Formulary apportionment in international tax law

This thesis explores how global profits of multinational enterprises can be fairly taxed in the age of digitalization and globalization. It builds on the OECD/G20 Base Erosion and Profit Shifting initiative and the resulting two-pillar framework, which addresses the growing disconnect between value creation and taxation. Traditional profit allocation methods, such as transfer pricing based on the arm’s length principle, are increasingly ineffective and have enabled aggressive tax planning, leading to significant revenue losses for states. The author examines whether formula-based profit allocation can offer a more suitable approach, using examples from existing models in German, European, and international tax law. The paper ultimately advocates allocating global profits according to countries’ population sizes, assuming this reflects a sufficient economic nexus. Practical implementation is deliberately excluded from the scope of the study to focus on conceptual foundations.