Global profit split: An evolutionary approach to international income allocation

International taxation is concerned mainly with the equitable allocation of cross-border income between countries in which income-earning activities take place. Such allocation has traditionally been governed by the arm’s-length principle, which has been interpreted as requiring a comparable transactional pricing approach. This approach assumes that each member of a multinational enterprise (MNE) group is a separate entity and that the transactions between related parties can be separated and compared with arm’s-length transactions. It has, however, proved difficult to apply comparable transactional pricing to internationally integrated businesses, especially those involving intangibles and services, and formulary apportionment has been suggested as an alternative. Essentially, formulary apportionment treats the MNE group as a single economic entity. The group’s profit is allocated to members according to a formula that reflects the particular member’s contribution to the production of that profit. A rich academic literature exists which either defends or attacks this alternative approach. The OECD and national governments have rejected formulary apportionment mainly on the ground that it violates the arm’s-length principle. This article proposes a global profit split (GPS) method for allocating international income. The GPS would allocate the global profit of an integrated business to each country in accordance with the economic contributions made by components of the business located in that country. The allocation would be based on a formula that would reflect the economic factors that contribute to profit making. While the GPS draws on elements of the traditional formulary apportionment and profit split methods, it also differs from them. The author discusses in detail the key issues involved in designing the GPS. She also presents and evaluates the main policy and pragmatic justifications for the adoption of this innovative approach. The author argues that the GPS is not only theoretically and practically superior to traditional income allocation methods, but also consistent with the arm’s-length principle. On the basis of historical developments, interpretation of article 9 of the OECD model tax convention, and international tax policy considerations, the author establishes that the GPS is not a radical departure from the arm’s-length principle, but rather a natural development in its evolution. She concludes that the law of evolution ison the side of reform because the GPS would provide for a fair and effective allocation of income derived from globally integrated business activities.

Market research effectiveness : the effects of organisational structure, resource allocation and strategic type

According to the marketing literature and marketing textbooks, market research is required for successful marketing. However organisations differ in the way they both manage and resource their market research. This study hypothesised that market research effectiveness would be a function of internal research buying expertise, resource allocation and strategy. The research was conducted among a sample of 240 Australian marketing managers. Market research effectiveness was measured in terms of a) decision making support, b) contribution to marketing strategy, c) leveraging customer and competitor data, d) its ability to represent the "voice of the customer" and finally, e) bolstering the role of the marketing group and marketing manager within the organisation. The findings showed that having dedicated internal market researchers and allocating internal and external resources to the research function enhanced market research effectiveness. It was also found that organisations with an entrepreneurial strategic orientation were more likely to see value in the market research function, with these organisations being less likely to use market research for internal political purposes.

A decision support tool for resource allocation in batch manufacturing

A decision support tool for production planning is discussed in this paper to perform the job of machine grouping and labour allocation within a machining line. The production plans within the industrial partner have been historically inefficient because the relationship between the cycle times, the machine group size, and the operator's utilisation hasn't been properly understood. Starting with a simulation model, a rule-base has been generated to predict the operator's utilisation for a range of production settings. The resource allocation problem is then solved by breaking the problem into a series of smaller sized tasks. The objective is to minimise the number of operators and the difference between the maximum and minimum cycle times of machines within each group. The results from this decision support tool is presented for the particular case study.

Attitudes about work practices, time allocation and publication output: profiles of U.S. marketing academics

This study examines attitudes of U.S.-based Academy of Marketing Science members toward teaching, research, participation in administration (including service), and academic promotional issues. Individuals were grouped using Ward’s and K-means clustering procedures, which revealed four groups—established academics, research-focused academics, less satisfied midcareer academics, and satisfied teachers. Clusters were further profiled according to the amount of time spent on teaching, research, and administration; research output; and individual demographic and institutional characteristics. Overall, clusters were generally dissatisfied with a range of work-related issues, with workload stress appearing as an issue that needs to be addressed within marketing academia.

Attitudes about work practices, time allocation and publication output : profiles of Australasian marketing academics

The Australasian tertiary education sector has undergone significant organizational and cultural changes, which have increased pressures on academics to undertake a range of additional activities while at the same time improving research performance. These pressures impact on individuals in different ways, although there may be some groups or clusters of individuals within institutions with common characteristics. Managers may need to develop different sets of management strategies and policies to assist each group of academics to deal better with these pressures and improve their individual performance. The paper examines Australasian marketing academics’ perceptions of their work environments and whether these perceptions result in differing clusters of individuals who might also vary based on their research performance, time allocated to different academic roles, and their professional and demographic characteristics. Sixty-eight members of the Australian and New Zealand Academy of Marketing responded to a survey using a modified version of an instrument developed by Diamantopoulos et al. (1992). K-means clustering procedure identified four groups of academics – “Traditional Academics,” “Satisfied Professors,” “Newer Academics,” and “Satisfied Researchers.” While only a few significant differences among clusters were identified in relation to time allocated to academic activities and research performance, it appears that clusters differ on several professional and demographic characteristics.

Interpreting risk allocation mechanism in public-private partnership projects : an empirical study in a transaction cost economics perspective

Risk allocation in public-private partnership (PPP) projects is currently claimed as capability driven. While lacking theoretical support, the claim is often 'violated' by current industrial practice. There is thus a need for formal mechanisms to interpret why a particular risk is retained by government in one project while transferred to private partners in another. From the viewpoint of transaction cost economics (TCE), integrated with the resource-based view (RBV) of organizational capabilities, this paper proposed a theoretical framework for understanding risk allocation practice in PPP projects. The theories underlying the major constructs and their links were articulated. Data gathered from an industry-wide survey were used to test the framework. The results of multiple linear regression (MLR) generally support the proposed framework. It has been found that partners' risk management routine, mechanism, commitment, cooperation history, and uncertainties associated with project risk management could serve to determine the risk allocation strategies adopted in a PPP project. This theoretical framework thus provides both government and private agencies with a logical and complete understanding of the process of selecting the allocation strategy for a particular risk in PPP projects. Moreover, it could be utilized to steer the risk allocation strategy by controlling certain critical determinants identified in the study. Study limitations and future research directions have also been set out.

Stress, resource allocation and mortality

We model the optimal allocation of limited resources of an animal during a transient stressful event such as a cold spell or the presence of a predator. The animal allocates resources between the competing demands of combating the stressor and bodily maintenance. Increased allocation to combating the stressor decreases the mortality rate from the stressor, but if too few resources are allocated to maintenance, damage builds up. A second source of mortality is associated with high levels of damage. Thus, the animal faces a trade-off between the immediate risk of mortality from the stressor and the risk of delayed mortality due to the build up of damage. We analyze how the optimal allocation of the animal depends on the mean and predictability of the length of the stressful period, the level of danger of the stressor for a given level of allocation, and the mortality consequences of damage. We also analyze the resultant levels of mortality from the stressor, from damage during the stressful event, and from damage during recovery after the stressful event ceases. Our results highlight circumstances in which most mortality occurs after the removal of the stressor. The results also highlight the importance of the predictability of the duration of the stressor and the potential importance of small detrimental drops in condition. Surprisingly, making the consequences of damage accumulation less dangerous can lead to a reallocation that allows damage to build up by so much that the level of mortality caused by damage build up is increased. Similarly, because of the dependence of allocation on the dangerousness of the stressor, making the stressor more dangerous for a given level of allocation can decrease the proportion of mortality that it causes, while the proportion of mortality caused by damage to condition increases. These results are discussed in relation to biological phenomena.

Risk allocation in public-private partnership projects : an innovative model with an intelligent approach

Both the increasing private participation in public projects and the critical importance of appropriate risk allocation to the success of Public-private partnership (PPP) projects justify specific research on how to establish effective risk allocation strategies in PPP projects. Partner’s risk management capability is currently the main concern to risk allocation in PPP projects. Following the transaction cost economics, it is argued that factors such as partner’s commitment and risk management structure should be considered simultaneously in order to develop effective risk allocation strategies. Based on the holistic capability-commitment governance-driven view, this paper proposed a model for generating an optimal risk allocation strategy in PPP projects. The model is demonstrated and described. An artificial intelligent technique integrated with fuzzy logic for model testing and validation is then introduced and justified. The innovative model is expected to provide a logical and complete understanding of the risk allocation strategy selection process, and to provide stakeholders with a richer framework than previously existing ones to guide their decision-making on risk allocation strategies.

Wealth holdings and portfolio allocation of the elderly : the role of marital history

This paper investigates the role of marital history in terms of explaining differences in wealth holdings and portfolio allocation of older individuals by studying data from the first wave of Health and Retirement Study which was conducted in 1992. The results generally suggest that both men and women suffer from the negative shocks of past marital dissolutions in terms of household wealth accumulation. The significance level, however, differs across currently married couples, single males, and single females. The examination of the asset components of net worth also indicates that both the probability of owning a particular asset and the fraction of wealth allocated to that asset might vary depending on the elderly individuals’ marital history.

Interjurisdictional allocation of multinational banking income : aligning taxation principles with economic activity

This thesis argues that one type of multinational entity – the multinational bank – poses particularly significant challenges to the international tax regime in terms of its current profit allocation rules. Multinational banks are a unique subset of multinational entities, and as a consequence of their unique traits, the traditional international tax regime foes not yield an optimal interjurisdictional allocation of taxing rights. The opportunity for tax minimisation, achievable because of the unique traits, and realised through exploitation of the traditional source and transfer pricing regime, results in a jurisdictional distribution of taxing rights which does not reflect economic reality. There are two distinct ways in which the traditional international tax regime fails to reflect economic activity. The first way that economic activity may not be reflected in the distribution of the taxing rights to income from multinational banking is through the application of traditional source rules. The traditional sources rules allocate income where transactions are completed rather than where the intermediation services are arranged. As a result of their unique commercial role as financial intermediaries, by separating intermediary economic activity from legal transactions with third parties, multinational banks may distort the true location of the activity giving rise to income. The second way in which the traditional tax regime may fail to reflect economic activity is through the traditional transfer pricing regime requiring related or internal transaction to be undertaken at an arm’s length price. The arm’s length pricing requirement is theoretically deficient in its failure to recognise the highly integrated nature of multinational banking. In practice, the arm’s length pricing requirement is also difficult, if not impossible, to apply to multinational banks because of the requirement of comparability. The difficulties associated with the current model have resulted in a subtle move by multinational banks towards global formulary apportionment. This thesis concludes that, for the international taxation of multinational banks, the current source regime should be replaced with a system that allocates profits for tax purposes on the basis of income source, with source determined using a unitary taxation or global formulary apportionment system. It is argued that global formulary apportionment is a theoretically superior model that provides both jurisdiction to tax and allocated profits on the basis of the economic activity that generates the income.