TAX, SOCIETY & CULTURE

Follow me on Twitter:

Assessing BEPS: Origins, Standards, and Responses

Published Jul 14, 2017 - Follow author Allison Christians: - Permalink

If you are an IFA member or are attending IFA this fall, you can now download the full IFA 2017 Cahiers. The general report for Subject 1 on BEPS is co-authored by myself and Stephen Shay and is also available on SSRN. Here is the abstract:

The G20/OECD’s multi-year campaign to combat base erosion and profit shifting (BEPS) marks a critical step in the evolution of the international tax regime and the roles of institutions that guide it. This General Report for Subject 1, IFA Congress 2017, provides a snapshot of the outcomes of the BEPS project by comparing national responses to key mandates, recommendations and best practices through the end of October, 2016 based on National Reports representing the perspectives of 48 countries.  These National Reports reveal that the impact of the BEPS initiative on a particular country corresponds to at least three key factors, namely: (1) the extent to which domestic law is already in substantial compliance with BEPS outcomes; (2) the degree to which implementation of BEPS outcomes appears capable of delivering positive revenue or economic results, or both, relative to a country’s experiences and perceptions prior to BEPS; and (3) the type and degree of involvement of a country in the formative stages of the initiative preceding the release of the final BEPS action plans.  As BEPS continues to unfold, it is difficult to gauge the full extent to which countries in fact will adhere or defect from the rules. However, the BEPS project has witnessed the transition of global tax governance from the OECD countries exclusively to global fora. This leaves open questions regarding agenda-setting for international tax policy going forward. As we conclude this interim snapshot of the origins, standards, and responses to BEPS to date, we look to future IFA congresses for answers to these questions and a final assessment of the BEPS project.
 

Tagged as: BEPS OECD research scholarship tax policy

COMMENTS

Share:

Thinking about the OECD's New World Tax Order

Published Mar 14, 2016 - Follow author Allison Christians: - Permalink

Last week I presented a work in progress on the OECD's newest global forum, which is being created to fulfill and further its BEPS initiative, as part of the BYU symposium "The Cutting Edge Of International Tax Reform." I tentatively titled my paper (ok, outline) "Not So Soft Law: The OECD Tax Regime" but I don't think I will stay with that title because soft law is still a fairly obscure notion among tax academics and practitioners, at least, in North America (it seems somewhat better-understood elsewhere). In any event I don't have a working paper yet but here is my working abstract:

Tax jurisdiction gaps and overlaps are inevitable in a world economy powered by constant cross-border flows of capital and income. States have long sought to overcome issues thus created by engaging in consensus building over nonbinding “soft law” norms via the Organisation for Economic Cooperation and Development (OECD). But with its most recent exercise, the Base Erosion and Profit Shifting initiative, the OECD is hardening these norms into a genuine global tax regime. It is doing so with model legislation, peer monitoring, and institutions that supplant its more inclusive policy rival, the United Nations, bringing in non-OECD countries as "BEPS Associates". This Article argues that the implications of these developments include building a new international tax organization (or world tax order) to avoid the encroachment of the United Nations as a potential tax policy rival, thus ensuring the continuing global tax policy monopoly of a core set of OECD nations.
I'm still thinking through all of the fascinating institutional changes taking place as part of the BEPS process, and don't have any grand conclusions. International tax governance has become infinitely more complicated over the past several years, with multiple institutions popping up as potential rivals for the OECD's monopolistic grip on global tax policy norms and processes.   I welcome the OECD's desire to develop an inclusive forum to enable more effective participation in global tax norm development. However I am wary about whether and how inclusive the proposed institution can be in light of the observation that agenda-setting is such an important aspect of effective participation. BEPS Associates don't quite seem like full partners yet, hence their title unfortunately seems all too apt.

If non-OECD countries set up a new forum, to which they invited OECD countries as Associates, would the major action items be those covered in BEPS? I am not convinced. A serious study of formulary apportionment as an alternative to transfer pricing seems like a topic that a truly inclusive forum would insist upon immediately. That is not to say that formulary apportionment is wonderful or great or a panacea--I am not sure it is. But there are so many calls for it, it seems to me impossible to understand the continued insistence by the OECD to quash the discussion. If it's not a great idea, fine: study it and reveal its weaknesses. If it is a great idea, why suppress it? Perhaps there are good reasons, but in general I favour studying things to not studying them, especially when not studying them looks like an attempt to intentionally thwart progress. Similarly, I would expect such a forum to tackle items of interest especially to "less developed" countries (as far as that term may be adequately defined), such as the longstanding source/residence compromise and the expansion of the permanent establishment regime to deal with services.

If these items were to become topics of attention and study within or because of the new OECD forum, I think I would reflect on this new tax order as a success story in developing the means for effective participation of more countries in the global tax dialogue. If not, I would be less sure that progress has been made. At this stage I have far more questions than answers.

Tagged as: institutions OECD scholarship tax policy

COMMENTS

Share:

Parada: Legal Questions Surrounding FATCA-based Agreements in Europe

Published Feb 08, 2016 - Follow author Allison Christians: - Permalink

Leopoldo Parada has recently posted on SSRN an article published last summer in the World Tax Journal, entitled Intergovernmental Agreements and the Implementation of FATCA in Europe, of interest. Here is the abstract:

FATCA is a US domestic tax policy that requires Foreign Financial Institutions around the world to provide the IRS information regarding their US clients. Recognizing this extraterritorial characteristic and the troubles associated with it, the US Treasury Department developed the Intergovernmental Agreements (IGAs), which have served the double purpose of coordinating FATCA at an international level and influencing the new international standards on automatic exchange of information. Nevertheless, the IGAs are instruments that still need to be improved, at least in order to guarantee their successful implementation in Europe. The first part of this article explores the legal nature and the characteristic of the IGAs, concluding that they possess an asymmetriclegal nature that can lead to conflicts of interpretation. Likewise, it concludes that their contribution toward international transparency is incompatible with the existence of other instruments in Europe that seek the opposite goal of protecting bank secrecy, although it recognizes the importance of the most recent achievements at the European level in order to ensure a coherent and consistent system of automatic exchange of information. The second part of this article analyses three grey areas in the IGAs implementation process in Europe (i.e., “quoted Eurobonds” in the United Kingdom; group requests under the Switzerland-United States IGA, and the “coordination timing” provision of the IGA Model 1A), concluding that there is still work to be done in order for the IGAs to grant an acceptable level of reciprocity in practice.
I was not aware of this article when I wrote on a column last fall on this very same topic, in which I called the IGAs "Hybrid Tax Agreements" and pointed out the mess created by their unprecedented legal form as treaties to the rest of the world but administrative guidance in the United States. Parada's article goes further in the analysis and lays out a number of enduring difficulties. It seems to me that governments are simply ignoring these difficult issues as inconvenient barriers to desired outcomes and courts will face the same temptation. But I don't think these issues go away with time and gradual acceptance of FATCA as an institution. Instead, I think the issue will cause systemic problems going forward, both in terms of raising endless conflicts of law, and in terms of the precedent set for international tax relations by the failure of states to challenge US exceptionalism even as it tramples on law and legal process throughout the world.

Tagged as: FATCA IGAs international law scholarship

COMMENTS

Share:

Latest Update in Canada FATCA IGA litigation

Published Sep 28, 2015 - Follow author Allison Christians: - Permalink

The Federal Court of Canada (Martineau J.) issued a decision in the Canadian FATCA IGA litigation on September 16, ruling against the plaintiffs by finding that the provisions of the IGA are duly enacted law, thus clearing the way for the Canadian tax authorities to furnish information to the United States. You can read the decision here.  Today, the Plaintiffs made a motion for an interlocutory injunction pending appeal of the decision.

Because of my role as an expert witness I will abstain from detailed comments other than to stand by my submissions, but I do note the overwhelming sense of judicial impotence expressed in the September 16 decision. The decision notes that the issues at stake involve injustice at the individual level as well as harsh dealings in terms of sovereign relations. As to the former, the legality of the regime is given as its justification, while the latter are deemed inappropriate matters for judicial intervention. Instead the plaintiffs are directed to seek redress for the personal effects of these circumstances though political and administrative channels.

In my view it was political malfunction in both the US and Canada that brought forth FATCA and then the FATCA IGA, and that FATCA as applied can be summed up in terms of administration as a case of continuous indifference to individuals who are wrongdoers in no real sense yet bear the brunt of severe punishments meant for others. If the judiciary is also not to blame and not to fix, then it seems there is no avenue to right the wrongs of FATCA anywhere. I hope that is not the case.

In any event, two days after the decision was released, the IRS announced another delay in FATCA, this time for Model 1 IGA countries. Model 1 IGA countries involve government-to-government sharing, as compared to Model 2, under which financial institutions directly report to the IRS pursuant to authority granted by their home governments. Canada has a Model 1 IGA so it could delay furnishing information to the United States if it notifies the IRS before September 30, 2015 "and provides assurance that the jurisdiction is making good faith efforts to exchange the information as soon as possible." There have been some efforts to compel the Canadian government to avail itself of this option (see, e.g., here and here), but I am not sure how to monitor the government's response.

More to come as events unfold.





Tagged as: Canada FATCA

COMMENTS

Share:

In global tax governance, institutions matter.

Published Aug 04, 2015 - Follow author Allison Christians: - Permalink

José Antonio Ocampo posted a plea for institutional reform in tax policymaking today,  in which he decries the jealous guarding of tax policy exclusivity by OECD countries, especially the US and the UK. At the recent Financing for Development conference, developing countries called for a greater role for the UN in global tax governance but the OECD countries balked. Ocampo writes:

The OECD, whose members are essentially the world’s 34 richest countries, certainly has the capacity to set international standards on taxation. Yet the domination of a select group of countries over tax norms has meant that, in reality, the global governance architecture for taxation has not kept pace with globalization. 
The Monterrey Consensus reached in 2002 included a call to enhance “the voice and participation of developing countries in international economic decision-making and norms-setting.” But although the OECD invites some developing countries to participate in its discussions to establish norms, it offers them no decision-making power. The OECD is thus a weak surrogate for a globally representative intergovernmental forum.
I understand that it is costly and complicated to develop institutions that allow for meaningful participation by all people affected by transnational tax policy norms.  But the international tax system is a resource allocation machine that has significant impacts on people's life chances across all populations. I fail to see what principles of justice support a world in which a small and privileged group of people make decisions of both process and substance that directly impact, and yet purposefully and systemically exclude, the majority of the world's population. The substance of norms, rules, and standards may matter in global tax governance, but ultimately institutions matter even more.

Tagged as: institutions justice OECD political malfunction tax policy

COMMENTS

Share:

Responses to Questions on Canada's Adoption of FATCA IGA

Published Jan 29, 2015 - Follow author Allison Christians: - Permalink

Back in November I noted that MP Ted Hsu presented an order paper question (OPQ 816) on the topic of the unusual process surrounding Canada's adoption of an intergovernmental agreement on FATCA. He asked a series of detailed questions about the treaty tabling and ratification process, and today he got his answers, the substance of which I have reproduced below; you can find the full document here.

I note that there is a common answer to many of the questions: "Information pertaining to Memorandums to Cabinet which are less than 20 years old is considered a cabinet confidence and details of these are excluded from disclosure under the principles of the Access to Information Act." Therefore, most of the answers are: you will find out in 20 years.

Though the government continues to claim that it "followed the treaty tabling policy" and that it made procedural exceptions deliberately, according to stated procedures, and out of urgent need, the facts and the nonexistence of key documents declare otherwise.

Bottom line: if there is a treaty policy in Canada, it is that a sitting government can bind the nation to any agreement of any sort with no parliamentary oversight of any kind and with no transparency, and if that agreement violates existing laws and rights, then it will be up to those whose rights have been violated to mount legal action to assert those laws and get their rights restored. This is not just a matter of some arcane technical procedure. It is fundamentally a problem of access to justice. Law is not free. It is, in fact, quite expensive.

I note that all the answers below are from the Minister of Foreign Affairs except with respect to three answers from Finance, which are indicated in brackets.

ORDER/ADDRESS OF THE HOUSE OF COMMONS
No. Q-816
By Mr. Hsu (Kingston and the Islands) 
Date November 24, 2014 

With regard to the Agreement Between the Government of Canada and the Government of the United States of America to Improve International Tax Compliance through Enhanced Exchange of Information under the Convention Between the United States of America and Canada with Respect to Taxes on Income and on Capital (the Agreement), the government's Policy on Tabling of Treaties in Parliament (the Policy), and the statement of Peter Van Loan, Government House Leader, in the House on Monday, April 28, 2014, that "in this case, the fact is that the government, the cabinet, actually did grant such an exemption to the tabling policy. As such, the very words of the policy, the
requirements of the policy, have been followed. The processes for obtaining the exemption were obtained. As a result, the requirement that it be tabled in the House 21 days in advance of the legislation being introduced is not necessary and the policy is fully complied with" (the Statement):

(a) was an exemption to the government's Policy granted with respect to the Agreement;
Yes.
(b) what is the difference between an "exemption" and an "exception" in terms of the Policy;
Either term could be used in the context of the Policy.
(c) if the word "exception" is substituted for “exemption" is the Statement accurate;
Either term could be used in the context of the Policy.
(d) on what basis was the Statement made;
The Statement was made because the Agreement was granted an exemption to the normal treaty tabling process under the Policy.
(e) how was the Government House Leader informed of the exemption or exception being granted to the Policy;
The Department of Foreign Affairs, Trade and Development (the "Department") has no information on how the Government House Leader was informed,
(f) what documents or memos were created regarding this exemption or exception and what are their access or control numbers;
Information pertaining to Memorandums to Cabinet which are less than 20 years old are considered cabinet confidences and details of these are excluded from disclosure under the principles of the Access to Information Act
(g) who was involved in this decision to grant an exemption or exception and at what stage were they involved;
Information pertaining to Memorandums to Cabinet which are less than 20 years old are considered cabinet confidences and details of these are excluded from disclosure under the principles of the Access to Information Act
(h) what was the process, step-by-step, by which this Agreement was granted an exemption or exception;
Information pertaining to Memorandums to Cabinet which are less than 20 years old are considered cabinet confidences and details of these are excluded from disclosure under the principles of the Access to Information Act
(i) who reviewed the decision to grant an exemption or exception, (i) when, (ii) why, (iii) how;
Information pertaining to Memorandums to Cabinet which are less than 20 years old are considered cabinet confidences and details of these are excluded from disclosure under the principles of the Access to Information Act.
 (j) does the Policy apply to the Agreement, and how;
Yes. The Agreement was granted an exemption to the normal treaty tabling process under the Policy,
(k) between what departments does correspondence exist-regarding the tabling of the Agreement under the Policy and what are the file numbers for these documents;
There is some correspondence between the Department, and the Department of Finance. There are no file numbers for the correspondence,
(l) on what date was the Agreement concluded;
[Finance] The Agreement was signed and made public on February 5, 2014.
(m) on what date was the Agreement tabled in Parliament;
In the context of the Policy, "If an exception is granted, the Minister of Foreign Affairs will inform the House of Commons that Canada has agreed to be bound by the instrument at the earliest opportunity following the ratification." (6.3b of the Policy), The Agreement was publicly tabled on September 15, 2014 by the Parliamentary Secretary to the Minister of Foreign Affairs as per Standing Order 32.2. That was the earliest opportunity for the Government to inform the House that Canada had agreed to be bound by the Agreement following its ratification - also the first sitting day of the House after the summer Parliamentary recess.
(n) on what date was the Agreement ratified;
Canada ratified the Agreement on June 27, 2014.
(o) when was the House made aware of the text of the Agreement;
In the context of the Policy, "If an exception is granted, the Minister of Foreign Affairs will inform the House of Commons that Canada has agreed to be bound by the instrument at the earliest opportunity following the ratification." (6.3b of the Policy)". The Agreement was publicly tabled on September 15, 2014 by the Parliamentary Secretary to the Minister of Foreign Affairs as per Standing Order 32.2. That was the earliest opportunity for the Government to inform the House that Canada had agreed to be bound by the Agreement following its ratification - also the first sitting day of the House after the summer Parliamentary recess. Additionally, the text of the Agreement was set out in Schedule 3 to Bill C-31, the Economic Action Plan 2014 Act, No. 1, which was introduced in the House of Commons on March 28, 2014.
(p) how was the House made aware of the text of the Agreement;
[Finance] Legislative proposals to implement the Agreement with the U.S., including related amendments to the Income Tax Act, were set out in Part 5 of the Economic Action Plan 2014 Act, No. 1 (Bill C-31 ). The text of the Agreement was provided in Schedule 3 of Bill C-31. Bill C-31 was introduced in the House of Commons on March 28, 2014.
In the context of the Policy, the text of the Agreement was publicly tabled in accordance with the Policy on September 15, 2014. Additionally, the text of the Agreement was set out in Schedule 3 to Bill C-31, the Economic Action Plan 2014 Act, No. 1, which was introduced in the House of Commons on March 28, 2014.
(q) when was the House made aware of the granting of an exemption or exception to the Policy in the case of the Agreement;
The House was first informed of the exemption through the Statement by the Government House Leader on April 28, 2014. In the context of the Policy, the House was made aware of the granting of an exemption when the Agreement was publicly tabled in accordance with the Policy on September 15, 2014.
(r) how was the House made aware of the granting of an exemption or exception to the Policy in the case of the Agreement;
The House was first informed of the exemption through the Statement by the Government House Leader on March 28, 2014. In the context of the Policy, the House was made aware of the granting of an exemption in the Explanatory Memorandum which accompanied the Agreement when it was publicly tabled on September 15, 2014.
(s) when and by what means is the House usually informed that an exception has been granted to the Policy;
In the context of the Policy, the House is usually made aware of the granting of an exemption to the normal treaty tabling process under the Policy in the Explanatory Memorandum which accompanies the treaty when it is tabled publicly.
(t) in the absence of the point of order prompting the Government House Leader's response, how and when would the House have been informed of the exemption;
In the context of the Policy, the House would have been made aware of the granting of an exemption to the normal treaty tabling process under the Policy in the Explanatory Memorandum which accompanies the treaty when it is tabled publicly.
(u) what steps and measures are in place to ensure that Parliament is informed of exceptions being granted to the Policy;
The Policy states: "If an exception is granted, the Minister of Foreign Affairs will inform the House of Commons that Canada has agreed to be bound by the instrument at the earliest opportunity following the ratification."
(v) what steps are in place to ensure that Canadians are informed when exceptions have been granted;
Informing Parliament publicly, as described under (u), is effective as a means of informing Canadians.
(w) what steps and measures are in place to ensure that Parliament is informed of exemptions being granted to the Policy;
The Policy states: "If an exception is granted, the Minister of Foreign Affairs will inform the House of Commons that Canada has agreed to be bound by the instrument at the earliest opportunity following the ratification."
(x) what steps are in place to ensure that Canadians are informed when exemptions have been granted;
Informing Parliament publicly, as described under (w), is effective as a means of informing Canadians.
(y) what does "urgent" mean in the context of the Policy;
The term "urgent" is not defined in the Policy.
(z) how was the ratification of the Agreement determined to be urgent;
The U.S. Foreign Account Tax Compliance Act ("FATCA") was enacted by the U.S. in March 2010. FATCA requires non-U.S. financial institutions to report to the IRS accounts held by U.S. persons. Absent the Agreement, obligations for Canadian financial institutions to comply with FATCA would have been unilaterally and automatically imposed on them by the U.S. as of July 1, 2014. These obligations would have forced Canadian financial institutions to choose between (a) entering into an agreement with the IRS that would require them to report directly to the IRS on accounts held by U.S. residents and U.S. citizens, which would raise concerns about consistency with Canadian privacy laws; or (b) being subject to the 30 percent FATCA withholding tax on certain U.S.-source payments for not complying with FATCA.
The Agreement takes into account the objectives and provisions of the FATCA, while supporting Canada's objectives for improving the integrity and fairness of the Canadian tax system. The Agreement addresses the Canadian concerns about FATCA described above, as well as others. It was realized that observing the Policy's requirement of waiting 21 sitting days would have made meeting the U.S. FATCA deadline of July 1, 2014, unachievable. As a result, the ratification of the Agreement was determined to be urgent, and a request for an exemption to the normal treaty tabling process under the Policy was granted.
(aa) who made the determination in (z), (i) how, (ii) on the basis of what information, (iii) with what authority, (iv) under what criteria;
Information pertaining to Memorandums to Cabinet which are less than 20 years old are considered cabinet confidences and details of these are excluded from disclosure under the principles of the Access to Information Act.
(bb) how was the decision in (z) reviewed, (i) by whom, (ii) how, (iii) when, (iv) by what criteria;
Information pertaining to Memorandums to Cabinet which are less than 20 years old are considered cabinet confidences and details of these are excluded from disclosure under the principles of the Access to Information Act.
(cc) who are or were the lead ministers with respect to the Agreement in terms of the Policy and how was this determined;
The Minister of Finance is the lead Minister with respect to the Agreement. The Minister of Foreign Affairs is responsible for tabling treaties under the Policy.
(dd) when and how did the Minister of Foreign Affairs and the lead ministers seek approval from the Prime Minister for an exemption to the treaty tabling process;
Approval from the Prime Minister was sought. Information pertaining to Memorandums to Cabinet which are less than 20 years old are considered cabinet confidences and details of these are excluded from disclosure under the principles of the Access to Information Act.
(ee) when was the approval in (dd) granted and how;
Information pertaining to Memorandums to Cabinet which are less than 20 years old are considered cabinet confidences and details of these are excluded from disclosure under the principles of the Access to Information Act.
(ff) what correspondence is available -with file and control number- to corroborate the information provided in response to (dd) and (ee);
Approval from the Prime Minister was sought. Information pertaining to Memorandums to Cabinet which are less than 20 years old are considered cabinet confidences and details of these are excluded from disclosure under the principles of the Access to Information Act.
(gg) was a “joint-letter that clearly articulates the rationale to proceed with the ratification, without tabling in the House of Commons" created;
No.
 (hh) with respect to the letter in (gg), (i) who created this letter, (ii) when is it dated, (iii) how can it be obtained, (iv) who has access to it, (v) to whom is it addressed;
No such letter was created.
(ii) was the letter drafted in consultation with the Treaty Section of the Department of Foreign Affairs and International Trade and the relevant Secretariat in the Privy Council Office;
Information pertaining to Memorandums to Cabinet which are less than 20 years old are considered cabinet confidences and details of these are excluded from disclosure under the principles of the Access to Information Act.
(jj) what documentation exists - with file or control number for each document - to corroborate the information provided in response to (ii);
No such document exists.
(kk) who is responsible for retention and access of such joint letters;
There are no special provisions for retention and access of such joint letters. Joint letters would be subject to the normal retention and access legislation, regulations, and guidelines for the Government of Canada.
(ll) with respect to the Agreement, were the responsible ministers and the Minister of Foreign Affairs aware early on of the need to request an exemption to the treaty process prior to obtaining Cabinet authority to sign a treaty;
Yes.
 (mm) how is "early on" defined for purposes of the Policy;
The term "early on" is not defined in the Policy.
 (nn) how is "aware" defined for purposes of this provision in the Policy;
The term "aware" is not defined in the Policy.
(oo) was a request made in a Memorandum to Cabinet, seeking policy approval for the Agreement;
Information pertaining to Memorandums to Cabinet which are less than 20 years old are considered cabinet confidences and details of these are excluded from disclosure under the principles of the Access to Information Act.
(pp) what Memorandums to Cabinet exist relative to this agreement, (i) what are their dates, (ii) are they subject to privilege, (iii) who made them, (iv) what are their record or control numbers;
The Department of Finance will respond to this question and sub-questions. Information pertaining to Memorandums to Cabinet which are less than 20 years old are considered cabinet confidences and details of these are excluded from disclosure under the principles of the Access to Information Act
[Finance] Information pertaining to Memorandums to Cabinet which are less than 20 years old is considered a cabinet confidence and details of these are excluded from disclosure under the principles of the Access to Information Act.
(qq) which document in (pp) can be said to "clearly articulate the rationale for the exception to the treaty tabling process";
Information pertaining to Memorandums to Cabinet which are less than 20 years old are considered cabinet confidences and details of these are excluded from disclosure under the principles of the Access to Information Act.
(rr) what is the rationale for the exception to the treaty tabling process with respect to the Agreement;
The response in (z) outlines the rationale for requesting an exemption to the normal treaty tabling process under the Policy.
(ss) who determines the rationale per the Policy;
The rationale was prepared through consultations by officials on behalf of the Minister of Finance, the Minister of Foreign Affairs, and the Minister of National Revenue.
(tt) what is an acceptable rationale per the Policy;
There is no definition of “acceptable rationale” under the Policy.
(uu) how is rationale defined in terms of the Policy;
The term "rationale" is not defined in the Policy.
(vv) is there a minimal level of sufficiency for a rationale per the Policy and if so what is it;
There is no definition of a "minimal level of sufficiency" for a rationale under the Policy.
(ww) when was the exception granted;
Information pertaining to Memorandums to Cabinet which are less than 20 years old are considered cabinet confidences and details of these are excluded from disclosure under the principles of the Access to Information Act.
(xx) did the Minister of Foreign Affairs "inform the House of Commons that Canada has agreed to be bound by the instrument at the earliest opportunity following the ratification" per the Policy;
Yes. The Agreement was publicly tabled on September 15, 2014 by the Parliamentary Secretary to the Minister of Foreign Affairs as per Standing Order 32.2.
(yy) when did the actions in (xx) occur and how;
The Agreement was publicly tabled on September 15, 2014, which was the first sitting day of Parliament after the Agreement was ratified.
(zz) in 2014, how many exemptions or exceptions were granted under the Policy before the Agreement;
In 2014, there were two exemptions granted under the Policy. The first was concerning the Agreement. The second was concerning the Canada-Korea Free Trade Agreement.
(aaa) in 2014, was the Agreement's rationale for exception unique;
Yes. The ratification of the Agreement was determined to be urgent, and a request for an exemption to the normal treaty tabling process under the Policy was granted.
(bbb) in 2014, was the Agreement the only item determined to be urgent in terms of the Policy;
In 2014, the Agreement was one of two items determined to be urgent in the context of the Policy.
(ccc) is the Government House Leader always informed of exceptions and exemptions under the Policy and, if so, how;
The Department has no information on how the Government House Leader would be informed of exemptions to the normal treaty tabling process under the Policy. There are no special provisions under the Policy to inform the Government House Leader of exemptions.
(ddd) is the House always informed of exceptions or exemptions under the Policy and, if so, how;
In the context of the Policy, "If an exception is granted, the Minister of Foreign Affairs will inform the House of Commons that Canada has agreed to be bound by the instrument at the earliest opportunity following the ratification." (6.3b of the Policy).
 (eee) how early could the Agreement have been tabled in Parliament;
It was realized early on that observing the Policy's requirement of waiting 21 sitting days would have made meeting the FATCA deadline of July 1, 2014, unachievable. As a result, the ratification of the Agreement was determined to be urgent, and a request for an exemption to the normal treaty tabling process under the Policy was sought, and subsequently granted. Since an exemption to the normal treaty tabling process under the Policy was granted, the Agreement was to be tabled at the earliest opportunity following ratification. This was done as early as it could have been when the Agreement was tabled, in accordance with the Policy on September 15, 2014. It should be noted that the text of the Agreement was also set out in Schedule 3 to Bill C-31, the Economic Action Plan 2014 Act, No. 1, which was introduced in the House of Commons on March 28, 2014.
(fff) how was the date in (eee) determined;
Since an exemption to the normal treaty tabling process under the Policy was granted, the Agreement was to be tabled at the earliest opportunity following ratification. This was done as early as it could have been when the Agreement was tabled, in accordance with the Policy on September 15, 2014. It should be noted that the text of the Agreement was also set out in Schedule 3 to Bill C-31, the Economic Action Plan 2014 Act, No. 1, which was introduced in the House of Commons on March 28, 2014.
(ggg) if the Agreement could have been tabled earlier in Parliament than the date in (o), (i) why was it not, (ii) what decisions were made in this regard, (iii) who made these decisions, (iv) how, (v) on what basis; and
Since an exemption to the normal treaty tabling process under the Policy was granted, the Agreement was to be tabled at the earliest opportunity following ratification. This was done as early as it could have been when the Agreement was tabled, in accordance with the Policy on September 15, 2014. It should be noted that the text of the Agreement was also set out in Schedule 3 to Bill C-31, the Economic Action Plan 2014 Act, No. 1, which was introduced in the House of Commons on March 28, 2014.
(hhh) if the Statement could have been made sooner in the House than Monday, April 28, 2014, (i) why was it not, (ii) what decisions were made in this regard, (iii) who made these decisions, (iv) how, (v) on what basis?
The Department has no information on this question.

Reply by the Offices of the Prime Minister and the Privy Council
With regard to the Agreement, the Privy Council Office has no information in relation to part (ii) regarding a letter drafted in consultation with the Treaty Section of the Department of Foreign Affairs and International Trade.




Tagged as: Canada FATCA rule of law treaties u.s.

COMMENTS

Share:

Today at McGill Law: Martin O'Neill on Corporations, Tax, and Social Justice

Published Nov 10, 2014 - Follow author Allison Christians: - Permalink

Martin O'Neill, Senior Lecturer in Politics at the University of York, joins us as today's speaker in the Spiegel Sohmer Tax Policy Colloquium at McGill. He'll present a work in progress that he has entitled "Corporations, Conventionalism, Taxation and Social Justice." Here is an abstract:

A failure to take seriously the conventionality of corporations has led to an unimaginative view of corporate taxation as being structurally analogous to the taxation of individuals. There are, in fact, many disanalogies between the two: corporate profit should not be treated as analogous to individual income; low-profit corporations should not be treated advantageously by a tax system in the same way as it should treat low-income individuals; and, most significantly, corporations are not owed the same level of care and determinacy as individuals with regard to the tax rules that they face. Breaking the perceived link between individual taxation and corporate taxation makes room for a reassessment of the structure and purpose of corporate taxation. 
Taking a step back from issues focussed narrowly on taxation, as such, there is a general need to integrate normative issues regarding corporations into our understanding of the proper configuration of the basic structure of a democratic society. In our current non-ideal circumstances, the corporations we actually have are corrosive of the possibility of social justice. In part, this is because we’ve been blinded by a certain picture of corporations as ‘natural’ economic entities, and have been too timid and unimaginative in the ways in which we subject corporations to political regulation and constraint. A robust conventionalism would allow us to reverse the usual order of justification: from seeing corporations as placing constraints on government policy, to seeing corporations as conventional economic units that should be embedded in an institutional and regulatory structure that delivers social justice. 
This gestalt switch opens up wide vistas for public policy innovation. Thus, this is an area in which applied political philosophy has an important home. First, conceptually, it opens up policy spaces which are easy to ignore when one is in the grip of an earlier picture. Secondly, in order to make sense of theories of liberal egalitarian justice, we need a better idea of their institutional setting, and this means moving beyond (or at least supplementing) overly schematic debates about the relative significance of government agencies and individual behaviour. We also need to think about how the basic structure of society should be organized so as to marshal its most significant economic institutions in directions which are conducive to the pursuit of social justice within a democratic society.
The presentation will again take place in the Seminar Room of the Institute for Health and Social Policy, Charles Meredith House, 1130 Pine Ave., Montreal, beginning at 2:35 pm. As always, the colloquium is open to all: students, faculty and the general public are welcome.

Tagged as: colloquium corporate tax McGill philosophy scholarship tax policy

COMMENTS

Share:

Today at McGill Law: Joseph Heath on Taxation as Collective Consumption

Published Oct 20, 2014 - Follow author Allison Christians: - Permalink

Professor Joseph Heath, Professor of Philosophy, University of Toronto, joins us today as the second speaker in the McGill University Speigel Sohmer Tax Policy Colloquium. Professor Heath is drawing from his book, Filthy Lucre: Economics for People Who Hate Capitalism, (released in the US as "Economics without Illusions: Debunking the Myths of Modern Capitalism"), where he writes about viewing taxation as a "club good":

Individuals express a surprisingly pervasive error that I refer to as the “government as consumer” fallacy. The picture underlying this fallacy is relatively straightforward. Government services, such as health care, education, national defense, and so on, “cost” us as a society. We are able to pay for them only because of all the wealth that we generate in the private sector, which we transfer to the government in the form of taxes. A government that taxes the economy too heavily stands accused of “killing the goose that lays the golden eggs” by disrupting the mechanism that generates the wealth that it itself relies upon in order to provides its services. Thus the government gets treated as a consumer of wealth, while the private sector is regarded as a producer. This is totally confused. The state in fact produces exactly the same amount of wealth as the market, which is to say, it produces none at all. People produce wealth, and people consume wealth. Institutions, such as the state or the market, neither produce nor consume anything. They simply constitute mechanisms through which people coordinate their production and consumption of wealth.
Heath has also pointed us to Todd Sandler's work on "Buchanan clubs."

 The presentation will take place in the Seminar Room of the Institute for Health and Social Policy, Charles Meredith House, 1130 Pine Ave., Montreal, beginning at 2:35 pm.

As always, the colloquium is open to all: students, faculty and the general public are welcome.

Tagged as: McGill philosophy scholarship tax policy

COMMENTS

Share:

This Fall at McGill: Colloquium on Tax Philosophy

Published Sep 12, 2014 - Follow author Allison Christians: - Permalink

I am pleased to announce that the annual McGill tax policy colloquium is now being generously supported by the law firm Spiegel Sohmer, Inc., under a grant established for the purpose of fostering an academic community in which learning and scholarship may flourish.

This fall, in its inaugural instalment, the Spiegel Sohmer Tax Policy Colloquium will return to tax policy fundamentals by critically examining the goals of taxation from a law and philosophy perspective.

The Colloquium will therefore be convened jointly by myself and Daniel Weinstock, who is the James McGill Professor in the Faculty of Law and Director of the McGill Institute for Health and Social Policy.  His research explores the governance of certain types of liberal democracies, and the effects of religious and cultural diversity from an ethical perspective on the political and ethical philosophy of public policy.

Each talk takes place in the Seminar Room, Institute for Health and Social Policy, 1130 Pine Ave, from 14:35 to 17:35.  These events are free and open to everyone. We welcome students, faculty and the general public to attend. Here is the line-up:

Monday, October 6: Wayne Norman, Mike and Ruth Mackowski Professor of Ethics, Kenan Institute for Ethics and Department of Philosophy, Duke University. His work focuses on business ethics and his published work includes numerous books and journal articles, as well as contributions to “Ethics for Adversaries: How to Play Fair When You’re Playing to Win.”

Monday, October 20: Joseph Heath, Professor in the Department of Philosophy and the School of Public Policy and Governance at the University of Toronto; Director of the University of Toronto Centre for Ethics. He has published work very widely including the recent book "Enlightenment 2.0: Restoring Sanity to Our Politics, Our Economy, and Our Lives."

Monday, October 27: Patrick Turmel, Professor in the Department of Philosophy, Laval University. His work focuses on ethics and political institutions, particularly cities. His publications include co-authorship of a book titled “La Juste Part: Repenser les Inégalités, la Richesse et la Fabrication des Grille-Pains.”

Monday, November 11: Martin O’Neill, Senior Lecturer in Moral and Political Philosophy, Department of Politics, University of York, U.K. His research examines global and intergenerational justice. Among his many publications, Professor O’Neill’s most recent book is “Property-Owning Democracy: Rawls and Beyond.”

Monday, November 17: Peter Dietsch, Professor, Department of Philosophy, Université de Montréal. He works on questions of distributive justice with particular emphasis on the application of philosophical theories through social instruments including the tax system. His work is widely published, including a recent article titled “Tax Competition and Global Background Justice” in The Journal of Political Philosophy. He is also working on a book on tax competition entitled “Catching Capital”.

I am looking forward to hearing what these pre-eminent philosophers can tell us about the state of contemporary tax policy theory. Over the course of the semester it is my hope that we can develop a framework for thinking about tax policy that responds to the world in which we find ourselves today, with all of its promises and challenges for democracy, economy, and identity.

Tagged as: McGill philosophy scholarship tax policy

COMMENTS

Share:

IRS claims statutory authority for FATCA agreements where no such authority exists

Published Jul 04, 2014 - Follow author Allison Christians: - Permalink

Over at federal tax crimes blog Jack Townsend has posted a letter from the IRS to Congressman Bill Posey, in response to an inquiry the Congressman apparently made about the intergovernmental agreements ("IGAs") to implement FATCA by other governments (instead of directly by foreign financial institutions, per the law Congress enacted in 2010). Treasury says:
“Your letter also asks about statutory authority to enter into and implement the IGAs. The United States relies, among other things, on the following authorities to enter into and implement the IGAs: 22 USC Section 2656; Internal Revenue Code Sections 1471, 1474(f), 6011, and 6103(k)(4) and Subtitle F, Chapter 61, Subchapter A, Part III, Subpart B (Information Concerning Transactions with Other Persons)."
None of these sources of law contain any authorization to enter into or implement the IGAs.  It is patently clear that no such authorization has been made by Congress, and that the IGAs are sole executive agreements entered into by the executive branch on its own under its "plenary executive authority”. As such the agreements are constitutionally suspect because they do not accord with the delineated treaty power set forth in Article II. As Michael Ramsey wrote in a 1998 article, the danger is that if the president seeks to reach agreements outside of his plenary constitutional powers, the agreement lacks domestic legal effect.

Just to be clear, the fact that a document signed by an individual might or might not bind the United States as a matter of constitutional law does not mean that the United States will not honor whatever commitments the individual makes under such an agreement. The contrary is likely the case especially given the predicament Treasury found itself in, coupled with the pitiable small promises undertaken by the US in these "agreements."

But we should be clear that the analytical terrain we should be traversing is whether the scope of the plenary executive authority can suffice to support as a matter of law the promises made in some 80 or so IGAs (many of which are currently agreements in principle only). We should not be wasting anyone's time pretending that Congress has authorized Treasury or the Secretary of State to enter into the IGAs. It has not.

So let’s take a look at what these sources actually say.

22 USC 2656 is about the power of the secretary of state. It says:
The Secretary of State shall perform such duties as shall from time to time be enjoined on or intrusted to him by the President relative to correspondences, commissions, or instructions to or with public ministers or consuls from the United States, or to negotiations with public ministers from foreign states or princes, or to memorials or other applications from foreign public ministers or other foreigners, or to such other matters respecting foreign affairs as the President of the United States shall assign to the Department, and he shall conduct the business of the Department in such manner as the President shall direct.
If that is an authorization for the IGAs, it is a vague one at best. Does an IGA constitute “correspondences, commissions, or instructions,” “negotiations”, “memorials or other applications,” or “such other matters respecting foreign affairs”? Under what interpretation of such relevant provisions? Also there is nothing here about the content or scope of the treaty power hereby implicitly authorized. Is IRS saying that with this power the Secretary of State can bind the nation at will on any matter, without the need for the President to seek advice and consent from the Senate prior to ratification? If so this is an extraordinary claim that does not scan with either historical practice or constitutional theory. 

26 U.S. Code § 1471 is, of course, part of FATCA. It is entitled “Withholdable payments to foreign financial institutions”.  It sets out the reporting obligations imposed on foreign financial institutions and states that the Secretary is authorized to treat a foreign financial institution as “meeting the requirements” of 1471 if the institutions complies with procedures or requirements set forth by the Secretary or is “a member of a class of institutions” identified by the Secretary. 

There is explicit authorization in 1471 for the Secretary to engage in agreements with FFIs to implement FATCA. However where is the authorization in 1471 for the Secretary to engage in agreements with other countries to implement FATCA? It is not in the text, certainly.

Therefore to what specific provision of 1471 could IRS possibly refer when it suggests this statute authorizes individuals to sign agreements altering the reach of FATCA on behalf of the United States? There is clearly no explicit authority. Is it implied? If so, by what?

Moreover, many or most of the IGAs have been signed by officers of the Secretary of State, ambassadors, consulates general and others, and not by Treasury. Does s1471 also impliedly delegate its implied treaty power authority to those outside of Treasury who have signed on behalf of the United States? Certainly there is no explicit delegation here.

26 U.S. Code §1474(f), also part of FATCA, is the statutory authorization for the Secretary of the Treasury to 
“prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of, and prevent the avoidance of, this chapter.” 
There is no authority expressed in this provision for the Secretary to enter into agreements with other governments. Does IRS suggest that an IGA constitutes “regulations” or “other guidance”? Under what interpretation of that characterization does the Treasury interpret the promulgation of either regulations or other guidance as an authorization to negotiate an agreement with a foreign government?

26 U.S. Code § 6011 is entitled “General requirement of return, statement, or list,” and it states the parameters under which a person must make a return “[w]hen required by regulations prescribed by the Secretary.” There is authorization in 6011 for the Secretary to require taxpayers to fulfill various reporting requirements, including electronic reporting. There is no authorization in 6011 for the Secretary to engage in agreements with other countries to implement 6011. 

What provision of 6011 is IRS suggesting confers the authority to negotiate agreements with other governments without Senate advice and consent?  Does IRS mean to imply that each and every authorization that Congress gives Treasury for the prescription of regulations is an implicit authorization for Treasury (or its implied designees in other departments) to conclude agreements with other governments? If so, this is a surprising claim of executive power that is inconsistent with the treaty power described in Article II of the constitution. I would think Congress would like to know under what interpretation of Congressional direction to the Secretary to issue guidance, IRS or Treasury would conclude that it now holds the power to make treaties on behalf of the United States.  

In other words, if IRS stands by this authorization it is suggesting that any tax code section that authorizes Treasury to regulate implicitly contains both a treaty making power as well as the power to delegate authority to departments other than that specifically charged with implementing the statute. That is not a plausible claim.

26 U.S. Code § 6103 is entitled “Confidentiality and disclosure of returns and return information” and it provides that “returns and return information shall be confidential,” with exceptions provided by statute. There is authorization in 6103 for the Secretary to engage in agreements with taxpayers to implement 6103 (for example in the case of advance pricing agreements). There is no authorization in 6103 for the Secretary to engage in agreements with other countries to implement 6103. Therefore, as with 1471 and 6011, to what specific provision of 6103 does IRS refer, and under what interpretation of the authority given by Congress in 6103 to enter into agreements with taxpayers does IRS find the authority for anyone to enter into agreements with other countries?

26 U.S. Code Part III, Subpart B is entitled “Information Concerning Transactions With Other Persons” and it contains 26 US Code §§ 6041 through 6050W—a very broad set of statutes involving information reporting, none of which explicitly grant anyone the power to bind the nation to anything. Certainly nowhere in the subpart appears any express authorization for Treasury to enter into agreements with other governments in respect of s1471 or otherwise. Therefore the same questions I have raised with respect to 1471, 1474, 6011, and 6103 would seem to arise here.

In short I see no express authorization anywhere in any of these authorities for the Treasury to enter into the intergovernmental agreements. Moreover there is no precedent for such agreements, and they are being signed by US officials who are not members of the Treasury. Does it not seem at least noteworthy that an enormous network of bilateral tax agreements has been established, a network that dwarfs the existing tax treaty network in size and scope, all without any explicit Congressional authorization, and without any regard to the Treaty power clearly laid out in Article II of the Constitution? 

And why not cite the TIEA power?

I would add that is not at all clear why any list of authorizations for an individual to enter into agreements with other governments on behalf of the United States would not include 26 US Code § 274(h)(6)(C)(f), which has long been relied upon to by Treasury to find the authority to enter into tax information exchange agreements ("TIEAs") that were not expressly authorized by the statute (because they are not listed in Section 274 as beneficiary Caribbean Basin countries).  This statute has clearly been abused by Treasury in extending it way beyond what Congress intended. However, the fact that Congress has not complained suggests that it has acquiesced to the overreach. 

That makes the TIEAs good precedent for those who want to defend the IGAs as a matter of law. In omitting this, the only plausible source of support for the authority to bind the nation without the advice and consent of Senate, does IRS suggest that Treasury now backs away from this authority? If so, why would they do that? The answer is of course that IRS believes that if necessary the TIEAs can also be considered sole executive agreements, and as such a TIEA "does not need Senate or other congressional approval." This is an official claim that the IRS doesn't think Treasury or anyone needs even s.274 as a cover: the executive can simply act alone to achieve its tax goals through international agreements.

At the end of the day, it is clear that Treasury saw a real and serious need to work with other governments to make FATCA work. There is no disputing that fact, and indeed it is a step toward multilateral cooperation which should be celebrated if only it weren’t so lopsided, and if only it weren't being accomplished via the threat of economic sanctions for all the world’s tax havens except the United States itself. But no amount of need or want can sidestep the constitutional delegation of powers among the branches, and the treaty power is no exception: nor should it be. At least one Treasury official has already conceded that the explanation for the IGAs is that they are "executive agreements”, not Article II treaties. 

IRS and Treasury should therefore just admit that the IGAs are simply “sole” executive agreements—not authorized by Congress but entered into by the executive branch under its sole discretion. 

This is a tenuous position and it ought to fail constitutional scrutiny but for the fact that in the past, Congress has acquiesced to this exercise of power by the executive and it is likely to do so again, especially given how little has been undertaken by the United States in these IGAs. As Lee Sheppard pointed out in a Tax Notes article two years ago, "An executive agreement depends on the good will of the parties to enforce it.” And as Susie Morse also pointed out in Tax Notes last year, Treasury is very likely to try to enforce their part of the IGAs. 

Since the US side of the IGAs is to deliver very modest undertakings that Treasury also believes can be done without congressional approval (namely, extending the longstanding s. 6049-based information exchange with Canada to other countries), this is probably true; all IGA promises to alter the law in the future should be seen as what they are, unenforceable promises that are beyond Treasury’s control and so won’t be delivered. 

Therefore honesty is still the best policy for Treasury. Instead of citing non-existent statutory authority that is easily refuted by simple reading, Treasury should own what it is doing outright. These are sole executive agreements, they lack statutory approval, they undertake very little on the part of the United States, but they are an effective way of pretending to be cooperative so that other countries can save face as they submit to the threat of economic sanctions that is FATCA. There isn’t really any reason why Treasury shouldn’t acknowledge this reality, since it is, strictly speaking, of Congress’ own making.

Tagged as: FATCA rule of law Tax law tax policy u.s.

COMMENTS

Share: