When measurement is political: Accounting for natural resources and the true location of sales under unitary taxation

KUALA LUMPUR, 13 AUGUST 2026 —

Under unitary taxation, multinational companies are treated as what they are: single businesses. Their global profits are aggregated, and the right to tax them is allocated among countries according to where the group’s economic activity takes place. Economic activity is usually measured using a formula that captures the factors contributing to multinational profits.

Under a formula based on employment and sales, for instance, a country hosting 10% of a multinational’s employees and accounting for 10% of its sales would be allowed to tax 10% of the group’s global profits at its own rate. This would end profit shifting, create a level playing field between domestic and multinational companies, and allow the countries and societies on which multinational profits depend to tax a fair share of those profits.

In a study published with with Public Services International, we estimate what this would be worth: between US$300bn and more than US$500bn in additional revenue worldwide, in every year we examine. Is it really that simple? We treat multinationals as single companies, allocate taxable profits using a formula, and almost all the problems we have been trying to solve for years are gone?

As we show in our study, the answer is yes and no. Yes, because that is exactly what unitary taxation can achieve. No, because we need to get a few things right for it to deliver. Two of them come down to something as mundane as measurement, and getting the measurement wrong hurts precisely those countries that stand to gain most from unitary taxation in relative terms: low- and lower-middle-income countries.

Both core ingredients of unitary taxation – aggregating profits and apportioning them with a formula – require measurement. First, which global profits do we aggregate? Second, how do we measure economic activity? As our report shows, the answer to the first is “all of them, except those arising from resource extraction”. Ours is the first study to give countries’ rights over their own natural resources priority over taxing rights before profits are apportioned.

Without this step, resource-rich countries can appear to lose from a reform designed to help them. The answer to the second is “the formula is a political compromise – but sales should be measured where the customer is located”.

Our study is also the first to provide unitary taxation estimates in which sales are consistently measured where customers are actually located, and a large part of what lower-income countries stand to gain depends on that single choice. This blog explains why both measurement choices matter. Multinationals do not generate their profits in a vacuum.

They use land and water, draw on forests, fisheries, minerals and energy resources, and may leave behind pollution, degraded ecosystems and climate damage. Their profits therefore rest not only on workers’ effort, machinery and customers’ payments – the economic activity usually captured by standard apportionment formulas – but also on natural wealth that belongs to the people of the countries in which it is found.

Resource-rich countries already claim part of the value generated by their natural resources. This is done most systematically in the extractive sector, where royalties and licence fees, taxes on extractive profits, production-sharing arrangements and state equity participation have evolved alongside one another over decades. For their interaction with unitary taxation, it matters how a country claims its share.

Claims paid before profit is calculated – such as royalties and licence fees, which companies deduct as costs – are unaffected by how global profits are reallocated. But most resource-rich countries also rely on claims paid out of reported profit, in particular taxes on extractive profits and returns from state participation.

If extractive profits are now simply added to the global profit pool and apportioned using a formula based on assets, employees or sales, they are allocated away from the country where the resources are located and towards the places where extractive multinationals hold assets, employ people and make sales. The associated taxing rights move with them, stripping the resource-rich country of its resource rights.

The examples of Angola and Peru show what this can mean for resource-rich countries. In Angola, oil accounts for around 95% of exports and more than 30% of GDP (Reuters, 2025; IMF, 2024, 2025a); in Peru, mining – dominated by copper and gold – accounts for more than 60% of exports and roughly one tenth of GDP (Chin et al., 2025; MINEM, 2024; IMF, 2025b).

Much of the profit that multinationals report in both countries therefore stems from resource extraction. Royalties and licence fees have already been deducted before these profits are reported and remain unaffected. But the resource rent that Angola and Peru currently capture through taxes on extractive profits would be reallocated under a system of unitary taxation that ignores resource rights.

As a result, both countries appear to lose: under the sales and employees formula, Angola by around US$410m a year and Peru by around US$835m (Figure 1, left-hand panels). In principle, this problem could be addressed within the formula by adding a resource factor that allocates part of the profits to the country of extraction. But reliance on natural resources varies greatly across multinationals, making sector-specific formulas necessary.

Besides increasing complexity, such formulas could invite manipulation. They would also treat countries differently depending on how they capture resource rents: countries relying mainly on royalties would already have secured their claims before profits enter the unitary pool, while countries relying more heavily on taxes on extractive profits would need the formula to restore taxing rights that had first been taken away.

A better solution than trying to weave resource rights into unitary taxation is to treat them strictly as prior to taxing rights. This means reserving for the resource-rich country the extractive profits on which it currently levies taxes or receives returns, before the remaining profits enter the unitary pool. Only value arising directly from extraction is protected in this way; refining, processing, transport and sale remain fully within the unitary tax base.

To estimate the revenue effects of unitary taxation,… (AI-assisted rewrite, based on the original source)