The Use of Profit Splits in the Context of Global Value Chains

We have now published our submission in response to the consultation on BEPS Action 10: The Use of Profit Splits in the Context of Global Value Chains

Summary

The BMG welcomes this report from the OECD, which confirms that the time has arrived for expanded use of the profit split method, placed on a more regularised and systematic foundation. In our view there is a serious need to develop a simple-to-apply reliable approach to determining how profits will be apportioned amongst the members of a centrally managed multinational group. Specifically, we suggest that the Transfer Pricing Guidelines should include clear guidance stating concrete allocation keys and weightings for all business models now commonly being used. Anticipating the likely emergence of new business models, the Guidelines should also articulate the principles on which concrete allocation keys and weightings should be determined. Such simple and clear rules would be easier to administer, and greatly reduce conflicts both between tax authorities and companies, and among tax authorities. They would make an enormous step towards achieving the aim set by the G20 that multinationals should be taxed ‘where economic activities take place and value is created’.