Corporate Tax Reform and “Value Creation”: Towards Unfettered Diagonal Re-allocation across the Global Inequality Chain

Discussion of corporate tax reform loosely uses concepts like “value creation” and “economic substance” as a basis for systematic departures from the tax outcomes that would otherwise eventuate from computational artifacts based on price, but in fact mainstream economics does not have a theory of value creation as distinct from computational artifacts based on price. Corporate tax reform discourse is therefore an unacknowledged exercise in heterodox value theory. This article deploys global value chain theory to question a key assumption in that exercise; the assumption that while intra-group pricing may be modified or ignored for the purposes of reallocating the corporate tax base between jurisdictions for corporate tax purposes, prices arrived at between entities not under common control are sacrosanct. The article proceeds to deploy an expanded version of the global value chain analytic, the “global inequality chain”, to (i) investigate this question using a schematic illustrative case study based around Amazon’s UK/Luxembourg structuring, and (ii) to develop the beginnings of a concept of “unitary taxation by formulary apportionment of the entire value chain”, which would enable unfettered “diagonal” re-allocations across the space which the global inequality chain describes.