Today, Ajay Mehrotra, Northwestern University and the American Bar Foundation, will present "The VAT Laggard: A Comparative History of U.S. Resistance to the Value-Added Tax, as part of the annual Spiegel Sohmer Tax Policy Colloquium at McGill Law. This is a fascinating topic as the United States considers major tax reform without explicitly embracing VAT as much of the rest of the world has done. Prof. Mehrotra's new project will explore the U.S. position in light of how Canada, Japan, and other jurisdictions were able to overcome historical resistance to a national VAT by adopting a Goods and Services Tax (GST).
The tax policy colloquium at McGill is supported by a grant made by the law firm Spiegel Sohmer, Inc., for the purpose of fostering an academic community in which learning and scholarship may flourish. The land on which we gather is the traditional territory of the Kanien’keha:ka (Mohawk), a place which has long served as a site of meeting and exchange amongst nations.
Tagged as: colloquium history McGill tax policy
This event is free and open to the public.
Tagged as: conference history McGill Tax law
2017 marks the centennial of Canada's federal income tax, so it is appropriate that this year’s tax policy colloquium at McGill Law will focus on the theme of 100 Years of Tax Law in Canada. The colloquium is made possible by a grant from Spiegel Sohmer. The land on which we gather is the traditional territory of the Kanien’keha:ka (Mohawk), a place which has long served as a site of meeting and exchange amongst nations.
The distinguished speakers who will contribute to this year’s colloquium include:
- Kim Brooks, Professor of Law, Dalhousie University. Former Dean, Dalhousie Law, Prof. Brooks is an internationally recognized tax scholar. On October 2, she will present a keynote and take part in a half-day symposium on the history of tax law in Canada.
- Amir Pichhadze, Lecturer, Deakin University, Australia. Prof. Pichhadze is an emerging scholar who studied comparative tax law in the U.S. and U.K. and completed a Judicial Clerkship at the Tax Court of Canada. On October 23, he will present work in progress on the development of value added taxes in Canada, the U.K., and the U.S.
- Shirley Tillotson, Professor of History, Dalhousie University. Prof. Tillotson is a recognized expert in Canadian tax law history, and has written multiple articles and books on the subject. On November 6, Professor Tillotson will present on her new book entitled “Give and Take: The Citizen-Taxpayer and the Rise of Canadian Democracy,” and her upcoming research plans.
- Ajay Mehrotra, Executive Director and Research Professor, American Bar Foundation, and Professor of Law, Northwestern University. Professor Mehrotra is a leading voice on tax history in North America who has studied various aspects of interrelationships and influences in Canadian and U.S. tax law history. On November 20, he will present a work in progress on intersecting developments in Canadian and U.S. tax law history.
- Ashley Stacey, Associate, Olthuis, Kleer, Townshend. Ms. Stacey is a junior associate whose practice is focused on advising First Nations and First Nation-owned businesses on corporate and commercial transactions and who blogs at oktlaw.com on tax and governance issues relevant to First Nations communities. On December 4, Ms. Stacey will present her work in progress on historical and contemporary intersections of taxation, sovereignty, and autonomy of First Nations in Canada.
The colloquium is open to all.
Tagged as: colloquium McGill scholarship tax policy
Last fall I via twitter I shouted out two of my students who won the Tax Analysts Student Writing Competition, in the international category:
I posted about the first paper long ago but I inadvertently neglected to post the second. Correcting that oversight, here it is, available at Tax Analysts: A World Tax Court: The Solution to Tax Treaty Arbitration, by Jake Heyka. Here is the brief abstract by TA:Very proud that two of my students @LAWMcGill won this year: @montano_cabezas (2015) and @Heyka14 (2017) https://t.co/XjWV2A66Cj— Allison Christians (@taxpolblog) July 11, 2016
Jake Heyka examines tax treaty arbitration standards while demonstrating that as a matter of fundamental justice, arbitration should be revamped. He proposes the creation of a world tax court.Heyka begins by observing that "[t]he institution of international tax treaty arbitration (ITTA) is hotly debated in international business and tax law. While the process is helpful because it pressures governments to resolve contested tax decisions, opponents have called it 'secret and evil.'"
He then makes the provocative observation that "the use of ITTA ultimately frustrates the resolution of tax disputes and should be supplanted by a world tax court." In support of his proposal, Heyka lays out the history and critique of tax treaty arbitration (including by me) and concludes:
Standardizing ITTA will create some procedural certainty but does not guarantee consistent use of those procedures, allow the public to see whether the process is fair, or establish reliable precedent. As Lindencrona and Mattson suggested over 30 years ago, ITTA should be a stepping stone to what the world ultimately needs: a world tax court.
As radical as it may seem, the idea is not far-fetched. World courts exist in many commercial and noncommercial contexts, and those that deal with money rather than crime are followed by many countries and used quite often. Moreover, state authority is regularly ceded to resolve disputes between commercial parties in arbitration courts such as the Permanent Court of Arbitration in The Hague, the London Court of International Arbitration, and many other arbitration institutes. A world tax court would merely serve as a place to resolve tax disputes in a similar manner while sustaining the public nature of tax law.While I am late to post it, Heyka's article remains timely as the inclusion of arbitration in the recently released MLI is sure to keep the issue front and center in international tax discourse. Congrats Jake, and sorry for the delay in posting your accomplishment.
This week I will be in Vancouver to present a paper at the UBC Allard School of Law. The paper, "Uncle Sam Wants...Who? A Global Perspective on Citizenship Taxation," is now available in draft form on SSRN. Here is the abstract:
Across the globe, banks are flagging accounts with indicia indicating their owners may be “US Persons,” making it possible for the United States to enforce its taxation of nonresident citizens extraterritorially for the first time in history. The indicia method constitutes a mining expedition for US citizens carried out by foreign banks and governments. Establishing a tax jurisdiction in this manner is unprecedented and has significant practical and normative consequences. In the case of so-called “accidental Americans,” it violates one of the most fundamental and universally- acknowledged tenets of taxpayer rights, namely, the right to be informed about what the law requires. Third party indicia-searching should be universally rejected as a means of identifying a taxpayer population. Instead, the United States itself is responsible for cataloguing, informing, and educating its global population of taxpayers. Those who don’t belong in the system should be allowed to opt out without cost.I welcome comments on this work in progress.
Together with Reuven Avi-Yonah, I am seeking paper proposals for a Citizenship and Taxation Symposium, to be held at the University of Michigan Law School, Ann Arbor, Michigan, on Friday, October 9, 2015. The call for papers closes on February 28.
This symposium will focus on ongoing developments regarding the unique US practice of taxing citizens who live permanently overseas. With the adoption of regimes such as the expatriation tax added by IRC § 877A and the Foreign Account Tax Compliance Act (FATCA), the taxation of non-residents with US person status now has serious and tangible implications.
Like most countries, the United States claims the right to tax on a worldwide basis all of the people resident in its territory regardless of their legal status. But virtually alone in the world, the United States also claims worldwide fiscal jurisdiction over its citizens whether or not those persons are or ever have been resident within the territory. The legal claim over citizens dates to the first national income tax and has been continued through the present, but enforcement has always been an abstract ideal rather than a viable program. This status quo has dramatically changed as an unexpected side effect of the adoption of the Foreign Account Tax Compliance Act (FATCA) in 2010. By introducing an unprecedented regime for global third party reporting, FATCA enables the IRS to enforce citizenship taxation on a worldwide basis for the first time in the history of the income tax. As will becomes ability, the normative foundations of citizenship taxation are coming under intense scrutiny.
To explore these issues, the symposium presenters will offer different perspectives on the meaning, feasibility, efficiency, and fairness of the U.S. practice of citizenship taxation, and will comment on the practical and policy effects of new legislative developments. We invite proposals that consider U.S. citizenship-based taxation from a historical, economic, social, political, institutional, or philosophical perspective. We welcome proposals from junior scholars and from scholars within and outside the United States.
In addition to the conveners, the symposium will feature a panel of distinguished speakers, including:
- Wei Cui, University of British Columbia School of Law
- Tessa Davis, University of South Carolina Law School
- Michael Kirsch, Notre Dame Law School
- Patrick Martin, Procopio, Cory, Hargreaves & Savitch LLP
- Ruth Mason, University of Virginia Law School
- Saul Templeton, University of Calgary Faculty of Law
- Phil West, Steptoe & Johnson
- Ed Zelinsky, Cardozo School of Law
- Deadline for proposals: February 28, 2015.
- Paper proposals must be between 300–500 words in length and should be accompanied by a CV.
- Successful applicants will be notified by the end of March 2015.
- Proposals should be submitted by email to Reuven Avi-Yonah and Allison Christians.
- Successful applicants must submit a working draft of their paper by September 8, 2015 for circulation among conference participants.
- additional info and updates on the symposium will available here.
Tagged as: citizenship conference scholarship tax policy u.s.
The start of a new semester means the return to fundamentals in taxation for me, which always begins with a discussion of the power to tax. Yesterday I asked my students: could Queen Elizabeth say hey Canadians, I notice you still have my face on your dollar and you've got a nice surplus shaping up; over here in England it's all austerity and program cuts. Mind helping out a bit? General consensus: she might as a legal matter be able to tax Canadians to help the Brits out, but she won't. Hmmm. During the discussion a student informed me that Canadians pay more for monarchical services than the Brits do. Well, sharing is caring.
Relatedly and on a more scholarly note, a recent twitter conversation brought me to a chapter in a book on socio-legal tax research (thanks to Martin Hearson for starting that conversation and Judith Freedman for making this recommendation). The book is called Taxation: a Fieldwork Research Handbook, edited by Lynne Oats, and the chapter I had my eye on today is entitled Tea Parties, Tax, and Power, by Rebecca Boden. Boden writes:
History...points to a longstanding power relationship between rulers and those they rule that is articulated through tax regimes. States, whether feudal or modern, need money to operate, to pursue their various programmes, from war to welfare, As citizens may be unwilling to relinquish their money voluntarily, the state must have powers to require payment, with sanctions for non-compliance. By the same token, this power is held in balance in democracies by the principle of consent, exercised through representation. Ultimately, taxpayers give their consent to be dominated and have their money taken away from them.
This contingent nature of the state's powers in taxation - taxation by "consent"- chimes with Foucault's notion that power can never be absolute (Foucault 1977). No, Foucault argues, is power only hierarchical or structural, rather it works in a capillary fashion. As such, the analysis of such power relationships is central to the critical tax project - only by viewing tax structures, policies, and practice through the prism of power relationships that change them can we understand how and why they are constituted and what their effects are likely to be.There is much more in the chapter to reflect upon, but I found this intro intriguing. In my view a lot of mischief takes place in the subtle--maybe you missed it--transition from the use of the word "citizen" to the use of the word "taxpayer." This is a transition all too many scholars make without even noticing it, yet it masks a world of ideology and assumption that frame and define how we think about tax today.
The power to define the taxpayer permeates contemporary tax policy discussion. The question of who can tax whom is one that could or should involve theory but while the scholars talk it over, reality plays out in economic might. In an intro to tax policy principles that I recently prepared for my tax policy course, I wrote:
Perhaps because taxation has been so connected to state-building, most scholars closely associate the act of taxation with the state. Some even go so far as to argue that taxation is a fundamental right belonging to the state as sovereign, often citing Thomas Hobbes for the proposition that “[t]hese are the rights which make the essence of sovereignty … the power of raising money”. None have offered theoretical grounds for the claim that states are in fact holders of rights, however.
We observe throughout history that states exercise powers (mostly through military and economic might), and only declare rights for themselves upon successful domination (such as in constitutions and charters). This observation leads to the likelihood that taxation is not anyone’s right but rather it is a constructed reality, coming about solely by and through human experience. This would explain why so much has to be done to both justify as a matter of theory - and entrench as a matter of custom - the state’s authority to tax.We don't have to work too hard to think of a few examples where defining the taxpayer is an exercise in claiming authority, which fundamentally depends on power. FATCA is an obvious one; anti-inversions, BEPS, and the OECD common reporting standard are less obviously but equally so.
With FATCA, the US is using its sheer economic clout to get the whole world involved in chasing what it deems to be "US persons" for their tax tribute, without any discussion about whether the state's unilateral conferring of citizenship constitutes consent to (permanent and worldwide) taxation. Indeed, it continues to erect ever-higher barriers to shedding that status, without a single policy discussion at any level of government about the merits of this action. Those who think not can be expected to resist per Foucault, or, if it suits your taste better, Locke:
[People] therefore in society having property, they have such a right to the goods, which by the law of the community are their's, that no body hath a right to take their substance or any part of it from them, without their own consent: without this they have no property at all; for I have truly no property in that, which another can by right take from me, when he pleases, against my consent.At the OECD, the common reporting standard, ostensibly modeled on FATCA but in fundamental principles not at all like FATCA, is all about making sure the "right" government gets the info it needs to exert its power over "its" taxpayers. Same idea: a state claims the authority to tax people that live within its territory, but other states have the power to thwart that exercise. (Different in fundamentals than FATCA for two reasons: (1) finding implied consent to tax is a given for residents of a state and (2) the OECD is not currently suggesting countries use economic sanctions to force others to cooperate).
The anti-inversion and BEPs issues are similarly about exerting power over a "taxpayer." Despite bemoaning their apparent helplessness in preventing corporate US persons becoming corporate non-US persons, US lawmakers clearly claim the authority to intervene and they likely have the power, too. But, this involves erecting higher and higher walls to keep the "taxpayers" inside. Internationally, discussions about the global problem of multinational tax dodging focus on the failure of the state to tax corporate persons that come in to the jurisdiction to do business. At the OECD, the BEPS project is very much about who belongs to who, so we can decide what belongs to who. Source and residence as tax concepts have always been about power and they have always been explained with ideas about authority and consent.
Globally, discussions about both corporate and personal income taxation are being forced to focus more and more on unanswered questions about the power to tax, and the issues of authority and consent that are raised when power is exerted and when it is resisted. The full Boden chapter is thus definitely recommended reading and I'm working my way through the rest of the book, which looks promising in several respects. More to come on this subject.
Peter Spiro has a post up over at opinio juris on a pending US constitutional challenge to FATCA, of interest. No surprise, I agree with him that the strongest case is likely to be found in the violation of the treaty power (and not just because he points to my own work on the subject!) He says:
The Treaty Clause argument is a plausible one, the doctrinal terrain at least unsettled. The FATCA agreements enjoy implied congressional authorization, at best, in the form of prior tax treaties. ...There is a lot of history behind sole executive agreements but not much judicial precedent. ... Could this be another platform for the Supreme Court to advance its formalist turn in foreign relations law?A very good question.
Tagged as: FATCA international law treaties u.s.
I am pretty sure the Revenue Rule will not survive the current era, so this paper by Kye Handy is of interest. Abstract:
The Revenue Rule, a common law rule from British court systems, prevents foreign countries from bringing claims in the United States to enforce or adjudicate tax claims that did not happen in the United States. The Supreme Court in Pasquantino v. United States held that Canada’s right to collect imported liquor taxes was not barred by the Revenue Rule. However, the 2nd Circuit in European Community v. RJR Nabisco Inc., ruled the European Union and Colombia could not recover lost tax money or enforcement costs from cigarette smuggling under RICO because of the Revenue Rule. The European Community petitioned the Supreme Court. After accepting the Community’s petition, the Court reversed and remanded the case back to the 2nd Circuit to be reheard in light of Pasquantino. The 2nd Circuit did not change its ruling citing Pasquantino as a criminal case brought by the U.S. government. With no distinction between criminal and civil RICO cases in current jurisdiction, this comment seeks to provide a solution to the split between the Second Circuit and the Supreme Court. This comment argues in favor of limitations being placed on the Revenue Rule so that it can never trump RICO claims in United States courts. In the alternative it argues if limitations cannot be placed upon the Revenue Rule then the only option is abolition. Lastly this comment provides that if limitations and abolition are not the answer, then foreign countries should appeal to the United States government to bring the RICO claims on their behalf.
And from the paper:
The Racketeering Influence and Corrupt Organizations Act (RICO) allows foreign countries to bring suit in America for illegal acts committed by American citizens. Unfortunately for these foreign countries, a common law rule denies them the remedies they seek. The Revenue Rule bars foreign RICO claims because of an almost 300 year old doctrine which states that “no country ever takes notice of the revenue laws of another.”The author calls the rule an "injustice" and suggests it should be limited or abolished; I'd say that 300 years of history suggests there must be some good reason for the limitation, but I applaud the effort to make an argument: it is certainly more than we have seen in the context of FATCA even though it almost goes without saying that FATCA is itself, or at minimum portends, the end of the Revenue Rule as we know it. The comment gives a too-brief overview of the history but at least provides some useful sources; worth a read.