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Full-Text Articles in Law

Who Invented The Single Tax Principle?: An Essay On The History Of Us Treaty Policy, Reuven S. Avi-Yonah Jan 2015

Who Invented The Single Tax Principle?: An Essay On The History Of Us Treaty Policy, Reuven S. Avi-Yonah

Articles

In 1997, I wrote an article on the international tax challenges posed by the then-nascent electronic commerce, in which I suggested that the international tax regime is based on two principles: the benefits principle and the single tax principle. The benefits principle states that active (business) income should be taxed primarily by the country of source, and passive (investment) income should be taxed primarily by the country of residence. This is the famous compromise reached by the four economists at the foundation of the regime in 1923 and is not particularly controversial. It is embodied in every one of the …


Formulary Appointment In The U.S. International Income Tax System: Putting Lipstick On A Pig?, J. Clifton Fleming Jr., Robert J. Peroni, Stephen E. Shay Sep 2014

Formulary Appointment In The U.S. International Income Tax System: Putting Lipstick On A Pig?, J. Clifton Fleming Jr., Robert J. Peroni, Stephen E. Shay

Michigan Journal of International Law

An affiliated corporate group consists of two or more corporations linked by sufficient stock ownership to cause them to function as an economic unit instead of as independent economic actors. Thus, an affiliated corporate group engaged in international business is often referred to as a multinational enterprise (MNE), a term that we will use throughout this Article. When corporate members of an MNE engage in transactions among themselves, the prices they employ (transfer prices) will significantly affect the amount of overall MNE income that is allocated to each member and, hence, to the tax bases of the various countries in …


Tax Policy And The Efficiency Of U.S. Direct Investment Abroad, Mihir A. Desai, C. Fritz Foley, James R. Hines Jr. Jan 2011

Tax Policy And The Efficiency Of U.S. Direct Investment Abroad, Mihir A. Desai, C. Fritz Foley, James R. Hines Jr.

Articles

Deferral of U.S. taxes on foreign source income is commonly characterized as a subsidy to foreign investment, as reflected in its inclusion among “tax expenditures” and occasional calls for its repeal. This paper analyzes the extent to which tax deferral and other policies inefficiently subsidize U.S. direct investment abroad. Investments are dynamically inefficient if they consistently generate less in returns to investors than they absorb in new investment funds. From 1982–2010, repatriated earnings from foreign affiliates exceeded net capital investments by $1.1 trillion in 2010 dollars, and from 1950–2010, repatriated earnings and net interest from foreign affiliates exceeded net equity …


Reply To Becker And Fuest, James R. Hines Jr. Jan 2010

Reply To Becker And Fuest, James R. Hines Jr.

Articles

It is an understatement to say that the appropriate taxation of foreign business income is a controversial and potentially confusing topic. One of the mysteries of international taxation has been that the prescriptions of what, until recently, was the accepted academic wisdom differs so sharply from widespread international practice. In an important contribution, Richman (1963) noted that a home government confronted with the choice of where it would prefer one of its resident taxpayers to allocate a single unit of capital would weigh the after-foreign-tax return from investing abroad against the pre-tax return from investing at home. From this observation, …


Closing The International Tax Gap Via Cooperations, Not Competition, Reuven S. Avi-Yonah Jan 2009

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. Jan 2009

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.


Back To The Future? The Potential Revival Of Territoriality, Reuven S. Avi-Yonah Jan 2008

Back To The Future? The Potential Revival Of Territoriality, Reuven S. Avi-Yonah

Articles

Since 1994, the trend in the United States and other developed countries appears to be to reduce the scope of residence jurisdiction and increase the emphasis on source jurisdiction. If this trend continues, these countries are likely to move toward territoriality and decrease the emphasis on their CFC rules. In the author’s opinion, the reason for this trend is political and economic, not legal. It is part of tax competition, specifically the competition to be the headquarters jurisdiction for multinationals. The author also thinks, however, that it is not necessary to go down this road because the solution to the …


Comment On Yin, Reforming The Taxation Of Foreign Direct Investment By Us Taxpayers, Reuven S. Avi-Yonah Jan 2008

Comment On Yin, Reforming The Taxation Of Foreign Direct Investment By Us Taxpayers, Reuven S. Avi-Yonah

Articles

In this excellent article, George Yin addresses an important proposal by the President's Advisory Panel on Federal Tax Reform. The Advisory Panel proposed that the United States should permanently switch from taxing the parent corporation of U.S. multinationals on worldwide income to a modified territorial regime under which dividends paid out of active business income would be exempt from U.S. tax.' The Joint Committee on Taxation made a similar recommendation.2


Foreign Income And Domestic Deductions, James R. Hines Jr. Jan 2008

Foreign Income And Domestic Deductions, James R. Hines Jr.

Articles

To what extent should taxpayers deduct expenses incurred domestically that contribute to foreign income production? It is widely believed that if the home country does not tax foreign income, then it also should not permit deductions for that portion of domestic expenses attributable to earning foreign income. This prescription is, however, inconsistent with the decision to exempt foreign income from taxation in the first place. The paper shows that, for any system of taxing foreign income, the consistent and efficient treatment is to permit domestic expense deductions for all expenses incurred domestically. This differs from the current U.S. regime, under …


Review Of Foreign Direct Investment And The Regional Economy, James R. Hines Jr. Jan 2007

Review Of Foreign Direct Investment And The Regional Economy, James R. Hines Jr.

Reviews

There is a broad consensus that foreign direct investment (FDI) confers economic advantages on local economies. Jones and Wren simply refuse to share the good feeling about FDI without first processing some numbers. In doing so, they take a detached and serious look at the consequences of foreign direct investment in one area, the northeastern region of England. They have access to excellent data on the regional operations of foreign-owned plants from 1985 to 1999, and use these data to answer important questions about FDI in the region. How large are the benefits that FDI brings, as measured by new …


International Tax Law As International Law, Reuven S. Avi-Yonah Jan 2004

International Tax Law As International Law, Reuven S. Avi-Yonah

Articles

Is international tax law part of international law? To an international lawyer, the question posed probably seems ridiculous. Of course international tax law is part of international law, just like tax treaties are treaties. But to an international tax lawyer, the question probably seems less obvious, because most international tax lawyers do not think of themselves primarily as international lawyers (public or private), but rather as tax lawyers who happen to deal with crossborder transactions. And indeed, once one delves into the details, it becomes clear that in some ways international tax law is different from "regular" international law. For …


Taxation-Federal Income Tax-Liquidation Distributions Entitled To Both Capital Gains Treatment And Foreign Tax Credit, Lloyd C. Fell Jun 1962

Taxation-Federal Income Tax-Liquidation Distributions Entitled To Both Capital Gains Treatment And Foreign Tax Credit, Lloyd C. Fell

Michigan Law Review

Plaintiff, Associated, is an American corporation whose wholly-owned subsidiary, Automatic, owned all the stock of Filcrest, a Canadian corporation. In 1954 all the assets of Filcrest were distributed to Automatic pursuant to a plan of complete liquidation, accomplished in accordance with Canadian law. In its 1954 consolidated return, plaintiff treated the gain realized on the Filcrest liquidation as a capital gain, and also claimed a foreign tax credit for any Canadian income, war or excess profits taxes which Filcrest had paid over the years to Canada on that part of the liquidation distribution which represented Filcrest's accumulated earnings and profits. …