The world is in a state of fairly deep confusion regarding whether the international tax system is to be moved toward or away from residence-based corporate taxation. Chapter 7 outlined the parameters of that confusion and described the historical and recent steps that have been taken to strengthen the application of the residence basis; these steps have included combatting both the erosion of the tax base and the practice of shifting taxable profits. This chapter explores ways in which those efforts could be, and are being, strengthened still further. Yet, at the same time, as also described in Chapter 7, most advanced economies—the primary capital exporters—have now moved away from worldwide taxation toward territorial systems that in theory tax active business income at the source only, by one mechanism or another, largely for reasons of tax competition.

Why Reform Is Needed and How It Could Be Designed