Game theory taxation

Skip to search form Skip to main content Skip to account menu You are currently offline. Some features of the site may not work correctly. DOI: View via Publisher. Save to Library Save. Create Alert Alert. Share This Paper. Information is a prerequisite and evidence for the enterprise to implement tax planning. However, there is also the technical question about how value generation of local user contributions can be assessed economically. Through projects, NERA Economic Consulting has gained insights and developed objective techniques to assess value contribution by users and data, which could be considered in the regulatory debate.

A simplified example of how an economic analysis can be technically conducted is presented below. This is not to say that local users or data should be considered a local nexus per se. In the simplified example, a technology company that has a user base that uses the digital services of the company while being shown advertisements, is considered.

Typically, the company will be largely driven by two factors: user participation and the underlying technology. From an economic point of view, both factors are unique value drivers that generate value jointly and should thus be remunerated via the profit split method. This shifts the question to what percentage of the profits should be attributable to each intangible category.

Economic analysis to determine an appropriate split of a jointly generated profit is rooted in game theory. In our experience, the Shapley value concept can be particularly useful for gaining insights. The concept is based on marginal contributions i.

If one party is relatively unimportant to the overall business, it should earn a lower share of the overall profit. Substantial portions of the technology and user base might turn out to be either relatively easy to replicate or not subject to effective protection legal or otherwise. The precise definition of what constitutes unique features will depend on the individual case, but, as a guideline, analyses can be conducted regarding which features can be readily copied by competitors and what data is easily available on the one hand, and which features are strictly proprietary to the analysed company on the other hand.

When the unique and valuable aspects of the user base and technology are clearly identified and delineated, it becomes possible to conduct a meaningful marginal profit analysis for four combinations:. Data analytics experts from technology companies regularly conduct such analyses for business reasons. On a global level, the high net worth population is expanding, and the wealth of high net worth individuals HNWI is increasing rapidly.

For various reasons, high net worth families and individuals are searching for vehicles to assist them in safeguarding and conveniently managing their wealth. Private foundations represent one useful avenue for achieving this end, and the use of private foundations has become increasingly popular in recent years, particularly in European countries. Many countries have laws which regulate private foundations and several are looking for adjusting or introducing legislation.