Law Commons^™

Holding U.S. Corporations Accountable: Toward A Convergence Of U.S. International Tax Policy And International Human Rights, Jacqueline Laínez Flanagan

Pepperdine Law Review

International human rights litigation underscores the inverse relationship between corporate power and corporate accountability, with recent Supreme Court decisions demonstrating increased judicial protections of corporate rights and decreased corporate accountability. This article explores these recent decisions through a tax justice framework and argues that the convergence of international human rights law and U.S. international tax policy affords alternate methods to hold corporations accountable for violations of international law norms. This article specifically proposes higher scrutiny of foreign tax credits and an anti-deferral regime targeting the international activity of U.S. corporations that use subsidiaries to shelter income and decrease taxation while …

The Devil In The Details: Reflections On The Camp Draft, Reuven S. Avi-Yonah

Articles

The discussion draft of the Tax Reform Act of 2014 (TRA 14) released by House Ways and Means Committee Chair Dave Camp, R-Mich., on February 26 represents a major effort for fundamental and far-reaching reform of U.S. tax law. Unfortunately, while many parts of the proposal seem sensible as an effort to bring back the spirit of 1986, the international tax reform proposals are deeply flawed and based on obsolete assumptions of the world that faces U.S. multinationals in 2014.

Should The Us Dictate World Tax Policy? Reflections On Ppl, Reuven S. Avi-Yonah

Articles

The U.S. Supreme Court’s decision to grant certiorari in PPL offers it a unique opportunity to change the law regarding foreign tax credits that has significantly impeded the ability of other countries to engage in meaningful tax reform. In 1938 the Court said in dicta that to qualify for the FTC a tax had to be an income or excess profits tax (or a tax imposed in lieu thereof) under U.S. tax principles. This statement has led to an elaborate set of regulations defining what is an income tax, which has significantly hampered the ability of foreign countries to adopt …

Economic And Legal Arguments In Ppl V. Commissioner, Michael S. Knoll

All Faculty Scholarship

In late February 2013, the U.S. Supreme Court will hear oral argument in PPL Corp. v. Commissioner. The Court took that case, which involves a claim by a U.S. corporation for foreign tax credits for taxes paid in accordance with the 1997 U.K. Windfall Profit Tax Act, in order to resolve a conflict between the Third Circuit, which denied the credit in PPL, and the Fifth Circuit, which allowed the credit in Entergy Corp. v. Commissioner. Nominally, the U.K. Act imposed a tax on recently privatized regulated companies of 23 percent of the difference between their estimated …

Corporate And International Tax Reform: Proposals For The Second Obama Administration (And Beyond), Reuven S. Avi-Yonah

Articles

The passage of the American Taxpayer Relief Act of 2012 (ATRA) offers an opportune moment to consider proposals for corporate and international tax reform. With the debate over individual tax rates for the income and estate tax settled for the present, the President and Congress are free to consider broader reforms. Few observers doubt that such reforms are sorely needed, for several reasons. First, the long-term budgetary outlook is unsustainable. Second, the U.S. corporate tax rate is the highest in the Organisation for Economic Co-Operation and Development (OECD). Third, the current system raises relatively little revenue and large amounts of …

Slicing The Shadow: A Proposal For Updating U.S. International Taxation, Reuven S. Avi-Yonah

Articles

In the article Avi-Yonah proposed that the United States tax multinational corporations using a formulary apportionment system based solely on income derived from sales. The background for the article was drawn principally from Robert Reich’s The Work of Nations (1991), and the analysis was inspired by Stanley I. Langbein’s work on transfer pricing, especially his seminal article "The Unitary Method and the Myth of Arm’s Length," Tax Notes, Feb. 17, 1986, p. 625; see also Louis Kauder, "Intercompany Pricing and Section 482: A Proposal to Shift From Uncontrolled Comparables to Formulary Apportionment Now," Tax Notes, Jan. 25, 1993, p. 485.

Foreign Administrative Law And International Taxation: A Case Study Of Tax Treaty Implementation In China, Wei Cui

Wei Cui

U.S. taxpayers and the IRS increasingly have to take into account the interactions between U.S. and foreign laws, but they have paid little attention to the administrative law backgrounds of foreign tax laws. In a growing range of cases, the need for such attention has become urgent. This Article describes a novel class of cases encountered by U.S. taxpayers that emanate from tax treaty implementation in China. In these cases, U.S. (and other foreign) investors face certain rules that conflict with common treaty interpretations, and that, at the same time, are not legally binding under Chinese domestic law. The question …

Vive La Petite Difference: Camp, Obama, And Territoriality Reconsidered, Reuven S. Avi-Yonah

Articles

The recent tax reform proposals by House Ways and Means Committee Chair David Camp, R-Mich., and by President Obama seem to offer starkly contrasting visions of how to reform the taxation of foreign-source income earned by U.S.-based multinational enterprises.1 Both acknowledge the problem, which is that U.S.-based MNEs currently have more than $1 trillion of ‘‘permanently reinvested’’ income offshore, which they cannot bring back to the U.S. without incurring a 35 percent tax penalty. However, they seem to offer radically different solutions: Under the Camp proposal, a participation exemption will enable U.S.-based MNEs to bring back the income without paying …

The Connection Between Competitiveness And International Taxation, Michael S. Knoll

All Faculty Scholarship

The term “competitiveness” is a highly elastic concept that has been used in a myriad of different ways. However, in discussions of the connection between international taxation and competitiveness, there are two conceptions of competitiveness that are frequently used, but are not always clearly distinguished from one another. One conception emphasizes the competition between firms to be profitable and grow by acquiring productive assets. The other conception focuses on the competition between states to attract investment capital and people by varying their regulations.

Those two conceptions of competitiveness each imply a distinct definition of a domestic industry and a different …

Taxes And Competitiveness, Michael S. Knoll

All Faculty Scholarship

Around the world, the tax laws are shaped by concerns with competitiveness. This paper provides a general theory of how taxes impact competitiveness. As part of that theory, this paper also introduces the concept of tax-based competitiveness neutrality. A tax system is competitively neutral when taxes do not cause competitors to change their relative valuations of any investments. This paper then uses that theory to evaluate tax policy in two high profile and important areas. The paper begins by describing two models of competitiveness, called the conduit or new money model and the investor or old money model. The central …

The Silver Lining: The International Tax Provisions Of The American Jobs Creation Act - A Reconsideration, Reuven S. Avi-Yonah

Articles

The American Jobs Creation Act of 2004, passed by the US Congress on 12 October and signed into law by President Bush on 22 October 2004, has been greeted by general dismay by various critics. The Act has been described as overloaded with “pork” and giveaways to special interest groups like tobacco farmers. The critics contend that the only achievement of the Act, the repeal of the “extraterritorial income” (ETI) regime that was ruled by the WTO to be a prohibited export subsidy, is dwarfed by 633 pages of special interest legislation. Even the Bush Administration distanced itself from the …