Dr. Jim Stewart:

To answer the question, the OECD did not go near the question of where one is located for tax purposes. It has run with the idea that one is located for tax residency purposes where one is managed and controlled. The problem with that is: what is the definition of being managed and controlled? This is in contrast to the national statistical agency which defines one's location as the country of residence, where one is incorporated. That is why there is such a large gap between US estimates of profits of US firms in Ireland and the Revenue Commissioners' estimates. The US would say that if one's profits are made in Bermuda and the company is owned in Ireland, the profits are attributable to Ireland, whereas the Revenue Commissioners would say the profits are attributable to Bermuda. That is a huge problem in how one defines tax residency. The OECD decided to go with where it is managed and controlled.

The problem is that in an era in which meetings can take place by telephone, where are the directors meeting? They may all be living in California, Ireland or in other countries and the meeting supposedly takes place in Bermuda via telephone, so this has become a type of legal fiction or a moveable feast. We decide where we are located and we can bolster this by where meetings of directors take place. I do not have the solution to this. It is an area of corporate tax planning that is very widely used. It featured in the Apple case, as we saw, and will feature in other cases as well.