Gently Down the Stream: BEPS, Value Theory and the Allocation of Profitability along Global Value Chains

Abstract

OECD consultation documents and corporate sector responses relating to transfer pricing reform and the taxation of the digital economy between 2010 and 2020 are analysed through the lens of classical value theory. In the transfer pricing context, “value creation” came to mean business functions outside the classical production boundary, and in the digital economy context, a variety of heterodox positions were adopted, with recognition of the classical production boundary being conspicuous by its absence. Seemingly, profitability had to be allocated outside the bounds of the firm, given that to some extent value is created elsewhere and captured by it, but rich states and corporate capital were only willing to allocate it downstream in global value chains, where consumption is predominantly located, i.e. not upstream in global value chains to the lower-income states where, in the classical production framework, value creation is predominantly situated.