Ednaldo Silva, Founder of RoyaltyStat, also a member of TPED, published Location Savings Adjustments to Profits in Journal of International Business and Economics (Silva, Location Savings Adjustments to Profits, JIBE, Volume 19 n°1 19 – https://www.royaltystat.com/assets/docs/RoyaltyStatLocSavAdjTP.pdf). It follows the publication of Silva, Pygmalion Comparables: Why Data from the “Center” Does Not Apply for “Periphery”, BNA Tax 23/2015, 1 (1 et seq) https://issuu.com/ednaldosilva/docs/ednaldo_silva_-_pygmalion_comparabl.
MNE income taxes in developing countries are determined by profit rates from enterprise-level comparables in developed countries. Unless a location saving adjustment is made, corporate income taxes collected in developing countries are under-reported because wage and salary shares (unit labor costs) don’t converge. We develop a simple formula to correct this systemic error that, if left uncorrected, adds to the persistent poverty of most of the world’s population. — Ednaldo Silva