Banking and Finance Law Commons^™

Real-Time Collection Of The Value-Added Tax: Some Business And Legal Implications, Richard Thompson Ainsworth, Boryana Madzharova

Faculty Scholarship

Recent estimates of the level of VAT fraud in the EU are commensurate with the EU budget. With the Green paper on the future of VAT, the European Commission stressed the urgency and necessity of comprehensive VAT reforms. This paper analyses the business and legal implications of the recently proposed split-payment mechanism, which, if implemented, would move VAT’s method of collection to real-time. The discussion is positioned in the context of two increasingly visible trends in the EU – the general shift towards greater reliance on indirect taxation and the growing popularity of electronic payment instruments. The potential implementation of …

Vat Fraud In The Customer Chain - The German Perfect Storm Cases, Richard Thompson Ainsworth

Faculty Scholarship

German civil and criminal courts have not always agreed over whether to allow a taxpayer to zero-rate intra-Community supplies when the taxpayer making the supply knew (or should have known) that his buyer in the other Member State intended to fraudulently evade VAT as a missing trader. This is no longer the case. Zero-rating of intra-community supplies is now being denied in German civil and criminal courts.

This paper considers how far Germany appears to be extending the law in this area. In 2011 six cases were heard by the Bundesfinanzhof (German Supreme Tax Court) that demonstrate both (a) the …

Mahagében Kft & Péter Dávid: Re-Directing The Eu Vat's Perfect Storm, Richard Thompson Ainsworth

Faculty Scholarship

On June 21, 2012 the Court of Justice of the European Union (CJEU) rendered judgment on two Hungarian references, Mahagében kft v. Nemzeti Adó-és Vámhivatal Dél-dunántúli Regionális Adó Fölgazgatósága and Péter Dávid v. Nemzeti Adó-és Vámhivatal Dél-dunántúli Regionális Adó Fölgazgatósága (Mahagében/Dávid). The Mahagében/Dávid decisions clarify the CJEU’s earlier holdings in the joined cases of Alex Kittel v. Belgium and Belgium v. Recolta Recycling SPRL (Kittel/Recolta).

Kittel/Recolta is a critically important decision. It is central to the EU’s anti-fraud effort. It is one of three legal imperatives that earlier this year appeared to be coalescing into a Perfect (enforcement) Storm.

After …

Refund Fraud? - Real-Time Solution! Digital Security Borrowed From The Vat (Brazil, Quebec, & Belgium), Richard Thompson Ainsworth

Faculty Scholarship

This article provides support for a proposal to eliminate refund fraud in the U.S. by turning Forms W-2, and 1099 into self-certified/ self-authenticated tax documents. The proposal suggests that a “digital signature” of these documents should be taken after they are completed. The signature should then be made part of the final document.

This proposal was initially advanced in Refund Fraud? Real-Time Solution! The underlying premise of that article was that the US could dramatically reduce, if not eliminate, refund fraud if it borrowing digital security techniques from the VAT. The article did not however, explain or expand upon these …

Transfer Pricing: The Cup -- Case Studies: Australia, Us, Uk, Norway And Canada, Richard Thompson Ainsworth, Andrew Shact

Faculty Scholarship

All transfer pricing regimes give priority to the comparable uncontrolled price (CUP) method. Despite declarations that transfer pricing is a search for the “best method” or “most appropriate method,” all systems concede that the search is over when an exact comparable is found because a CUP is preferred over all methods. The best CUP is an exact CUP because it provides an arm’s length price that is not calculated. The price emerges directly from the comparison.

CUPs have traditionally been the most commonly applied method for both taxpayers and the government. They are the judicial gold standard. They hold sway …

An American Look At Zappers: A Paper For The Physikalisch-Technische Bundesanstalt, Revisionssicheres System Zur Aufzeichnung Von Kassenvorgängen Und Messinformationenthe, Richard Thompson Ainsworth

Faculty Scholarship

The common observation in the U.S. is that enforcement against technology-facilitated sales suppression has fallen through an intra-jurisdictional crack. Neither federal nor state auditors systemically target this area. But this is changing, and the change is coming from the state side.

This paper has two main parts. First, it summarizes the current state of sales suppression enforcement in the U.S. Secondly, it reviews the international solutions that are attracting the most U.S. attention. A conclusion indicates likely directions for U.S. enforcement.

Georgia is the first state to take action. On May 3, 2011 Georgia added code section 16-9-62 to Georgia …

Transfer Pricing: Data Dumps And Comparability - Us, Uk, Canadian, And Australian Case Studies, Richard Thompson Ainsworth, Andrew Shact

Faculty Scholarship

Comparability is the heart of transfer pricing. The OECD, U.K., Canadian, Australian, and U.S. transfer pricing rules all echo one another on how critically important the comparability analysis is. Performing this analysis and proving comparability, however, is a demanding exercise.

What makes proving comparability so difficult is that the analysis is two sided. Both controlled and uncontrolled transactions must be thoroughly analyzed. Just as much effort needs to be applied to determine the functions, contract terms, risks and the economic conditions for the unrelated party comparables as is spent on analyzing the related parties (taxpayers).

But there is more to …

Making A Voluntary Greek Debt Exchange Work, Mitu Gulati, Jeromin Zettelmeyer

Faculty Scholarship

Within the next couple of months, the Greek government, is supposed to persuade private creditors holding about EUR 200bn in its bonds to voluntarily exchange their existing bonds for new bonds that pay roughly 50 percent less. This may work with large creditors whose failure to participate in a debt exchange could trigger a Greek default, but may not persuade smaller creditors, who will be told that their claims will continue to be fully serviced if they do not participate in the exchange. This paper proposes an approach to dealing with this free rider problem that exploits the fact that …

The Evolution Of Contractual Terms In Sovereign Bonds, Stephen J. Choi, Mitu Gulati, Eric A. Posner

Faculty Scholarship

In reaction to defaults on sovereign debt contracts, issuers and creditors have strengthened the terms in sovereign debt contracts that enable creditors to enforce their debts judicially and that enable sovereigns to restructure their debts. These apparently contradictory approaches reflect attempts to solve an incomplete contracting problem in which debtors need to be forced to repay debts in good states of the world; debtors need to be granted partial relief from debt payments in bad states; debtors may attempt to exploit divisions among creditors in order to opportunistically reduce their debt burden; debtors may engage in excessively risky activities using …

Reversible Rewards, Omri Ben-Shahar, Anu Bradford

Faculty Scholarship

This article offers a new mechanism of private enforcement, combining sanctions and rewards into a scheme of “reversible rewards.” The enforcing party sets up a precommitted fund and offers it as reward to another party to refrain from violation. If the violator turns down the reward, the enforcer can use the money in the fund for one purpose only – to pay for punishment of the violator. The article shows that this scheme doubles the effect of funds invested in enforcement and allows the enforcer to stop violations that would otherwise be too costly to deter. It argues that reversible …