United Nations Model Tax Convention Article 5: The Predatory Ploy - A Neo-Marxist Mapping of the Permanent Establishment
United Nations Model Tax Convention Article 5:
The Predatory Ploy - A Neo-Marxist Mapping of the Permanent Establishment
Muhammad Ashfaq Ahmed
 
ABSTRACT: The cornerstone of the extant international taxes system as laid out by the United Nations Model Tax Convention (UN MTC) is the Permanent Establishment (PE). The study seminally juxtaposes the PE principle in between the competing ideological pulls of capitalism and communism, and explores into the role it played towards the survival of the former disproving Marx’s deathly prognosis of an early demise of the capitalist mode of production. The argument – both spatially and temporally – is anchored in the PE’s evolution in the mid-19th century Prussia. The Prussian politico-economic milieu that helped conceive and contrive the PE as a mechanism of ensuring taxation in the source state, is employed as a backdrop to analyze PE’s development through subsequent epochs of history into what it has grown into presently – a tool of predation by the multinational corporation (MNC) on the developing country fiscal rights. The PE’s design manipulability is unraveled on a number of counts in a developed-developing country binary to argue that the PE-propped plunder carried out over the past century was sustained through a brute semantic occupation and elimination of alternatives, which was further reinforced by Neo-Marxists’ utter failure to adequately dissect and respond to the capitalist ploys. It is contended that recent oblique shift from the ‘physical presence’ to ‘economic presence’ as the basis for sharing taxing rights on business incomes between states, may be due to MNC excesses rather than digitalization of global economy as generally believed. It is further argued that a quarter to two centuries down the road, as the Organization for Economic Cooperation and Development (OECD) frames rules to ensure taxation in the source state, it actually re-enacts Prussia; the wheel of time has run full circle.

 


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