Lost in Translation? Rethinking the Oil and Gas Industry Formula under the Common Consolidated Corporate Tax Base Directive Proposal

The oil and gas industry is an important industry for several Eu- ropean countries. Due to the uniqueness of the industry, there have been special corporate taxation rules for the oil and gas industry where jurisdic- tion adopts formulary apportionment rules for levying cross-border corpo- rate taxation. Alaska of the United States of America is a typical jurisdic- tion where a special formula for the oil and gas industry is provided and the Common Consolidated Corporate Tax Base Directive Proposal under the European Union law has also a special formula for the oil and gas in- dustry, due to the influence from the United States of America formulary apportionment experiences. Based on the comparison between the Com- mon Consolidated Corporate Tax Base and Alaska experiences, this paper shows that the Common Consolidated Corporate Tax Base’s oil and gas in- dustry formula has two theoretical flaws. The paper suggests that the fun- damental rationale for the oil and gas industry should reaffirm the im- portance of the resource origin and a special asset factor is necessary for the oil and gas industry for improving the current Common Consolidated Corporate Tax Base Directive Proposal. The current Common Consolidated Corporate Tax Base Directive Proposal has made an effort to take into ac- count the interests of the natural resource origin countries, but it used a wrong policy tool. The original aim of the oil and gas industry formula is not achieved and new tax planning loopholes are created. The Common Consolidated Corporate Tax Base’s oil and gas industry formula is also a typical example that illustrates the risk of the “lost in translation” in comparative law research and legal transplantation.