2.2.5 Interim conclusion: theory of the firm

In short, treating a multinational group as one taxable entity would eliminate all legal transactions within the firm. This would eliminate double taxation as well as arbitrage possibilities in an intra-group context. Even though the economic rationale behind a unitary taxation system seems clear-cut, introducing such a system on a worldwide basis would be very challenging. In the next section, as a first step, the group concept to be used is discussed: only if there is one entity from an economic perspective, it makes sense to include the group as such in taxation.1 Before looking at existing group concepts in tax law,2 the framework conditions for an economic group concept are described. These framework conditions will form the basis for the group concept for tax treaty purposes to be established.