Page 115 - Special Topic Session (STS) - Volume 4

STS570 Nadim Ahmad et al.
producing goods and services, including corporate or ancillary services. But it
gets even more complicated in a world where MNEs set up complex structures
to allocate the receipts from IPPs and the payments for using them in the
preferred way. For example, SPEs are being established in certain countries to
reallocate the collection and distribution of royalties, license fees, or profits
more generally, with the purpose of avoiding or minimizing worldwide tax
payments. Countries with low tax rates, or providing the opportunity of using
certain fiscal loopholes, are very attractive for the establishment of such
conduits. The use of these conduits often gets front-page news coverage once
they become publicly known and relate to well-known MNEs. However, it also
has become less obvious to exactly pin down the economic ownership of these
intangible assets. For more details on the determination of economic
ownership, reference is made to UNECE (2015).

3. A proposal for an alternative way of recording
13. As explained in the above, the current international standards for
national accounts clearly can have a significant impact on the allocation of
output, value added (GDP) and profits across countries. The main discomfort
with the current international standards is related to the fact that the allocation
of multinational activities to national economies is not governed by economic
substance, but that legal considerations related to minimisation of the global
tax burden directly affect the macro-economic statistics including the
indicators derived from them. The main problems are caused by transfer
pricing and by the international allocation of IPPs and related income, with or
without the involvement of SPEs.
14. The first issue to address concerns the treatment of the SPEs. It is
apparent from the start that these SPEs are only considered as separate
institutional units because they are resident in an economy different from their
parents and/or affiliates. Were this not the case, they would be consolidated
into the rest of the MNE. Similarly, assigning economic ownership of IPPs to
these brass plate companies is a matter of practicality or legality, not a way to
approximating economic substance. Therefore, as also proposed by Rassier
(2017), a first suggestion to be considered in the future international standards
for compiling national accounts is the consolidation of SPEs with their ultimate
owners. Consequently, all returns, outlays, financial stocks, and positions of
these SPEs would directly end up in the accounts of the country where the
headquarters of the multinational are located.
15. The second problem of allocating output and value added of MNEs to
national economies more generally concerns the allocation of IPPs. These
assets, including the income generated through the use of them, are neither
physically nor locally constrained, it is relatively easy to relocate them across
countries. Instead of following the actual money flows that are primarily
governed by tax considerations, allocating the IPPs and related income to the

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