TAX, SOCIETY & CULTURE

Follow me on Twitter:

Taxing Income Where Value is Created: draft and powerpoint

Published Apr 11, 2018 - Follow author Allison Christians: - Permalink

I have posted a draft of a work in progress, Taxing Income Where Value is Created, which is co-authored by Laurens van Apeldoorn (Leiden University). Here is the abstract:

Subscribing to the core idea that income should be taxed where value is created, the international community has devised a set of tax base protecting rules to counter a world in which highly profitable multinational companies like Apple, Google, and Amazon pay very little in taxation. But these rules rely on assumptions about value that tend to allocate most revenues from international trade and commerce to rich countries while, whether intentionally or not, depriving poorer countries of their proper share. This article argues that a rigorous examination of what we mean by value would prompt changes in this allocation. To demonstrate with a concrete example, the article examines wages paid to workers in low income countries and reveals a clear and well-documented gap between market price and fair market value resulting from labor exploitation. It then demonstrates how to apply this knowledge to existing international tax rule sets to reallocate profits to align more closely to the value-based ideal. If accepted in principle, the proposed approach could be expanded beyond wages to consider other areas in which prices do not align with value creation. Ultimately this could provide a more detailed template to reallocate multinational revenues in a way that does not inappropriately benefit richer countries at the expense of poorer ones.
My powerpoint presentation of the paper is available in PPT here and in PDF here. I have used various versions of this powerpoint in presenting this paper a couple of times now, with (hopefully) some improvements in each presentation.

As depicted in one of my slides, I have encountered a perplexing mix of reactions to the ideas presented in this paper. Feedback ranges from "will make administration and compliance impossible for tax authorities and taxpayers alike" to "won't change anything, profit shifters gonna profit shift" to "great idea; doesn't go far enough." I wonder if a competent authority faced with a price adjusted per our proposal would see it as a position reasonable and consistent with the ALTP as we do, and whether it actually matters to the competent authority whether it is reasonable or consistent or not (I will admit that I am skeptical that competent authorities work out disputes among themselves on the merits: see this paper for why).


This is still a work in progress and comments are welcome.




Tagged as: corporate tax economics scholarship tax policy transfer pricing

COMMENTS

Share:

Tax Sovereignty in the BEPS Era

Published Jun 17, 2017 - Follow author Allison Christians: - Permalink

Kluwer law has recently published Tax Sovereignty in the BEPS Era, a collection of contributions I co-edited with Sergio Rocha, in which we and a slate of authors from a range of countries explore the impact of the BEPS initiative on "tax sovereignty"--which I take to mean the autonomy that nations seek to exercise over tax policy. Here is the description:

Tax Sovereignty in the BEPS Era focuses on how national tax sovereignty has been impacted by recent developments in international taxation, notably following the OECD/G-20 Base Erosion and Profit Shifting (BEPS) Project. The power of a country to freely design its tax system is generally understood to be an integral feature of sovereignty. However, as an inevitable result of globalization and income mobility, one country’s exercise of tax sovereignty often overlaps, interferes with or even impedes that of another. In this collection of chapters, internationally respected practitioners and academics reveal how the OECD’s BEPS initiative, although a major step in the right direction, is insufficient in resolving the tax sovereignty paradox. Each contribution deals with different facets of a single topic: How tax sovereignty is shaped in a post-BEPS world.
And here is the table of contents:
Part I The Essential Paradox of Tax Sovereignty
  • CH 1: BEPS and the Power to Tax, Allison Christians          
  • CH 2: Tax Sovereignty and Digital Economy in Post-BEPS Times, Ramon Tomazela Santos & Sergio André Rocha
  • CH 3: Justification and Implementation of the International Allocation of Taxing Rights: Can We Take One Thing at a Time?, Luís Eduardo Schoueri & Ricardo André Galendi Júnior
  • CH 4: An Essay on BEPS, Sovereignty, and Taxation, Yariv Brauner

Part II    Challenge to the Foundational Principles of Source and Residence
  • CH 5: Evaluating BEPS, Reuven S. Avi-Yonah & Haiyan Xu
  • CH 6: Jurisdictional Excesses in BEPS’ Times: National Appropriation of an Enhanced Global Tax Basis, Guillermo O. Teijeiro
  • CH 7: Taxing the Consumption of Digital Goods, Aleksandra Bal

Part III  Acceptance and Implementation of Consensus by Differently-Situated States
  • CH 8: The Birth of a New International Tax Framework and the Role of Developing Countries, Natalia Quiñones
  • CH 9: The Other Side of BEPS: “Imperial Taxation” and “International Tax Imperialism”, Sergio André Rocha
  • CH 10: Country-by-Country Over-Reporting? National Sovereignty, International Tax Transparency, and the Inclusive Framework on BEPS, Romero J.S. Tavares
  • CH 11; How Are We Doing with BEPS Recommendations in the EU?, Tomas Balco & Xeniya Yeroshenko      
  • CH 12: U.S. Tax Sovereignty and the BEPS Project, Tracy A. Kaye 
And finally, here is a brief description:

The book unfolds in three parts. The first, The Essential Paradox of Tax Sovereignty, features four chapters.

  • In chapter 1, Christians introduces the topic by demonstrating how BEPS arose from the paradox of tax sovereignty and analyzing why multilateral cooperation and soft law consensus became the preferred solutions to a loss of autonomy over national tax policy. The chapter concludes that without meaningful multilateralism in the development of global tax norms, the paradox of tax sovereignty will necessarily continue and worsen, preventing resolution of identified problems for the foreseeable future. 
  • Tomazela &; Rocha pick up this thread in chapter 2, where they demonstrate that BEPS addresses the symptoms, but not the problems, of the sovereignty paradox. In their view, the central defining problem of this paradox is an ill-defined jurisdiction concept. The chapter demonstrates why tax policymakers need to change the conventional wisdom on sovereignty in order to incorporate new nexus connections due to the changing nature of trade and commerce. 
  •  In chapter 3, Schoueri & Galendi further the inquiry by providing a detailed analysis of the interaction of contemporary cooperation efforts with the sovereignty of states in light of historical claims in economic allegiance, economic neutrality and now cooperation against abusive behaviour. 
  • Brauner rounds out this first part in chapter 4, which establishes the evolution of the concept of tax sovereignty. The chapter proposes an instrumental role for sovereignty in the process of improving cooperation and coordination of tax policies among productive (non-tax haven) countries, to balance claims and serve as a safeguard against political (in this case international) chaos. Brauner concludes that such a change to the business of international tax law would ensure at least an opportunity for all participants to succeed on their own terms. 

 Part Two of the book, Challenge to the Foundational Principles of Source and Residence, takes an in depth look at why residence and source continue to be the two essential building blocks of tax sovereignty and the backbone of the international tax system, surviving BEPS but still subject to multiple challenges in theory and practice.

  • In chapter 5, Avi-Yonah & Xu argue that BEPS simply cannot succeed in solving the sovereignty paradox because BEPS follows the flawed theory of the benefits principle in assigning the jurisdiction to tax. Avi-Yonah and Xu therefore make a compelling argument that for the international tax regime to flourish in the face of sovereign and autonomous states, countries must commit to full residence-based taxation of active income with a foreign tax credit granted for source-based taxation. 
  • In chapter 6, Tejeiro continues the analysis of the fundamental jurisdictional building blocks, demonstrating that by resorting to legal fictions within BEPS and beyond it, states are attempting to enlarge the scope of their personal or economic nexus, or to grasp taxable events and bases beyond their proper reach under well-settled international law rules and principles. 
  • Bal furthers the discussion in chapter 7, with an analysis of how digital commerce has upended traditional notions of source and residence. Bal advocates the consumer's usual residence as a good approximation of the place of actual consumption and therefore the best-justified place of taxation. 

Part Three of the book, Acceptance and Implementation by Differently-Situated States, considers tax sovereignty after BEPS from a range of perspectives. Chapters 8 through 10 focus on perspectives from lower income or developing countries, while chapters 11 and 12 review the landscape from the perspective of Europe and the United States, respectively.

  • In chapter 8, Quinones explores how developing countries might take advantage of the new international tax architecture, developed for purposes of coordinating the BEPS action plans, to ensure that their voices are truly shaping the standards. She argues that the knowledge gap between developing and developed is getting narrower instead of wider, with major negative impacts expected for the international tax order. 
  • Rocha continues this discussion in chapter 9, with a proposal: instead of simply accepting the BEPS Project’s recommendations and their reliance on historical decisions about what constitutes a country’s “fair share of tax”, developing countries should join in the formation of a Developing Countries’ International Tax Regime to focus discourse on the rightful limits of states’ taxing powers. 
  • Furthering the theme of autonomous priority-setting, in chapter 10 Tavares focuses in on a key part of the BEPS consensus, exploring whether implementing the CBCR standard, without a deeper transfer pricing reform, should be viewed as a priority in every country. He further questions whether this particular initiative, even if important, is worthy of mobilization of the scarce resources of developing countries. Tavares concludes with an incisive review of the role of the inclusive framework in prioritizing some needs over others. 
  • Balco & Yeroshenko then consider BEPS implementation from the very different perspective of the EU in chapter 11. The chapter demonstrates that even within the EU, BEPS implementation is not straightforward, as the interests of member states sometimes conflict and the basic notion of tax sovereignty remains fundamental even while tax coordination and harmonization across the EU expands. However, the authors note that the progress made in the last several years on key cooperation norms, which was largely inspired by BEPS, has been unprecedented. 
  • Finally, Kaye provides a capstone to the book in chapter 12, where she makes the convincing case that although some in the United States saw the BEPS Project as a threat to US tax sovereignty, this project was in fact necessary in order for the United States to effectively wield its tax sovereignty. Kaye’s chapter thus ends the book with a clear picture of the ongoing paradox of tax sovereignty in the world after BEPS.

Tagged as: BEPS scholarship sovereignty tax competition tax policy

COMMENTS

Share:

Lederman: Death, Taxes and a Beach Read

Published Mar 09, 2017 - Follow author Allison Christians: - Permalink

Over at Surly Subgroup, Leandra Lederman has posted Death, Taxes, and a Beach Read, a review of a series of novels by Diane Kelly, a former CPA and tax attorney turned romance novelist who "had the pleasure of working with a partner later convicted of tax shelter fraud [and] served a stint as an Assistant Attorney General for the State of Texas under an AG who pled guilty to criminal charges related to the tobacco company lawsuits." Leandra told me about these books last week when I was in Bloomington, and I have never heard of them before, so it is fun to see her write them up. From her post:

It never occurred to me to blog about [the series] until I read the first page of “Death, Taxes, and Cheap Sunglasses” while on a plane, and saw a link with tax issues I frequently write about. The opening paragraph reads:
“I slid my gun into my purse, grabbed my briefcase, and headed out to my car. Yep, tax season was in full swing once again, honest people scrambling to round up their receipts, hoping for a refund or at least to break even. As a taxpayer myself, I felt for them. But as far as tax cheats were concerned, I had no sympathy. The most recent annual report indicated that American individuals and corporations had underpaid their taxes by $450 billion. Not exactly chump change. That’s where I came in.” 
I had just presented my latest tax compliance article, “Does Enforcement Crowd Out Voluntary Tax Compliance?” and here were tax gap figures showing up in a novel! ...
Leandra notes that of course the novel simplifies, referring to “underpaid”taxes: official tax gap measurements by the IRS (see e.g. 2006; 2012) include late payment and filing/reporting failures. Leandra continues:
The heroine of this "romantic mystery series" is CPA Tara Holloway, who's described as "kicking ass, taking social security numbers, and keeping the world safe for honest taxpayers." She's a Special Agent with the IRS's Criminal Investigation Division.... 
Diane Kelly takes a few liberties with what Tara can get away with. The acknowledgments in “Death, Taxes, and Peach Sangria” include the following statement: “To the IRS special agents, thank you for sharing your fascinating world with me and for all you do on behalf of honest taxpayers. Please forgive Tara for being such a naughty agent and breaking the rules.” 
Leandra recommends readers start with the first novel in the series, Death, Taxes, and a French Manicure. But if Tara's mission is to close the tax gap, is it ok to buy the book on Amazon?

Tagged as: tax gap

COMMENTS

Share:

Idiot's Guide to DBCFT, Ryan Style

Published Jan 18, 2017 - Follow author Allison Christians: - Permalink

I've been fielding several "what is is this DBCFT idea" kinds of questions so I thought it might be helpful to present the six basic features of the DBCFT as proposed (in very general form) by Paul Ryan and a very simple chart to explain how the DBCFT would "work" if it was enacted as described in Ryan's "Better Way" plan.*

Accordingly, based on that proposal, the six main features of the DBCFT would be:

  1. domestic sales are included
  2. foreign sales are excluded
  3. dividends from foreign subsidiaries are exempt
  4. all foreign costs are non-deductible
  5. net interest is non-deductible
  6. allowable domestic costs are immediately deductible (expensed)

Obviously these are oversimplifications and I'm ignoring transition rules and so on, but these are the basic building blocks. The Ryan plan proposes a tax rate of 20%. 

So what happens if these building blocks are put in place via legislation, assuming away all transition issues etc., and that a tax imposed is a tax collected?** If we imagine a product that will sell for $125, and costs $100 to produce (in materials and labour), this is what happens:


Box 1: MAGA ideal: made in America, by Americans, for Americans. Tax will be collected on profits earned by selling goods produced & sold domestically. The DBCFT most resembles an income tax in this scenario (though expensing and non-deductibility of interest still moves it toward a consumption base); it will also be the easiest to collect.

Box 2: Exports. Tax exemption for sales abroad will create (possibly permanent) NOLs to carry forward indefinitely. This will require deciding on loss-shifting policy. This is obviously not an income tax but it not a VAT either.

Box 3: Imports. Sales in the US of goods produced abroad are taxed on a gross basis, more like an excise tax (or yes, a tariff). With an estimated $1.2 trillion trade deficit, this part of the DBCFT is expected to raise the most revenue but the success of that strategy depends to some degree (maybe a large degree) on remote sellers collecting tax (that’s complicated--see Europe).

Box 4: Foreign Sales of Foreign Products. Neither costs nor revenues are counted for goods produced and sold abroad, even if produced and sold by a US-based company. This part of the DBCFT would be more or less consistent with either a VAT or territorial income tax.

That, in a nutshell, is the basic skeleton of the DBCFT as proposed in the Ryan plan. It will be interesting to see what, if any, of this ends up enacted IRL.

* There is absolutely zero chance that the proposal will be enacted as described. Still, it is helpful to understand the basic vision. I do not claim to be an expert on the DBCFT and offer here no analysis or predictions about the incidence of the tax, or the impact such a tax would have on US or world capital flows, investment, consumption, economic growth, or international relations. This paper by Wei Cui, or this one by Wolfgang Schoen are helpful in addressing many of these issues.
** A tax imposed is never a tax collected. There is always a gap between a great idea (or for that matter a not so great idea) and something that can actually be carried out: tax administration is tax policy.

Tagged as: DBCFT Tax law tax policy US VAT WTO

COMMENTS

Share:

Analysis of Canada's Tax Gap Pre-Study

Published Jul 26, 2016 - Follow author Allison Christians: - Permalink

Further to my last post on the newly released Tax Gap study by the Canada Revenue Agency, the following comes from guest blogger Iain Campbell (ARC, UK):

I hope this comment is not too long but I’ve been following Tax Gap discussions for so long that it’s hard to pass by the chance to comment!

Background
This is an interesting development. Writing from the UK I’m not in regular contact with developments in Canadian tax administration. But I do recall there has been some entertainment over the Tax Gap, with the Parliamentary Budget Officer asking for the CRA to do some work on it - and being rebuffed.

In fact, the CRA has not been keen on preparing a Tax Gap analysis. In 2002 it reported that attempting to estimate overall levels of reporting non-compliance such as the ‘tax gap’ or the total amount of smuggling activity was fraught with difficulty. (CRCA Performance report for the period ending 31 March 2002.) Ten years later the CRA were still not convinced. At the start of 2013 they told the PBO:

The CRA later pointed out “the significant debate about the precision, accuracy and utility of any methodology to calculate the tax gap”. It drew attention to critical comments from the UK Treasury Select Committee, as well as the fact of 52 tax administrations surveyed by the IRS, 33 did not produce one, and the high costs of doing so. (CRA, PBO Information Request IR0102: tax gap estimates, letter 20 March 2013,] and PBO Information Request IR0102: tax gap estimates, letter 1 August 2013.) In 2014 the PBO even threatened to take legal action in order to compel production.
But in the recent election there was a promise to undertake such a study, ending this long standing reluctance to follow the example of other countries, including the USA and UK.  And following the Panama Papers the Revenue Minister said in January a tax gap study would be done. The new Canadian study comprises a 31pp paper on a conceptual study of the Canadian tax gap and an 11pp study on the Canadian GST/HST, which gives a gap of 5.5% in 2000 and 6.5% in 2014. (It explicitly references the decision announced by the Minister of National on 11 April.)

Basis of study – what’s in and what’s out
The conceptual study does, to an outsider, seem to spend a lot of time in not saying a great deal. It seems to add qualification to qualification, caveat after caveat, so that at times I wondered if the CRA really wanted to publish anything at all. Gus O’Donnell is the UK civil servant who wrote the Report that led to the UK Customs and Excise combining with the Inland Revenue to form HM Revenue and Customs. In that Report he surely got it down to a few words: “Making estimates of the tax gap is methodologically and empirically difficult, although easier for indirect taxes where tax can typically be related to consumption. Direct tax gaps are particularly difficult to estimate because the aggregate figures for income, for example, are built on tax data.”

The CRA's conceptual study refers a lot to the HMRC papers and policies on calculating the Tax Gap. But in some of the key areas it dances around what might be difficult decisions e.g., whether to report the gross tax gap, or, as in the UK, the gap after action to tackle non-compliance.

Avoidance
More controversially, the UK includes tax avoidance.  This is a good illustration of its overall approach.


On the other hand, academics and members of the accountancy profession have argued the opposite, that any estimate should not include avoidance as referenced by the “spirit of the law”. For example, during a Treasury Select Committee Hearing on The Administration and Effectiveness of HMRC, Judith Freedman (Professor of Tax Law, Oxford University) commented “I really take issue with the spirit of the law part, because either you have law or you don’t have law and the law has to state what it is.”

The Canadian paper discusses this option and concludes “the appropriate treatment of tax avoidance is less clear”. It seems Canada has decided to not include avoidance in its definition: “In general the CRA’s approach to the tax gap encompasses non-compliance related to non-filing, non-registration (in the case of GST/HST), errors, under-payment, non-payment, and unlawful tax evasion” (p29).  There seems to be no explicit position on avoidance but, although I doubt it will happen, “under-payment” is potentially broad enough to include under-payment via avoidance.

Other “Gaps”
Another area the study did not address is what the IMF and EU call the “tax policy gap”. I agree with this decision (which mirrors the UK). The IMF would widen the definition and use of the Tax Gap approach. It suggests including the effects of policy choices that lead to reduced revenues. In a study on the UK Tax Gap it refers to the impact of compliance issues on revenue as “the compliance gap” and the revenue loss attributable to provisions in tax laws that allow an exemption, a special credit, a preferential rate of tax, or a deferral of tax liability, as the “policy gap” (para 68).  As part of this they recommend tax avoidance schemes deemed legal through litigation should be considered part of the policy gap, not the compliance gap, and this distinction should be made clear.

A similar point was made by an EU report on VAT. They suggested that a possible link between the policy and the compliance gaps, since using the reliefs and allowances intended by policy could make compliance more difficult. “Reducing the policy gap may often be the simplest and most effective way to reduce the compliance gap. “ (p21)

In my view these kinds of proposals are likely to be very complex, perhaps contentious, and hard to administer. It seems a sensible decision to not refer to them or suggest their inclusion.

Then there are the base erosion issues where tax is avoided through the use of legal structures that make use of mismatches between domestic and international tax, e.g. permanent establishments. The Canadian study nods in the direction of BEPS and then passes by.

What’s the point of working out a Tax Gap?
But putting aside these sorts of issues, or whether “top-down” targeting is better than “bottom-up”, does the size of the hidden or “informal” economy predict the level of GST/VAT underpayment (or is it the other way around?), perhaps the  big $64K question is whether any of this means anything. If there is no clear agreement on the numbers, how they are calculated and their reliability, then is there are any point in preparing them?

The very concept of the tax gap is not universally agreed to be a useful analytical or strategic lever. Apart from the earlier Canadian reluctance, the Australians were slow to go down this road. UK Parliamentarians have been less than keen. In 2012 the Treasury Select Committee said they thought it was essentially a waste of time and resources. Worse, they feared it would misdirect HMRC away from ensuring every taxpayer paid the right amount of tax. Such fears have not died. The current TSC is examining UK corporation tax. Their early work involved scoping the problem and they heard some evidence on the tax gap. Andrew Tyrie (the Chair) seemed less than enthused at the very concept.

I think it has merits. But it ought not to be elevated to some shibboleth. It is one high-level measure of how successfully legislation is being applied, use of resources, etc.  The UK Government’s official position is that that “thinking about the tax gap forces the department to focus attention on the need to understand how non-compliance occurs and how the causes can be addressed—whether through tailored assistance, simpler legislation, redesigned processes or targeted interventions. Measuring the tax gap helps us to understand whether increasing returns from compliance activity reflect improved effectiveness or merely a decrease in voluntary compliance.”

The Canadian paper says broadly the same things (pp22-24). It talks of providing insight into the overall health of the tax system, of understanding the composition and scale of non-compliance, but warns of their limitations.

If that is how it used then I think it is a useful aid to policy making and how robust is the assurance being provided by the tax administration.


Tagged as: Canada tax gap tax policy

COMMENTS

Share:

Canada "Tax Gap" Study Released

Published Jul 05, 2016 - Follow author Allison Christians: - Permalink

The Government of Canada has released its first study of the "tax gap," which the Government defines as "the difference between the tax that would be paid if all obligations were fully met in all instances, and the tax actually paid and collected." The Canada Revenue Agency (CRA) has not completed a study of the income tax, but has released this paper on the concept and methodology. It has presented a report for GST/HST (Canada's VAT), estimating the tax gap to average about 5.6% per year over the period 2000-2014. For 2014, this produced an estimated tax gap of about $4.9 billion:



This study has been undertaken after many calls from academics and nongovernment organizations, including Canadians for Tax Fairness, which according to the CRA will be involved in consultations regarding the ongoing study. Canadians for Tax Fairness estimate that Canada loses $7.8 billion in income tax revenues to "tax haven" use, a number they constructed using Statistics Canada's foreign direct investment data.

The Government acknowledges that there is no reliable method for measuring the tax gap, and that the exercise is one in speculation based on imperfect information:
There are a number of challenges facing tax administrations undertaking tax gap estimation. The key challenge is access to the comprehensive and good-quality data necessary to produce estimates. A significant proportion of the tax gap involves unreported or under-reported income and assets and economic activity that are deliberately hidden from the government. As a result, many countries that publish tax gap estimates highlight their uncertainty.
Expect more to come from this exercise as the tax gap study is a key component of the Government's pledge to spend $444 million over five years "to enhance [CRA] efforts to crack down on tax evasion and combat tax avoidance."

Tagged as: budget Canada compliance CRA evasion governance

COMMENTS

Share:

This Friday in London: Conference on The Changing Shape of Tax Avoidance

Published May 04, 2016 - Follow author Allison Christians: - Permalink

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:


11.00 – 11.15 Welcome and Introduction

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

The venue for this conference is Friends House, 173 – 177 Euston Road, London.

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

COMMENTS

Share:

Brunson on Enforcing Foreign Tax Judgements: Kill the Revenue Rule

Published Feb 27, 2015 - Follow author Allison Christians: - Permalink

The revenue rule is a common law rule that holds that one country will not enforce the tax debts imposed on its people by a foreign sovereign. The revenue rule prevents US courts from enforcing foreign country tax liens, which prevents assistance in collecting taxes for other governments under tax treaties. Samuel Brunson has posted a paper on this topic entitled Accept this as a Gift: Unilaterally Enforcing Foreign Tax Judgments, of interest. Abstract:

Current U.S. law treats foreign tax judgments differently than other foreign civil judgments, prohibiting U.S. courts from recognizing and enforcing the former, even though they recognize and enforce the latter. In this article, Brunson argues that there is no compelling reason for this different treatment and that it is ultimately detrimental to the government’s revenue collection. As long as the revenue rule continues to prevent the United States from enforcing foreign tax judgments, the nation cannot enlist foreign help in reducing the foreign tax gap; other countries will only collect U.S. tax judgments if the United States reciprocally collects their tax judgments. The revenue rule also allows foreign persons to hide their assets in the United States, effectively turning the United States into a tax haven. For the sake of reducing the international tax gap and for the sake of international tax justice, the United States must revoke the revenue rule.

Tagged as: international law Tax law tax policy

COMMENTS

Share:

Today at McGill Law: Patrick Turmel on The Reasons for Taxation

Published Oct 27, 2014 - Follow author Allison Christians: - Permalink

We continue the Spiegel Sohmer Tax Policy Colloquium at McGill Law today with a presentation by Patrick Turmel, Professor of Philosophy, Université de Laval, who will be discussing a paper he is co-authoring with David Robichaud, Professor of Philosophy, University of Ottawa.  The paper is called "The Reasons of Taxation. Efficiency, Freedom, Equality." Here is the abstract:

In Capital in the XXI century, Thomas Piketty argues for a series of controversial policy recommendations, such as a substantial increase in tax rates on higher incomes and a global tax on capital whose explicit aim is to halt the current spiral of inequality. Piketty’s main argument for these recommendations is not moral, but economic. Indeed, higher tax rates on top revenues and a progressive global tax on capital have not much to do with social justice or equality per se. According to Piketty, they are mostly needed in order to correct the market and maximize efficiency. But Piketty also put forth democratic reasons in favour of fighting inequalities, since they not only threaten the market, but also the very foundations of political freedom. These two types of reasons – reasons of efficiency and reasons of freedom - certainly go a long way to justify fighting the current dynamics of inequality and thus resisting the return of the Belle Époque’s patrimonial capitalism. But they remain somehow weak, when looked at from the perspective of most theories of social justice. They certainly don’t have much normative force when it comes to justifying important redistribution of wealth, as social justice seems to call for. At the very least, they fall short of creating a complete argument. The aim of this paper is to contribute to filling this gap by showing that alongside reasons of efficiency and freedom, a third type of reasons should play a central role in our understanding and justification of taxation, namely: reasons of equality. 
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 McGill philosophy scholarship Tax law tax policy

COMMENTS

Share:

Avoidance, Evasion, and Taxpayer Morality

Published Apr 01, 2014 - Follow author Allison Christians: - Permalink

In light of the current sacrificing of Caterpillar on the altar of political posturing by lawmakers who are ultimately responsible for designing a global system that ensures US multinationals a world of tax-favorable opportunities, my latest SSRN post, Avoidance, Evasion and Taxpayer Morality appears à propos. It explores the difficult terrain we traverse when, confronted with the parade of household names apparently paying little or no taxes anywhere, we start talking about ethics and morality instead of law. Abstract:

In popular discourse, tax evasion by wealthy individuals is conflated with tax avoidance by multinational corporations to tell a single story about tax dodging and its negative impact on society. But conflating avoidance and evasion muddies the tax policy waters in important ways by turning legal obligations into moral ones. This Essay, prepared in connection with the Washington University School of Law colloquium on “Conceptualizing a New Institutional Framework for International Taxation,” makes the case for caution in using morality as a stop-gap measure to avoid drawing a regulated line between tax evasion and tax avoidance, while still meting out punishment within the undefined space between these two poles. It acknowledges the political gains derived from the rhetoric of morality but argues that the alternate view — that taxpayer behavior must ultimately be managed by law rather than social sanction — has the best chance of driving tax policy toward greater coherence in the long run because it makes the best case for more transparency in both lawmaking and the consequences of legislative decisions.
As always I welcome comments.

Tagged as: corporate tax fairness offshore politics rule of law scholarship tax policy

COMMENTS

Share: