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Session objective: To show how tax apportionment formulae can have a large impact on how much corporation tax a country receives.
Learning objective(s):
- Understand the concept of profit apportionment
- Begin to question why the OECD uses particular formulae in determining how much corporate tax is paid to a country.
Group size: 24
Time required: 45 minutes
Materials required:
- Tokens to represent profits
- Masking tape on the floor, separating the room into three sections. Put a sheet in each section named; headquarters, employees, sales.
Methodology:
- Split the large group into two and give them the instructions.
- Tell them to think of a company that has its headquarters in one country, manufactures in another (or many others), and sells in countries other than or in addition to where it is headquartered. Give them 5-7 minutes to decide on a hypothetical or real-life company, and to create a short pitch to describe the activities of the company.
- Ask group B to sit to the side while you are working with group A.
- Ask group A to tell the whole group what their company does to make its money.
- Instruct all members of group A to go to Section 1: Headquarters.
- Give them all the tokens.
- Ask group B what is happening in this scenario.
- Switch the groups and ask group B to tell the whole group what their company does.
- Ask for one third of the group to go to Section 2: Employees and Section 3: Sales.
- Distribute the tokens three ways equally.
- Ask group A what is happening.
- Discuss with the group that what you have all just shown is a simplified simulation of two formulae for apportioning profits. Discuss with the group what the implications would be of each formula for different countries around the world.
- Ask, what type of formula do they think would be most fair?
