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Articles 1 - 30 of 89
Full-Text Articles in Tax Law
Administrative Procedures As Tax Enforcement Tools, Wei Cui, Jeff Hicks, Michael Wiebe
Administrative Procedures As Tax Enforcement Tools, Wei Cui, Jeff Hicks, Michael Wiebe
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We study how common administrative procedures affect firm tax evasion. We begin with the counter-intuitive observation that many firms bunch above, rather than below, large notches in China’s corporate income tax. Cross-sectional patterns suggest that administrative procedures in the prepayment and refund system served as de facto enforcement tools that prevented some firms from accessing the reduced tax rates below the notches. Following a regulatory reform that eliminated these procedures, bunching below the notches increased dramatically. The results imply a tradeoff between reducing administrative barriers and allowing much taxpayer non-compliance in low-compliance environments.
The Chinese Tax System: Where It Stands And How We Should Study It, Wei Cui
The Chinese Tax System: Where It Stands And How We Should Study It, Wei Cui
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This book chapter offers an overview of where China’s tax system stands, critically assesses recent scholarship on Chinese taxation, and urges researchers to attend more to normative questions of tax design (e.g., economic efficiency and redistribution). After surveying major tax instruments deployed in China today, the chapter reviews recent studies of taxation’s impact on the Chinese economy, arguing that such scholarship often falls short of providing systematic support for policy analyses, and that ignoring normative questions in tax design leads to poor conceptual framing in positive analyses. The chapter then considers some themes at the intersection between Chinese political institutions …
The Canadian Digital Services Tax, Wei Cui
The Canadian Digital Services Tax, Wei Cui
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The Digital Services Tax (DST) may never be enacted in Canada. At least that seems to be what most Canadian tax professionals hope for: the draft Digital Services Tax Act (DSTA), released by the federal government in December 2021, has received little meaningful commentary; likely few Canadian taxpayers potentially affected by the DSTA (and their tax advisors) have attempted to learn from experiences of DST compliance in other countries; and the world also has little to learn from Canadian taxpayers’ preparation for a potential DST. This essay highlights three ways in which this collective dismissal of Canada’s proposed DST is …
The Chinese Enterprise Income Tax, Wei Cui
The Chinese Enterprise Income Tax, Wei Cui
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China’s Enterprise Income Tax (EIT) is the world’s largest corporate income tax by revenue, contributes a significant share to China’s total tax revenue, and is clearly the most substantial component of capital taxation in China. Yet scholarly research on the EIT is still limited. This overview chapter outlines the EIT’s main components from a legal perspective, while referring to empirical economic and accounting research that sheds light on these components. It discusses the personal scope of the EIT, so as to identify the significance of the pass-through and the tax-exempt sectors relative to the taxable corporate sector. It then examines …
The Mirage Of Mobile Capital, Wei Cui
The Mirage Of Mobile Capital, Wei Cui
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Capital mobility has preoccupied scholars of international taxation for more than 30 years. According to prevailing narratives, when capital is highly mobile, countries compete to attract investment, creating a race to the bottom; capital mobility also enables multinational enterprises (MNEs) to shift profits. The appeal of these narratives has culminated in the OECD’s proposed Global Minimum Tax, which declares the aim of substantially curtailing tax competition. This paper suggests, however, that the significance of mobile capital for international taxation may be largely an illusion.
Four deflationary arguments are advanced. First, the rising importance of intangibles for MNEs makes capital less, …
New Puzzles In International Tax Agreements, Wei Cui
New Puzzles In International Tax Agreements, Wei Cui
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The G7’s “global minimum tax” accord—followed by a new version of the OECD’s “Two Pillar Solution” and its endorsement by the G20—is accepted by many as evidence for international tax cooperation. But recent policy discussions offer no answer to a basic question: What can countries cooperate to achieve? This Article shows that the answers provided by proponents of the new international tax agreement are alarmingly ad hoc, misleading, and incoherent. Scholarship on corporate taxation has also long failed to identify potentials for international cooperation. The more successful international agreements purport to be, therefore, the more puzzling they become. I …
What Does China Want From International Tax Reform?, Wei Cui
What Does China Want From International Tax Reform?, Wei Cui
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In this article, the author examines China’s possible response to recent global efforts to reach consensus on international tax reform — particularly, a minimum corporate tax rate.
Will The New Global Tax Agreement Benefit The World?, Wei Cui
Will The New Global Tax Agreement Benefit The World?, Wei Cui
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The world has been abuzz lately with news of major global agreements within reach to reform international taxation. Countries in the G-7, G-20, and the even more impressive “Inclusive Framework”—a group of 139 countries convened by the Organization for Economic Cooperation and Development (OECD)—appear to be joining hands to end corporate tax competition and multinationals’ tax avoidance. Though many warn that the path to ultimate accord is arduous and depends on details, the declared goals of these efforts command broad public support.
The Growth Of Vancouver As An Innovation Hub: Challenges And Opportunities, Camden Hutchison, Li-Wen Lin
The Growth Of Vancouver As An Innovation Hub: Challenges And Opportunities, Camden Hutchison, Li-Wen Lin
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This article assesses the development of Vancouver as an entrepreneurial region. Using data collected from commercial startup databases, we find that Vancouver produces more startups and receives more venture capital financing per capita than any other major Canadian city. However, we also find that Vancouver lags many U.S. cities on these same metrics. In light of our empirical findings, we explore whether differences in entrepreneurial activity between Canada and the United States are due to differences in the countries’ legal environments. We conclude that legal differences do not explain observed economic disparities, and that differences in entrepreneurial activity are due …
Taxpayer Self-Inspections, Audits, And Optimal Tax Administration: Evidence From China, Wei Cui
Taxpayer Self-Inspections, Audits, And Optimal Tax Administration: Evidence From China, Wei Cui
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I document an important tax collection practice that is previously unknown to research on tax administration: mandatory taxpayer self-inspections. The practice emerged spontaneously across China in the 1990s and persists to this day despite having no basis in law. If taxpayers report additional liabilities after self-inspections, no penalties are imposed. Unlike tax amnesties, self-inspections are (i) backed up by the threat of government inspections with a significantly higher-than-normal audit probability, and (ii) used as a basic, routine revenue-generation technique. I show that self-inspections represent roughly 50% of the activity in China’s “tax inspection” (jicha) system and assume even greater importance …
Income Taxation Of Small Business: Toward Simplicity, Neutrality And Coherence, David G. Duff
Income Taxation Of Small Business: Toward Simplicity, Neutrality And Coherence, David G. Duff
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Among the many contributions that Judith Freedman has made to tax law and policy in the United Kingdom and around the world, one of the most sustained and significant involves the regulation and taxation of small business. This article reviews Professor Freedman’s contributions to tax law and policy regarding small business, and evaluates Canadian experience with the taxation of private companies and their shareholders in light of Professor Freedman’s work. Part II summarizes Professor Freedman’s main conclusions regarding the taxation of small business, addressing both the taxation of similar economic activities conducted through different legal forms and the rationale and …
The Interpretive Exercise Under The General Anti-Avoidance Rule, David G. Duff
The Interpretive Exercise Under The General Anti-Avoidance Rule, David G. Duff
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This chapter examines the interpretive exercise under the Canadian GAAR, contrasting this interpretive exercise with ordinary interpretation under the textual, contextual and purposive (TCP) approach, and considering the way in which the object, spirit, and purpose of the relevant provisions is determined in order to decide whether an avoidance transaction is subject to the GAAR. The first part distinguishes the interpretive exercise under the GAAR from the TCP approach, explaining that ordinary interpretation under the TCP approach is rightly constrained by the text of the applicable provisions in a way that the interpretive exercise under the GAAR is not. The …
General Anti-Avoidance Rules Revisited: Reflections On Tim Edgar’S 'Building A Better Gaar', David G. Duff
General Anti-Avoidance Rules Revisited: Reflections On Tim Edgar’S 'Building A Better Gaar', David G. Duff
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In addition to the requirement of a tax benefit or advantage, the application of most modern general anti-avoidance rules turns on two elements: a so-called "subjective element" which considers the purpose for which the transaction or arrangement resulting in the tax benefit or advantage was undertaken or arranged; and an "objective element" which considers the object or purpose of the relevant provisions to determine if the tax benefit resulting from the transaction or arrangement is or is not consistent with this object or purpose.
Although these two elements are present in most modern GAARs, the function of each element within …
How Well-Targeted Are Payroll Tax Cuts As A Response To Covid-19? Evidence From China, Wei Cui, Jeffrey Hicks, Max Norton
How Well-Targeted Are Payroll Tax Cuts As A Response To Covid-19? Evidence From China, Wei Cui, Jeffrey Hicks, Max Norton
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Numerous countries cut payroll taxes in response to economic downturns caused by COVID-19. This includes China, which completely exempted most firms from making social insurance (SI) contributions, resulting in an average tax cut of 21 percentage points on formal labor costs and approximately 20% of total tax remittances made by firms. We use novel data on 900,000 firms in one Chinese province to document new facts about the structure of SI in China and evaluate payroll tax cuts as a COVID-19 relief measure. We calculate that labor informality causes 54% of tax-registered firms---representing 24% of aggregate economic activity---to receive no …
Cash On The Table? Imperfect Take-Up Of Tax Incentives And Firm Investment Behavior, Wei Cui, Jeffrey Hicks, Jing Xing
Cash On The Table? Imperfect Take-Up Of Tax Incentives And Firm Investment Behavior, Wei Cui, Jeffrey Hicks, Jing Xing
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We investigate whether tax incentives are effective in stimulating private investment in less developed countries, by exploiting the introduction of accelerated depreciation for fixed assets investment in China as a natural experiment. In contrast to the large positive impact of similar tax incentives in the U.S. and U.K. found in recent studies, accelerated depreciation appeared ineffective in stimulating Chinese firms’ investment. Using confidential corporate tax returns from a large province, we find that firms fail to claim the tax benefits on over 80 percent of eligible investments. Firms’ take-up of the tax incentive is significantly influenced by their taxable positions …
What Is Unilateralism In International Taxation?, Wei Cui
What Is Unilateralism In International Taxation?, Wei Cui
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The OECD recently emerged as the site of unprecedented, multilateral, and seemingly high-stakes negotiations about the future of international business income taxation. Judging by the political resources deployed in these negotiations, international tax has entered unchartered territory. Professor Ruth Mason offers a timely and balanced portrayal of the OECD process so far. But explanations of this process remain highly contestable. On the one hand, international institutions that address externalities from uncoordinated actions and produce mutual benefits for participating nations can be highly stable. On the other hand, the OECD has struggled, whether in its BEPS (Base Erosion and Profit Shifting) …
The Digital Services Tax As A Tax On Location-Specific Rent, Wei Cui, Nigar Hashimzade
The Digital Services Tax As A Tax On Location-Specific Rent, Wei Cui, Nigar Hashimzade
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In 2018, the European Council and the UK and Spanish governments each proposed to introduce a Digital Services Tax (DST), to be levied on the revenue of large digital platforms from advertising, online intermediation, and/or the transmission of data. We offer a rationalization of the DST as a tax on location-specific rent (LSR). That is, just as many countries already levy royalties on rent from extracting natural resources, one can think of the DST as levied on rent earned by digital platforms from particular locations. We provide stylized illustrations of how platform rent can be assigned to specific locations, even …
Interest Deductibility And International Taxation In Canada After Beps Action 4, David G. Duff
Interest Deductibility And International Taxation In Canada After Beps Action 4, David G. Duff
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Among the ways in which multinational enterprises (MNEs) can shift profits from one jurisdiction to another in order to minimize taxes, one of the most simple and widely-employed involves the payment of interest to related parties and third parties. For these reasons, it is not surprising that the Organisation for Economic Cooperation and Development’s Action Plan on Base Erosion and Profit Shifting (BEPS) identified the deduction of interest and other financial payments as a significant source of BEPS concerns, and that BEPS Action 4 was charged with developing “recommendations regarding best practices in the design of rules to prevent base …
The Superiority Of The Digital Service Tax Over Significant Digital Presence Proposals, Wei Cui
The Superiority Of The Digital Service Tax Over Significant Digital Presence Proposals, Wei Cui
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Responding to calls for reallocating taxing rights over multinationals’ profits to reflect the place of user value creation, the OECD recently announced a Program of Work to implement international tax reform. I use the European Commission’s 2018 proposal to introduce the “significant digital presence” concept into income tax treaties as an example of the type of approach the OECD favors, and argue that it is inferior to recently proposed digital services taxes (DSTs). DSTs directly address the question of where profits should be allocated and taxed, while SDP proposals subordinate this vital question to superfluous treaty conventions. Global tax coordination …
The Digital Services Tax On The Verge Of Implementation, Wei Cui
The Digital Services Tax On The Verge Of Implementation, Wei Cui
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France enacted the digital services tax (DST) in 2019, and similar legislation is pending in the United Kingdom, Spain, Italy, and other countries. The DST can be viewed as a tax on location-specific rent (LSR), and it arguably solves genuinely new problems in international taxation. The author briefly reviews this justification of the DST and further examines the DST design in light of three criticisms. The first criticism is that certain features of the DST render it similar to distortionary import tariffs. The second is that the DST would not be borne by digital platforms but would only be shifted …
The Digital Services Tax: A Conceptual Defense, Wei Cui
The Digital Services Tax: A Conceptual Defense, Wei Cui
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As 2018 nears its end, a digital service tax (DST) seems imminent in Europe, yet elaborations of the DST’s motivations have so far come primarily from the European Commission and the UK Treasury: academic and practitioner commentators remain largely skeptical. This paper offers a new conceptual defense of the DST that is independent of the existing government positions. I argue that a clear case can be made for the DST as a way of taxing location-specific rent earned by digital platforms. While the DST may also be partially motivated by other, potentially conflicting visions for reforming international taxation, such as …
Tax Treaty Abuse And The Principal Purpose Test: Part Ii, David G. Duff
Tax Treaty Abuse And The Principal Purpose Test: Part Ii, David G. Duff
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The Multilateral Convention to Implement Tax Treaty Measures to Prevent Base Erosion and Profit Shifting or Multilateral Instrument (MLI) has been described as “an historical turning point in the area of international taxation” which introduces a third layer of tax rules for the taxation of cross-border transactions in addition to domestic tax law and bilateral tax treaties. Of the many provisions of the MLI, the most important are the preamble text in Article 6(1) and the so-called principal purpose test (PPT) in Article 7(1), both of which have been adopted by all signatories to the MLI in order to satisfy …
Tax Treaty Abuse And The Principal Purpose Test - Part I, David G. Duff
Tax Treaty Abuse And The Principal Purpose Test - Part I, David G. Duff
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The Multilateral Convention to Implement Tax Treaty Measures to Prevent Base Erosion and Profit Shifting (MLI) has been described as “an historical turning point in the area of international taxation” which introduces a third layer of tax rules for the taxation of cross-border transactions in addition to domestic tax law and bilateral tax treaties. Of the many provisions of the MLI, the most important are the preamble text in Article 6(1) and the so-called principal purpose test (PPT) in Article 7(1), both of which have been adopted by all signatories to the MLI in order to satisfy the OECD’s minimum …
Residence-Based Formulary Apportionment: (In-)Feasibility And Implications, Wei Cui
Residence-Based Formulary Apportionment: (In-)Feasibility And Implications, Wei Cui
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I examine one way of taxing international corporate income that has not previously been studied, “residence-based formulary apportionment” or RBFA. I first offer a new taxonomy of different ways of taxing corporate income by reference to individual shareholders, and distinguish what I call the “shareholder attribution” approach from integration, pass-through, and other approaches. I then argue that although traditional international legal norms had led international tax design to avoid taxing foreign corporations “unconnected” with the taxing jurisdiction (e.g. foreign corporations earning only foreign income), these legal norms have gone through substantial transformations in recent years. The exercise of jurisdiction over …
Legislated Interpretation And Tax Avoidance In Canadian Income Tax Law, David G. Duff, Benjamin Alarie
Legislated Interpretation And Tax Avoidance In Canadian Income Tax Law, David G. Duff, Benjamin Alarie
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Predictable statutory interpretation helps ensure the reliable operation of contemporary systems of taxation. Tax liabilities that are not clearly expressed and articulated by legislatures lead to over-reliance on litigation as a means to enforce and clarify legislative intent. For this reason, modern legislatures continually amend and draft new tax provisions, reformulating existing rules and introducing new ones to address ever-changing social and economic environments. Moreover, legislatures also respond with amendments directed at judicial decisions with which they disagree, as well as the transactions and arrangements at issue in these cases. As these amended and new rules are then subject to …
Local Tax Incentives And Behavior Of Foreign Enterprises: Evidence From A Large Developing Country, Jing Xing, Wei Cui, Xi Qu
Local Tax Incentives And Behavior Of Foreign Enterprises: Evidence From A Large Developing Country, Jing Xing, Wei Cui, Xi Qu
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We analyze how profit reporting and investment behavior of foreign enterprises respond to local tax incentives in China, a large developing country. Using firm-level data between 2000 and 2013 from China’s industrial enterprise survey, we first provide strong evidence for tax competition among Chinese cities (especially cities within the same province) over the average effective income tax rate. We then find that, despite stringent capital controls, both reported pre-tax profits and investment of foreign firms respond strongly to local tax incentives, suggesting that subnational tax competition in China is oriented towards both mobile profits and real resources.
Destination-Based Cash-Flow Taxation: A Critical Appraisal, Wei Cui
Destination-Based Cash-Flow Taxation: A Critical Appraisal, Wei Cui
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This article offers the first comprehensive scholarly response to proposals for destination-based, cash-flow taxation (DCFT). DCFT proposals have attracted heightened public attention in 2016 because of its incorporation into the U.S. House Republican Blueprint for tax reform and Donald Trump’s subsequent election to the White House. They also continue to fascinate tax specialists by suggesting that corporate profit can not only be taxed in countries of “source” or “residence,” but also (or even exclusively) in the countries where sales to final consumers occur. This Article clarifies the logical structure of DCFT proposals and exposes substantial gaps between their rhetoric and …
Taxation Without Information: The Institutional Foundations Of Modern Tax Collection, Wei Cui
Taxation Without Information: The Institutional Foundations Of Modern Tax Collection, Wei Cui
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A prominent strand of recent economic and legal scholarship hypothesizes that third-party information reporting (TPIR) is essential to modern tax collection. The slogan, “no taxation without information,” has captured researchers’ imagination and is even often presented as self-evident truth. This Article offers a fundamentally different perspective, arguing that the emphasis on TPIR is misplaced. TPIR is used largely in the collection of the personal income tax but not of many other types of modern taxes. Even for the personal income tax, TPIR also has close substitutes which do not involve information transmission to the government. Theoretically, the appeal to TPIR …
Taxation Of Non-Residents' Capital Gains, Wei Cui
Taxation Of Non-Residents' Capital Gains, Wei Cui
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Designing and enforcing a legal regime for taxing non-residents on capital gains realized from domestic sources is a topic of vital importance for developing countries. The reason is that non-capital-gain income that may be derived from a given country can generally be crystalized in the form of capital gains on the disposition of the income-generating asset. This is true of most important types of income, be it rent, interest, royalty, dividend or business profit. Taxing capital gains, therefore, is invariably needed to ensure that income from assets in the source country is properly subject to tax. In this sense, capital …
Does Judicial Independence Matter? A Study Of The Determinants Of Administrative Litigation In An Authoritarian Regime, Wei Cui
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Lawsuits against the government form a part of the regular functioning of legal systems in democratic countries, and responding to such lawsuits an unavoidable part of governance. However, in the context of authoritarian regimes, administrative litigation has been viewed as a distinctively valuable institution for promoting the rule of law and individual rights. Moreover, the judiciary is portrayed as the keystone to this institution and to the rule of law in general: the more powerful and competent is the judiciary, the more it is able to “constrain government” through judicial review. Through empirical and comparative analyses of over two decades …