"Is the corporate income tax (CIT) still an efficient system for taxing companies today? The CIT was introduced when economies were characterised primarily by tangible assets and goods and by limited international trade. Globalisation, digitalisation and the increasing weight of immaterial goods in company transactions and balance sheets have rendered that system outdated. These radical changes call for equally radical reflections on how to reform the CIT, bearing in mind the need for a corporate tax system that is fit for both the digital and the traditional economy, in developing and developed countries alike.

Rather than offering a complete solution, this paper discusses various approaches that could contribute to a solution. First, we suggest that the CIT base should always be strictly aligned with the accounting profit and loss account, eschewing special adjustments for tax purposes. Second, a more radical possibility would be to abandon altogether the reference to corporate income and tax companies instead on cash flow, based on destination. And, third, the possibility could also be explored to tax companies with reference to ‘presumptive' indicators of activity, rather than on the basis of public accounts. Presumptive indicators are already used in federal systems to allocate corporate income among decentralised jurisdictions. These propositions would not be viable without international agreement, at least at the level of the European Union. Such an agreement may prove difficult given the conflicts of interest between EU member states and between them and the United States."

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