Prof. Laurens van Apeldoorn of the University of Leiden will present a working paper at McGill, hosted by the Centre for Human Rights and Legal Pluralism at McGill Law and the Stikeman Chair in Tax Law (me). Here is the abstract:
Exploitation in global supply chains impacts prices that in turn bear on the allocation of corporate income tax revenue to jurisdictions where multinational enterprises transact. This presentation will develop a concept of exploitation based on the violation of the right to a living wage, put this in the context of discussions of transfer mispricing in multinational enterprises, and consider the economic dimension of the allocation of corporate income tax revenue in relation to public goods provisions in low-income countries where exploitation occurs.Prof. Van Apeldoorn is currently visiting McGill’s Centre for Human Rights and Legal Pluralism as an O’Brien Fellow in Residence (Sept-Dec 2017). He is Assistant Professor of Philosophy and a member of the Centre for Political Philosophy at Leiden University, where his research broadly focuses on the nature and prospects of the sovereign state and more recently considers the principles of international taxation in relation to global justice. As some readers will no doubt be aware, Laurens' presentation connects to collaborative work he and I are undertaking that probes the meaning and significance of taxing income "where value is created," working paper forthcoming.
The talk will be held from 1pm to 12:30 with lunch being served beginning at 12:30, in Chancellor Day Hall, Stephen Scott Seminar Room (OCDH 16), 3644 rue Peel, Montreal, Quebec. This event is free and open to all.
Tagged as: justice McGill scholarship sovereignty tax policy transfer pricing
I've posted on SSRN a new work in progress and two recently published works on the topic of taxation and human rights:
Human Rights at the Borders of Tax Sovereignty
Tax scholarship typically presumes the state’s power to tax and therefore rarely concerns itself with analyzing which relationships between a government and a potential taxpayer normatively justify taxation, and which do not. This paper presents the case for undertaking such an analysis as a matter of the state’s obligation to observe and protect fundamental human rights. It begins by examining existing frameworks for understanding how a taxpayer population is and ought to be defined. It then analyzes potential harms created by an improperly expansive taxpayer category, and those created by excluding from consideration those beyond the polity even if directly impacted by the tax regime. It concludes that a modified membership principle is a more acceptable framework for normative analysis of the jurisdiction to tax, even while acknowledging the overwhelming weight of existing perceptions about the bounds of the polity and the state-citizen relationship as significant barriers to acceptance.Taxpayer Rights in Canada
Canada is one of many countries where taxpayer rights are becoming an increasingly common topic of discourse among policymakers, practitioners, and the public. Especially in light of recent developments regarding the global expansion of taxpayer information exchange, the role of taxpayer privacy and confidentiality rights have emerged as significant legal issues. This chapter surveys the contemporary theoretical, legal, and political landscape of taxpayer rights in Canada. Part I outlines the theoretical and legal sources from which taxpayers may be said to have rights. Part II examines Canada’s Taxpayer Bill of Rights and considers some of the historical, legal, and political issues that give rise to their core principles. Part III focuses in on the taxpayer’s right to privacy and confidentiality in the context of evolving global trends surrounding the use and exchange of taxpayer information. The Chapter concludes with some observations about where taxpayer rights may be headed in Canada.Taxpayer Rights in the United States
Despite abundant sources of legal and quasi-legal protection against abuses of individual rights and freedoms, there are areas of contention regarding respect for taxpayer rights in the United States. This chapter lays out the framework of taxpayer rights and considers their meaning by considering a contemporary case, namely, the recent expansion of citizenship-based taxation through globally enforced financial asset reporting and information exchange. Part I outlines the theoretical and legal sources from which taxpayers may be said to have rights. Part II examines the US Taxpayer Bill of Rights and considers some of the historical, legal, and political issues that give rise to their core principles. Part III focuses in on the taxpayer’s right to be informed in the context of citizenship-based taxation in a globalized world. The Chapter concludes with some observations about where taxpayer rights may be headed in the United States.
Tagged as: fairness justice scholarship sovereignty tax policy
This Friday, I'll be in London participating in a conference on tax avoidance and evasion, hosted by the Journal of Tax Administration. Here is the program:
11.15 – 11.50 Matthew Rablen: Optimal Income Tax Enforcement in the Presence of Tax Avoidance
11.50 – 12.25 Maya Forstater: Can Stopping ‘Tax Dodging’ by Multinational Enterprises Close the Gap in Development Finance?
12.25 – 13.00 Allison Christians: Tax Avoidance in a World of Aggressive Tax States
13.00 – 13.45 Lunch
13.45 – 14.15 Federica Bardini: The “Ius Commune Europeum” on Tax Avoidance
14.15 - 14.45 Shu-Chien Chen: The Common Pattern of the “Tax Avoidance Concept” in the EU and USA
14.45 – 15.00 Discussion
15.00 – 15.20 Break
15.20 – 15.55 David Duff: Tax Avoidance – Causes, Consequences and Responses
15.55 – 16.30 David Quentin: Tax Risk Mining and Corporate Responsibility for Human Rights
Here is the abstract for my presentation:
Tax Avoidance in a World of Aggressive Tax States
Media coverage of tax “dodging” by high profile elites and multinational companies leads the public to believe that tax avoidance happens when individuals act to thwart the efforts of the state. Confined to the domestic arena this may be an apt description, and a problem anti-avoidance regimes are designed to solve. But on an international scale, tax avoidance is not a one-person show. Instead, it involves interactions among four types of actors: individuals, home states, host states, and intermediary states. International tax avoidance persists largely because home, host, and intermediary states intentionally use their tax systems to lure investment away from other jurisdictions that impose higher tax burdens, and individuals do their best to exploit available opportunities to the fullest. In deciding whether and how law should be used to prevent international tax avoidance, the goals and interests of each of the four actors must be examined.
Tagged as: conference fiscal state aid institutions Tax law tax policy
I have a few thoughts on this and I really look forward to seeing the results of the competition.Oxfam and the Tax Justice Network are joining together to launch a tax justice and human rights essay competition for legal students and professionals. With tax justice rising up the human rights agenda, we want to hear your ideas on how human rights law can be used in the fight against tax dodging.
Tax justice is a human rights issueInternational tax dodging by multinational corporations and wealthy elites costs countries both rich and poor billions of dollars a year in lost revenues. This is undermining vital public services where they are most needed and further driving inequality at a time when the richest 62 people in the world have as much wealth as half the world's population. Overall, substantial damage is done to human rights through the use of tax havens, the opacity of corporate accounting, the manipulation of trade prices and the disguising of beneficial ownership. But national and international fora may provide scope for redress.
What we wantWe're inviting 3,500-word complaints to identify the plaintiffs, defendants, remedies sought, and arguments that are considered enforceable in an existing legal forum. We seek complaints that could form the basis of effective advice to developing countries, or to groups of citizens in countries at any income level who have suffered, and want to know how they could best use law to protect their or their people's human rights in the face of tax injustice.
Tagged as: justice scholarship Tax law tax policy
The Global Justice Program at Yale University is currently hosting a conference exploring the post-2015 agenda for human rights and global justice. List of speakers and topics:
Day One: October 30
Panel 1: Global Tax Fairness: Allison Christians, Manuel Montes, Erika Siu; Chair: Zorka Milin)
Amartya Sen Prize Contest Ceremony
Panel 2: Illicit financial flows, human rights and the post-2015 agenda - Discussion of Independent Expert’s Report: Juan Pablo Bohoslavsky, Nicholas Lusiani, Léonce Ndikumana, Esther Shubert; Chair: Tom Cardamon
Panel 3: Addis, Post-2015, and future efforts against Illicit Financial Flows: Tom Cardamone, Steven Dean, Gail Hurley and Jakob Schwab; Chair: Laura Biron
Day Two: October 31
Statement of the Health Impact Fund (HIF) and mini-HIF, including discussion: Aidan Hollis, Thomas Pogge; Chair: Alex Sayegh
Panel 4: Mini-HIF: Piloting the Health Impact Fund: Laura Biron, Aidan Hollis, Peter Maybarduk, Thomas Pogge, Jeffrey Sachs, Richard Wilder; Chair: Tendayi Bloom
Concluding Session on the Health Impact Fund
Panel 5: Individual Deprivation Measure, Poverty Measurement: Sharon Bessell, Thomas Pogge, Scott Wisor; Chair: Yuan Yuan.
Day Three: November 1
Panel 6: Oslo Principles on Climate Change Obligations: Thomas Pogge, Jaap Spier, Kira Vinke; Chair: Shmulik Nili
Panel 7: Sustainable Development Goals (Daniel Esty, Thomas Pogge, Jeffrey Sachs; Chair: Corinna Mieth.I presented yesterday on the topic of "Global Tax Fairness." I discussed the connection between taxation and human rights, highlighting the challenges for the realization of rights and justice that are posed by tax competition and exploring whether and how systemic change is possible. I have a couple of works in progress on the topic and will post drafts when ready.
In the meantime, I'm experimenting with making my powerpoint presentations available online (along with other resources in the future). You can view a list here: see pull down menu entitled "resources". Comments and suggestions are welcome.
Tagged as: conference human rights justice tax policy
Interesting new paper on PILOTs: "payments in lieu of taxes" that some municipalities request of otherwise tax-exempt orgs. At a recent talk I did at Notre Dame on the topic of taxation and human rights, I explored the dual "social contribution" budgets that highly visible/profitable multinationals often have in impoverished places--the tax budget (that ends up appearing quite small in many cases) and the Corporate Social Responsibility or "CSR" budget (the fees some companies pay to build infrastructure or schools or provide basic services as a matter of "good corporate citizenship"). I brought up Starbucks' dealings with HMRC in response to charges of tax dodging as a rarely-seen tax-like-but-not-quite-tax arising in a developed country, and wondered aloud whether we ought to consider this kind of CSR outlay as in the nature of a tax, or not. One of the audience members suggested that the Starbucks payment or a CSR budget seems analogous to PILOTs, so it's worth taking a look at them. Good idea. I'll add this paper to the reading list. Here's the abstract:
Nonprofit charitable organizations are exempt from most taxes, including local property taxes, but U.S. cities and towns increasingly request that nonprofits make payments in lieu of taxes (known as PILOTs). Strictly speaking, PILOTs are voluntary, though nonprofits may feel pressure to make them, particularly in high-tax communities. Evidence from Massachusetts indicates that PILOT rates, measured as ratios of PILOTs to the value of local tax-exempt property, are higher in towns with higher property tax rates: a one percent higher property tax rate is associated with a 0.2 percent higher PILOT rate. PILOTs appear to discourage nonprofit activity: a one percent higher PILOT rate is associated with 0.8 percent reduced real property ownership by local nonprofits, 0.2 percent reduced total assets, and 0.2 percent lower revenues of local nonprofits. These patterns are consistent with voluntary PILOTs acting in a manner similar to low-rate, compulsory real estate taxes.
Tagged as: CSR culture economics scholarship Tax law tax policy
Tomorrow I will be participating on a panel on "Illicit Financial Flows" at the Engineers Without Borders 2015 National Conference, currently taking place in Montreal. The goal of the session is to discuss the nature and impact of so-called illicit financial flows in Canada, the United States, and the world's developing countries.
I have been asked to address the question "what promising policy instruments or reforms could potentially curb outflows of illicit finance?" The use of the term illicit in this context seems to be an attempt to elide the distinction between avoidance and evasion. Those familiar with my work know that I approach this terminology with caution because I think it is a mistake to conflate evasion and avoidance into a single category for purposes of advocating generalized policy reform. In a paper I published last year on Evasion, Avoidance, and Taxpayer Morality, I argued why I think the phenomenon of tax evasion is distinct from tax avoidance, each represents a different type of governance failure, and each requires a tailored response. But I certainly understand the instinct to see both tax avoidance and tax evasion as essentially drains on public resources that we'd like to imagine would otherwise be available for various socially useful projects.
I'll try to lay out the field as I see it in the time allotted. It is a big topic to cover in a limited time. I suppose I could just plug Martin Hearson's very good work on this subject. I am curious as to how Engineers Without Borders came to concern itself with this issue; the rest of the conference focuses on innovative, sustainable, and inclusive development. I think it is another sign that tax justice advocacy groups, like the Tax Justice Network, are successfully inducing NGOs across a broad spectrum to view taxation as a human rights issue that permeates all facets of social and economic development.
Tagged as: activism conference evasion human rights tax policy
UN Special Rapporteur Magdalena Sepulveda Carmona recently posted this Report of the Special Rapporteur on Extreme Poverty and Human Rights; of interest. Here is the abstract:
In the present report, the Special Rapporteur on extreme poverty and human rights presents fiscal policy, and particularly taxation policies, as a major determinant in the enjoyment of human rights. Taxation is a key tool when tackling inequality and for generating the resources necessary for poverty reduction and the realization of human rights, and can also be used to foster stronger governance, accountability and participation in public affairs. She outlines relevant human rights obligations to guide and inform State revenue-raising practices, including the duty to use the maximum available resources for the realization of economic, social and cultural rights. She also analyses the questions of how the principles of non-discrimination and equality and the duty of international cooperation and assistance should inform taxation policies at the global and national levels. After assessing how revenue-raising policies and practices can be strengthened through a human rights-based approach, she makes recommendations for fiscal and tax policies that are grounded in human rights and can lead to poverty reduction, sustainable development and the realization of transformative rights.
Tagged as: human rights inequality politics scholarship tax policy
The Canadian government announced a new package of "family" tax cuts/credits last week, with an income splitting scheme and modifications to child care benefits and expense deductions. These are, of course, really just re-election tax credits--announced at what the CBC describes as a "campaign-style event." Earlier this year, at the Tax Justice & Human Rights Symposium I hosted at McGill, Jonathan Rhys Kesselman explained the distributional impacts of the type of cuts announced by the government. He had to embargo his presentation so it's unfortunately not among those now viewable at the McGill Tax channel, but fortunately his paper is now available [pdf here], and the Vancouver Sun has a story: Detailed analysis exposes more income-splitting flaws.
Kesselman's main arguments are:
- restricting the measure to couples with children is inconsistent with the purported fairness rationale of taxing couples at the same rates as singles
- families with the greatest need will get no benefits at all
- families don't have to demonstrate or undertake any actual child care obligations in order to get the benefits
- the policy will decrease the after-tax value of a family's second earner (because earnings are effectively taxed at the higher-earner's marginal rate)
He ends by suggesting a number of alternative ways the government could spend money to support families in need without introducing these distortions.
It does feel frustrating that everywhere one looks, politicians just seem have no shame about trying to buy their next elections, and populations seem all too willing to be bought so long as you tell them it's for the "hard working" among us. The question is, whom does the Harper government define as hard-working? With this announcement, the message is: you are only a hard-working family, and therefore deserving of tax cuts, if you
- have a child under 18;
- with two parents;
- one of whom earns a lot;
- and who earns a lot more than the other.
Tagged as: Canada justice tax policy TJHR
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.