Do Tax Experts and Non-Experts Differ in Their Sense of Fairness About a More Even Distribution of "Digital" Profits Across Countries? - Evidence from a Survey in Germany

The taxation of multinational enterprises (MNEs) is challenging. The profits of an MNE should be aligned with value creation and taxed accordingly using the arm’s length principle (ALP) to achieve a proper distribution of taxing rights. However, those who are not tax experts, such as tax politicians, often raise concerns that, in a digital economy, arm’s length profits lead to a tax base allocation based on value creation. Therefore, they advocate fair taxation but, on the contrary, don’t describe or explain what can be understood as fair. In this paper, we use a survey to shed light on questions about whether tax experts, such as tax advisors and auditors, and non-experts differ in their senses of fairness with regard to a more even distribution of profits across countries. Our findings indicate that tax experts’ senses of fairness differ from non-experts’ senses of fairness about a more even distribution of profits across countries. Tax experts – to a certain extent – consider the ALP and value contributions, while non-experts do not. As the ALP allocates a vital role to inter-nation equity, it is essential that there is no perceived unfairness in this regard, or the current regime of international taxation is called into question.