The Myth of Corporate Tax Residence

The issue of corporate residence has recently attracted a great deal of attention in both the popular press and in academic discourse, primarily because of the phenomenon of corporate inversions. The consensus among commentators is that the root of the problem is a flawed definition of corporate residence, and they have therefore proposed replacing the current definition, which relies upon place of incorporation, with another that relies upon control and management, home office, customer base, source of income, or the residence of shareholders. The thesis of this article is that the concept of tax residence is inapplicable to corporations. Residence in tax law delineates the boundaries of distributive justice, and whereas corporations cannot be parties to a scheme of distributive justice, corporate residence is a misnomer. The incongruity of corporate residence along with the fact that residence is a fundamental concept in international taxation is one reason that the current international tax regime has proven unviable. The article then goes on to describe in broad outline an international corporate tax regime that avoids the problem of corporate residence by focusing on shareholders instead of on corporations