[gpresot]

>So how about treating profits that way? In every market, you count the revenue made from selling in that market, and subtract the costs made by buying, hiring, etc in that market. The difference is the profit you made in that market, and you've got to pay your corporate tax over that amount to the tax authority in that market.

>That way you can't book your profits in a country where you didn't make any revenue. And if somehow you do make your revenue in a country where you didn't make incur costs, you pay tax over the entire amount. If you don't make revenue, then tough. You could have made some tax-free revenue there.

This is already what is happening. Company A sells something for 100 in Country X. But the product is manufactured in Country Y, and the brand is "rented" by a company that owns it and set up in country Z. These costs that get passed to Country Y and Z are the local revenues in these countries. It happens that Y and Z are countries with lower tax rates, so the comapny tries to maximise the Transfer Price it pays to its legal entities located there.