Fairness and Tax Systems: A Rawlsian Approach to Addressing the Challenges Transfer Pricing Presents to the Fairness of Tax Systems Open Access

Abstract

This paper aims to provide unique insights when addressing the challenges that transfer pricing presents to the fairness of tax systems. The position taken in this paper is one predicated on John Rawls’ principles of justice. It will be argued that the current tax system’s reliance on the ambiguous definition of the “Arm’s Length” standard and its use of market forces to allocate income are the reasons that transfer pricing practices undermine the fairness of tax systems, particularly by harming the least-advantaged in society. Through an application of the Rawls’ principles of justice, it will be shown that Rawls’ conception of a fair tax system would not rely solely on the “Arm’s Length” standard but would employ the difference principle as a non-market criterion to specify permissible and impermissible transactions in the economy. But since the difference principle is a hypothetical tool that functions only in Rawls’ just society, it will be argued that tax systems need to develop policy that functions as a non-market criterion if they are to adequately weigh the social consequences of market allocations. Ultimately, by deliberately working at the intersections of philosophy and economics, theory and practice, ethics and business, this thesis intends to provide meaningful insights for establishing fairer tax systems.

Table of Contents

Preface …………………………………………………………………………………….……..1-2

Justice as Fairness and its Three Principles………………………………..……………..3-9

What Is Transfer Pricing?..............................................................................9-12

BEPS and its Impact on Governments……...………………………………........…...13-15

Ghana: A case study………………………………………………………………….....….15-21

Challenges Presented by the Digital Economy……………………………….……….21-24

Arm’s Length and Ambiguity ……………………………………………………......….25-26

Justice as Fairness for Tax Systems………………………………………………..…….27-33

Insights Arising……………………………………………………………………….….….33-35

Final Remarks …………………………………………………………………..............…35-37

Works Cited…………………………………………………………………………….…....38-40

About this Honors Thesis

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School	Emory College
Department	Interdisciplinary Studies in Society and Culture
Degree	B.A.
Submission	Honors Thesis
Language	English
Research Field	Ethics Political Science, International Law and Relations Economics, General
Keyword	Ethics Tax Rawls Transfer Pricing
Committee Chair / Thesis Advisor	Keith Robinson, Emory University
Committee Members	Peter Wakefield, Emory University Thomas Flynn, Emory University

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