Law Commons^™

Tax And Time: On The Use And Misuse Of Legal Imagination, Anthony C. Infanti

Book Chapters

In daily life and in tax law, time is taken for granted as something that is ever present but beyond our control. Time moves endlessly and relentlessly forward, constantly slipping from our grasp. But what if life were more like science fiction? What if we could, at will, move through time to alter its course? Or what if we could harness time by turning it into an exchangeable commodity, truly using time as money? In fact, there is no need to open a novel or watch a movie to experience time travel or to see time used as a medium …

Taxation And Business: The Human Rights Dimension Of Corporate Tax Practices, Reuven S. Avi-Yonah

Book Chapters

The response of both developed and developing countries to global developments has been first, to shift the tax burden from (mobile) capital to (less mobile) labour, and second, when further increased taxation of labour becomes politically and economically difficult, to cut government services. Thus, globalization and tax competition lead to a fiscal crisis for countries that wish to continue to provide those government services to their citizens, at the same time that demographic factors and increased income inequality, job insecurity and income volatility that result from globalization render such services more necessary. This chapter argues that if government service programs …

Due Diligence In International Tax Law, Reuven S. Avi-Yonah, Gianluca Mazzoni

Book Chapters

This chapter describes how the due diligence standard was developed in international tax law before 2008, and then how the standard was greatly modified after the financial crisis, the enactment of the Foreign Account Tax Compliance Act of 2010 (FATCA), and the subsequent development of the Common Reporting Standards (CRS). The chapter outlines how the due diligence concept is applied to private actors, especially financial institutions, to prevent tax evasion. It ends with some conclusions including that while due diligence in international tax law is currently embodied in a specific set of rules, there remains an absence of an overarching …

Multinational Activity In The Modern World, James R. Hines Jr., Fritz C. Foley, Raymond J. Malatoni Jr., David Wessel

Book Chapters

Multinational corporations are the global goliaths of modern times. These entities collectively are responsible for large portions of world production, employment, investment, international trade, research, and innovation. Although their economic impact is most pronounced in high-income countries, where their activities have been concentrated historically, their reach increasingly extends to every corner of the world. Decisions made by these firms affect not only those who work for them, buy from them, do business with them, and compete with them, but also communities and countries in which they are located. As a result, their operations and activities are subjects of considerable interest …

Principles For Policymakers, James R. Hines Jr.

Book Chapters

Multinational corporations are global goliaths, but they have not conquered the world, nor are they responsible for every economic ill, as is sometimes alleged. These firms contribute to global prosperity by improving productivity and efficiency, innovating, and creating jobs-mostly good jobs-in both home and host countries. Governments lavish attention on multinational corporations, seeking the good that accompanies their investments even as policymakers worry about the influence multinational firms have on the local environment, social conditions, and politics. In this regard, governments face the tradeoffs that commonly afflict economic policymaking. Efforts to control the actions of multinational firms typically come at …

Beps, Atap And The New Tax Dialogue: A Transatlantic Competition?, Reuven S. Avi-Yonah, Gianluca Mazzoni

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The Tax Cuts and Jobs Act (TRA17) signed into law by President Trump on 22 December 2017 contains multiple provisions that incorporate the principles of the OECD/G20 Base Erosion and Profit Shifting Action Plan (BEPS) into domestic US tax law. Together with the changes in the 2016 US Model Tax Treaty, 1 these provisions mean that the United States is following the European Union in implementing BEPS and particularly its underlying principle, the single tax principle (all income should be subject to tax once at the rate derived from the benefits principle, i.e., active income at a minimum source tax …

Formulary Apportionment And International Tax Rules, Reuven S. Avi-Yonah, Zachee Pouga Tinhaga

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Any proposal to adopt unitary taxation (UT) of multinationals has to contend with whether such taxation is compatible with existing international tax rules, and, in particular, with the bilateral tax treaty network. Indeed, some researchers have argued that the separate accounting (SA) method and the arm’s length standard (ALS), introduced in the early twentieth century, are so embodied in the treaties that they form part of customary international law, and are binding even in the absence of a treaty. We disagree, because the unitary approach is just as widely embodied in most of the current international tax treaties, and, where …

Transfer Pricing Disputes In The United States, Reuven S. Avi-Yonah

Book Chapters

In 1988, the US Treasury Department published a study of inter-company pricing (the 'White Paper') that included the following endorsement of the so-called arm's length standard (ALS) for examining the reasonableness of transactions between related parties for tax purposes: The arm's length standard is embodied in all U.S. tax treaties; it is in each major model treaty, including the U.S. Model Convention; it is incorporated into most tax treaties to which the United States is not a party; it has been explicitly adopted by international organizations that have addressed themselves to transfer pricing issues; and virtually every major industrial nation …

The Tax Revenue Capacity Of The U.S. Economy, James R. Hines Jr.

Book Chapters

The United States imposes smaller tax burdens than do other large high-income countries, its 24.8 percent ratio of tax collections to GDP in 2010 representing the lowest fraction among the G-7. The United States also differs from other G-7 countries in relying relatively little on expenditure-type taxes. It follows that there is significant unused tax capacity in the United States that could be deployed to pay the country’s debts, but that the most promising source of additional tax revenue is expenditure taxation that is widely perceived to have very different distributional features than the income taxes on which the U.S. …

Rethinking Treaty Shopping: Lessons For The European Union, Reuven S. Avi-Yonah, C. H. Panayi

Book Chapters

Whilst treaty shopping is not a new phenomenon, it remains as controversial as ever. It would seem that the more countries try to deal with it, the wider the disagreements as to what is improper treaty shopping and what is legitimate tax planning. In this paper, we reassess the traditional quasi-definitions of treaty shopping in an attempt to delineate the contours of such practices. We examine the various theoretical arguments advanced to justify the campaign against treaty shopping. We also consider the current trends in treaty shopping and the anti-treaty shopping policies under the OECD Model and the US Model. …

International Capital Taxation., Rachel Griffith, James R. Hines Jr., Peter Birch Sørensen

Book Chapters

Globalization carries profound implications for tax systems, yet most tax systems, including that of the UK, still retain many features more suited to closed economies. The purpose of this chapter is to assess how tax policy should reflect the changing international economic environment. Institutional barriers to the movement of goods, services, capital, and (to a lesser extent) labour have fallen dramatically since the Meade Report (Meade, 1978) was published. So have the costs of moving both real activity and taxable profits between tax jurisdictions. These changes mean that capital and taxable profits in particular are more mobile between jurisdictions than …

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 …

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.

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 …

Business Profits (Article 7 Oecd Model Convention), Reuven S. Avi-Yonah, Kimberly A. Clausing

Book Chapters

The 2006 OECD Report on attribution of profits to permanent establishments states that its recommendation "was not constrained by either the original intent or by the historical practice and interpretation of Article 7." Moreover, the Report recommends a redrafting of both the Article itself and the Commentary. Given this, it seems appropriate to begin by asking: If we were working on a clean slate, what would be the best way to tax MNEs at source in the light of 21st century business practices? The beginning point has to be that a modern MNE does not operate as if its constituent …

Corporate Taxation And International Competition, James R. Hines Jr.

Book Chapters

Many countries tax corporate income heavily despite the incentives that they face to reduce tax rates in order to attract greater investment, particularly investment from foreign sources. The volume of world foreign direct investment (FDI) has grown enormously since 1980, thereby increasing a country's ability to attract significant levels of new investment by reducing corporate taxation. The evidence indicates, however, that corporate tax collections are remarkably persistent relative to gross domestic product ( GDP), government revenues, or other indicators of underlying economic activity or government need. If this were not true- if corporate income taxation were rapidly disappearing around the …

Commentary, Reuven S. Avi-Yonah

Book Chapters

David Rosenbloom has delivered an important lecture on an important topic: whether exploiting differences between the tax system of two different jurisdictions to minimize the taxes paid to either or both ("international tax arbitrage") is a problem, and if so, whether anything can be done about it in a world without a "world tax organization." As Rosenbloom states, international tax arbitrage is "the planning focus of the future," and recently has been the focus of considerable discussion and debate (for example, upon the promulgation and subsequent withdrawal under fire of Notice 98-11). Rosenbloom's lecture is one of the first attempts …

Tax Treaty Overrides: A Qualified Defence Of U.S. Practice, Reuven S. Avi-Yonah

Book Chapters

The ability of some countries to unilaterally change, or "override;' their tax treaties through domestic legislation has frequently been identified as a serious threat to the bilateral tax treaty network. In most countries, treaties (including tax treaties) have a status superior to that of ordinary domestic laws (see, e.g. France, Germany, the Netherlands). However, in some countries (primarily the US, but also to some extent the UK and Australia) treaties can be changed unilaterally by subsequent domestic legislation. This result clearly violates international law as embodied by the Vienna Convention on the Law of Treaties ("VCLT"), which is recognized as …

Tax Arbitrage And The International Tax Regime, Reuven S. Avi-Yonah

Book Chapters

It is a great pleasure to introduce my student Luca Dell'Anese's book on tax arbitrage. This is an important book on an important topic, which lies at the heart of the current debate on whether an international tax regime exists in practice.

I have argued for many years (see, e.g., Avi-Yonah, 1996, 1997, 2000) that a coherent international tax regime exists, embodied in both the tax treaty network and in domestic laws, and that it forms a significant part of international law (both treatybased and customary). The practical implication is that countries are not free to adopt any international tax …

Annex 3: Definition Of 'Tax' In Us Law, Reuven S. Avi-Yonah

Book Chapters

Under US law, a tax is defined as a compulsory payment pursuant to the authority of a foreign country to levy taxes. While this definition is somewhat circular, it does require (i) a payment, (ii) that is not voluntary,(iii) to a foreign country, (iv) pursuant to its authority to levy taxes

Closing The International Tax Gap, Joseph Guttentag, Reuven S. Avi-Yonah

Book Chapters

In July of 1999, the Justice Department entered into a plea bargain with one John M. Mathewson of San Antonio, Texas. Mr. Mathewson was accused of money laundering through the Guardian Bank and Trust Co. Ltd., a Cayman Islands bank. Mr. Mathewson was chairman and controlling shareholder of Guardian, and in that capacity had access to information on its depositors. In return for a reduced sentence, Mr. Mathewson turned over the names of the persons who had accounts at Guardian. The result was an eye-opener: The majority of the accounts were beneficially owned by U.S. citizens, and the reason they …