Law Commons^™

The Historical Origins And Current Prospects Of The Multilateral Tax Convention, Reuven S. Avi-Yonah, Eran Lempert

Articles

This article has three aims. First, it surveys the pre-BEPS efforts to create a multilateral tax convention (MTC) from the 19th century onward, and explains why these efforts have failed, leading to an international tax regime dominated by unilateralism and bilateralism. Second, it contrasts the success of multilateralism in investment and trade law. Third, it examines the BEPS era efforts to create an MTC and suggests that, while there has been more convergence of the tax laws of countries, a fundamental divergence of interests persists that will likely doom any such efforts to failure. The article concludes that, at this …

The Historical Origins Of The Multilateral Tax Convention, Reuven S. Avi-Yonah, Eran Lempert

Law & Economics Working Papers

This paper will survey the efforts to create a multilateral tax convention (MTC) from the beginnings of the international tax regime to the present day. The paper’s main contribution is to provide a historical analysis of the (failed) efforts to create a MTC from the beginnings of the ITR until the League of Nations (as contained in Part 1 to this paper). Part 2 of the paper serves to provide a brief modern context to the historical analysis from Part 1, covering why the multilateral instrument (MLI) that was included in BEPS 1.0 is not a true MTC, and secondly …

After Pillar One, Reuven S. Avi-Yonah

Law & Economics Working Papers

Pillar One is unlikely to succeed for three reasons. First, it requires an MTC to be implemented because Amount A requires overriding Articles 5 (Permanent Establishment, PE), 7 (Business Profits) and 9 (Associated Enterprises) of every tax treaty to abolish the PE and Arm’s Length Principle (ALP) limits enshrined therein. But negotiating an MTC is hard, especially when over 100 countries are involved and there are fundamental disagreements among them.

Second, because Pillar One (despite its October 2021 expansion) is still aimed primarily at taxing the US digital giants (Big Tech), it is hard to envisage it being implemented without …

What Would Surrey Say? The Long Reach Of Stanley S. Surrey, Reuven S. Avi-Yonah, Nir Fishbien

Law & Economics Working Papers

This essay examines the extent of Surrey’s influence on developments in tax law after his death. It argues that his ideas clearly impacted the tax reform of 1986, but can even be seen in later enactments like the Tax Cuts and Jobs Act of 2017 and contemporary developments in international taxation. This in turn enables us to get a clearer perspective on what Surrey aimed to achieve and what the goals of these later developments are.

What Would Surrey Say? The Long Reach Of Stanley S. Surrey, Reuven Avi-Yonah, Nir Fishbien

Articles

Stanley S. Surrey died in 1984, two years before the enactment of the Tax Reform Act of 1986, which gave us the Internal Revenue Code of 1986 as amended. Historians have recently discovered Surrey’s work through his memoirs, published in 2022, and several articles based on the memoir and on the unpublished Surrey papers at Harvard Law School. There is no doubt that Surrey was a towering historical figure during his “Half-Century with the Internal Revenue Code.” As his protégé Donald Lubick, who served as Assistant Secretary for Tax Policy in both the Carter and the Clinton Administrations, stated, Surrey …

Tax Harmony: The Promise And Pitfalls Of The Global Minimum Tax, Reuven S. Avi-Yonah, Young Ran (Christine) Kim

Law & Economics Working Papers

The rise of globalization has become a double-edged sword for countries seeking to implement a beneficial tax policy. On one hand, there are increased opportunities for attracting foreign capital and the benefits that increased jobs and tax revenue brings to a society. However, there is also much more tax competition among countries to attract foreign capital and investment. As tax competition has grown, effective corporate tax rates have continued to be cut, creating a “race-to-the-bottom” issue.

In 2021, 137 countries forming the OECD/G20 Inclusive Framework on BEPS passed a major milestone in reforming international tax by successfully introducing the framework …

A New Framework For Digital Taxation, Reuven S. Avi-Yonah, Young Ran (Christine) Kim, Karen Sam

Law & Economics Working Papers

The international tax regime has wide implications for business, trade, and the international political economy. Under current law, multinational enterprises do not pay their fair share of taxes to market countries where profits are generated because market countries are only allowed to tax companies with a physical presence there. Digital companies, like Google and Amazon, can operate entirely online, thereby avoiding market country taxes. Multinationals can also exploit existing tax rules by shifting their profits to low-tax jurisdictions, thereby avoiding taxes in the residence country where their headquarters are located.

Recently, a global tax deal was reached to tackle these …

A New Framework For Digital Taxation, Reuven S. Avi-Yonah, Young Ran (Christine) Kim, Karen Sam

Articles

The international tax regime has wide implications for business, trade, and the international political economy. Under current law, multinational enterprises do not pay their fair share of taxes to market countries where profits are generated because market countries are only allowed to tax companies with a physical presence there. Digital companies, like Google and Amazon, can operate entirely online, thereby avoiding market country taxes. Multinationals can also exploit existing tax rules by shifting their profits to low-tax jurisdictions, thereby avoiding taxes in the residence country where their headquarters are located.

Recently, a global tax deal was reached to tackle these …

The New International Tax Regime, Reuven S. Avi-Yonah

Law & Economics Working Papers

On October 8, 2021, over 130 countries committed themselves to the most far-reaching changes in the international tax regime since its inception in 1923. Slated to begin on the anniversary year of 2023, this new regime (ITR 2.0) adopts significant changes from the old one (ITR 1.0). Specifically, ITR 2.0 eliminates the physical presence requirement and the arm’s length standard for a significant portion of the profits of large multinationals that have been essential elements of ITR 1.0 since the 1930s, in a way that is more consistent with ITR 1.0’s Benefits Principle (BP). ITR 2.0 also explicitly implements the …

International Tax Law- Status Quo, Trends And Perspectives, Reuven S. Avi-Yonah

Law & Economics Working Papers

This chapter will argue that developments in the past decade have significantly bolstered the International Tax Regime, so that it does a much better job in protecting PIT and CIT from erosion due to cross-border tax evasion and avoidance than it did before 2010. Specifically, the adoption of FATCA and the consequent development of Automatic Exchange of Information (AEI) and the Common Reporting Standard (CRS) have significantly protected PIT, while the OECD BEPS project has significantly improved CIT, especially if the current BEPS 2.0 effort is successfully concluded.

The Triumph Of Beps: Us Tax Reform And The Single Tax Principle, Reuven S. Avi-Yonah

Law & Economics Working Papers

The Tax Cut and Jobs Act (TRA17) as passed by the House on November 16 and by the Senate on December 2, 2017, contains multiple provisions that incorporate the principles of the OECD/G20 Base Erosion and Profit Shifting (BEPS) into domestic US tax law. Together with the changes in the 2016 model US tax treaty, these provisions mean that the US is following the EU and China in implementing BEPS and in particular its underlying principle, the single tax principle (i.e., all income should be subject to tax once: passive income at the residence state rate and active income at …

International Tax Avoidance -- Introduction, Reuven S. Avi-Yonah

Articles

Tax avoidance and evasion is a hot topic. On the evasion (illegal activity by individuals) front, the various leaks culminating in the Panama Papers have once again revealed the scope of evasion by the global elite. Gabriel Zucman conservatively estimated the annual revenue loss at $200 billion. On the tax avoidance (legal activity by corporations) front, the OECD BEPS project has estimated the scope of avoidance by multinationals at between $100 and $240 billion per year. By comparison, total US corporate tax revenues are about $400 billion per year. The articles in this volume reflect various aspects of these troubling …