS
increases efficiency
adds long term value

9. Thanks