Law Commons^™

Corporate And International Tax Reform: Long-, Medium-, And Short Term Proposals, Reuven S. Avi-Yonah

Law & Economics Working Papers Archive: 2003-2009

The current controversy surrounding President Obama’s international tax proposals seems like an opportune moment to try to consider them in context. How do these proposals fit in with an agenda for US corporate and international tax reform?

Few observers doubt that such reforms are sorely needed, for several reasons. First, the long-term budgetary outlook is unsustainable. Second, the US corporate tax rate is among the highest in the OECD. Third, the current system raises relatively little revenue and large amounts of corporate income go untaxed. Finally, the system is horrendously convoluted and imposes high transaction costs.

This paper will attempt …

Xilinx And The Arm's-Length Standard, Reuven S. Avi-Yonah

Articles

On May 7 the Ninth Circuit decided Xilinx v. Commissioner. By a 2-1 majority, the panel reversed the Tax Court and held that costs of employee stock options must be included in the pool of costs subject to a tax-sharing agreement. The Xilinx decision is important for three reasons. First, cost sharing is probably the key element in current transfer pricing law because it is the principal way in which profits from intangibles get shifted from the United States to low-tax jurisdictions. Moreover, informed observers agree that the allocation of income from intangibles is the most important problem in transfer …

Obama's International Tax Plan: A Major Step Forward, Reuven S. Avi-Yonah

Articles

President Barack Obama last week personally introduced a set of proposals to reform U.S. international taxation that are the most significant advance toward preserving the income tax on cross-border transactions since the enactment of the subpart F rules by the Kennedy administration in 1962. (For prior coverage, see Doc 2009-10047 or 2009 TNT 84-1.) In essence, the Obama proposals introduce a 21stcentury version of the vision begun by Thomas Adams in 1918 and continued by Stanley Surrey in 1961: a world in which source and residence taxation are coordinated so as to achieve the underlying goals of the international tax …

The Obama International Tax Plan: A Major Step Forward, Reuven S. Avi-Yonah

Law & Economics Working Papers Archive: 2003-2009

On May 4, 2009, President Obama in person introduced a set of proposals to reform U.S. international taxation that are the most significant advance toward preserving the income tax on cross-border transactions since the enactment of Subpart F by the Kennedy Administration in 1962. In essence, the Obama proposals (the “Obama Plan”) introduce a 21st Century version of the vision begun by Thomas Adams in 1918 and continued by Stanley Surrey in 1961: A world in which source and residence taxation are coordinated so as to achieve the underlying goals of the international tax regime. As I have explained at …

The Oecd Harmful Tax Competition Report: A Tenth Anniversary Retrospective, Reuven S. Avi-Yonah

Articles

Eleven years ago the Organisation for Economic Co-operation and Development published its report "Harmful Tax Competition: An Emerging Global Issue." The Report identified for the first time two problem areas facing international income taxation of geographically mobile activities: tax havens and harmful preferential tax regimes. It sought to initiate activities to eliminate both types of problems.

Closing The International Tax Gap Via Cooperations, Not Competition, Reuven S. Avi-Yonah

Book Chapters

All three major goals of the Volcker task force — reducing tax evasion and loopholes, simplifying the code, and reducing corporate welfare — can be advanced by focusing on the international aspects of the tax gap. These aspects include both enforcement of existing U.S. law on U.S. residents earning income overseas (the evasion issue) and reforming deferral for U.S.-based multinational enterprises (the avoidance issue). To best advance the task force’s three goals, I would propose a change in each of these two major international areas.

Protectionist Pitfalls In U.S. Tax Reform, James R. Hines Jr.

Book Chapters

The magnitude of current and projected U.S. budget deficits makes it appropriate for the government to cast its net wide in seeking new revenue sources. In doing so, however, there is the danger of misconstruing the role of domestic taxation in a global economy, and thereby designing a tax reform proposal with significant protectionist elements.

International Law: Private Law In United States Law, Reuven S. Avi-Yonah

Book Chapters

This article discusses some aspects of the development of international economic law in the United States since the end of World War I and the impact it had on the development of international economic law generally, focusing specifically on the three areas in which U.S. law had the most significant impact on international economic law: international trade and investment, international taxation, and international antitrust measures. In general, in all three areas U.S. law had considerable influence on the development of international economic law in the twentieth century. However, the degree of influence in these and other areas varied depending on …

Double Tax Treaties: An Introduction, Reuven S. Avi-Yonah

Book Chapters

The existing network of more than 2,500 bilateral double tax treaties (DTTs) represents an important part of international law. The current DTTs are all based on two models, the Organisation for Economic Co-operation and Development (OECD) and United Nations (UN) model DTTs, which in turn are based on models developed by the League of Nations between 1927 and 1946. Despite some differences that will be discussed below, all DTTs are remarkably similar in the topics covered (even the order of articles are always the same) and in their language. About 75% of the actual words of any given DTT are …

How Globalization Affects Tax Design, James R. Hines Jr., Lawrence H. Summers

Articles

The economic changes associated with globalization tighten financial pressures on governments of high-income countries by increasing the demand for government spending while making it more costly to raise tax revenue. Greater international mobility of economic activity, and associated responsiveness of the tax base to tax rates, increases the economic distortions created by taxation. Countries with small open economies have relatively mobile tax bases; as a result, they rely much less heavily on corporate and personal income taxes than do other countries. The evidence indicates that a ten percent smaller population in 1999 is associated with a one percent smaller ratio …

Reconsidering The Taxation Of Foreign Income, James R. Hines Jr.

Articles

The purpose of this Article is to analyze the consequences of taxing active foreign business income,1 and in particular, to compare a regime in which a home country taxes foreign income to a regime in which it does not. In practice, countries typically do not adopt such extreme policy positions. For example, a country such as France, which largely exempts foreign business income from taxation, nevertheless taxes small pieces of foreign income;2 and a country such as the United States, which attempts to tax the foreign incomes of U.S. corporations, permits taxpayers to defer home country taxation in some circumstances, …

Allocating Business Profits For Tax Purposes: A Proposal To Adopt A Formulary Profit Split, Reuven S. Avi-Yonah, Kimberly A. Clausing, Michael C. Durst

Articles

The current system of taxing the income of multinational firms in the United States is flawed across multiple dimensions. The system provides an artificial tax incentive to earn income in low-tax countries, rewards aggressive tax planning, and is not compatible with any common metrics of efficiency. The U.S. system is also notoriously complex; observers are nearly unanimous in lamenting the heavy compliance burdens and the impracticality of coherent enforcement. Further, despite a corporate tax rate one standard deviation above that of other OECD countries, the U.S. corporate tax system raises relatively little revenue, due in part to the shifting of …