Law Commons^™

The Digital Consumption Tax, Reuven S. Avi-Yonah, Nir Fishbien

Articles

Amid rising tension between the United States and France over the Digital Services Tax (DST), this article propositions the imposition of a Digital Consumption Tax, rather than the gross-receipts DST. The Digital Consumption Tax is not a new tax. It is a consumption tax (i.e. Value-Added Tax, or VAT, in Europe and sales tax in the United States) that is imposed on digital transactions. Such consumption tax would be applied on the seemingly free interaction between Facebook (and other companies alike) and its Users. This interaction, under which Users gain access to the Facebook platform for ‘free’ – should be …

Summary And Recommendations (Symposium On Designing A Federal Vat, Part I), Reuven S. Avi-Yonah

Articles

For the past thirty-five years, the debate on fundamental tax reform in the United States has centered on whether some type of consumption tax would replace all or part of the federal income tax. In my opinion, this debate has now been decided. Given recent budgetary developments and the impending eligibility of the baby boom generation for Social Security and Medicare, we cannot dispense with the revenue from the corporate and individual income tax. Moreover, we will need huge amounts of additional revenue, and most informed observers believe that the only plausible source for such revenues is a federal value-added …

The Last Best Hope For Progressivity In Tax, E. J. Mccaffery, James R. Hines Jr.

Articles

We argue that a spending tax, as opposed to an income or wage tax, is the “last best hope” for a return to significantly more progressive marginal tax rates than obtain today. The simple explanation for this central claim looks to incentive effects, especially for “rich people,” as both economists and commentators are inclined to focus. High marginal tax rates under an income tax fall on and hence deter the socially productive activities of work and savings. High marginal rates under a wage tax fall on and hence deter the socially productive activity of work alone. But high marginal rates …

Risks, Rents And Regressivity Revisited, Reuven S. Avi-Yonah

Articles

This article seeks to survey the debate in the United States about whether the tax base should be income or consumption, and then focus on some recent arguments that have been made in favour of a consumption tax. In the author's opinion, none of these arguments are convincing, and he would favour adopting a consumption tax in addition to, and not in lieu of, the existing income tax.

How Globalization Affects Tax Design, James R. Hines Jr., Lawrence H. Summers

Articles

The economic changes associated with globalization tighten financial pressures on governments of high-income countries by increasing the demand for government spending while making it more costly to raise tax revenue. Greater international mobility of economic activity, and associated responsiveness of the tax base to tax rates, increases the economic distortions created by taxation. Countries with small open economies have relatively mobile tax bases; as a result, they rely much less heavily on corporate and personal income taxes than do other countries. The evidence indicates that a ten percent smaller population in 1999 is associated with a one percent smaller ratio …

Taxation In Developing Countries: Some Recent Support And Challenges To The Conventional View, Reuven S. Avi-Yonah, Yoram Margolioth

Articles

The general advice given by international institutions such as the International Monetary Fund (IMF) and the World Bank to developing countries over the past few decades has been to replace trade taxes with domestic consumption taxes, particularly value-added taxes (VAT), and to maintain relatively high corporate income tax rates. This article reviews recent literature that supports and challenges this conventional view.

Taxing Consumption And Other Sins, James R. Hines Jr.

Articles

Federal and state governments in the United States use income and payroll taxes as their primary tools to collect revenue. In the rest of the world, governments also use income and payroll taxes, but rely much more heavily than does the United States on taxing consumption. Consumption taxes take many forms, including general sales taxes, value-added taxes, and excise taxes on the consumption of specific items including gasoline, alcohol, tobacco products, firearms, air travel, telephone communication, and others. The U.S. government does not use a value-added tax, making the United States unique among high-income countries and a rarity in the …

Risk, Rents, And Regressivity: Why The United States Needs Both An Income Tax And A Vat, Reuven S. Avi-Yonah

Articles

In this article, Prof. Avi-Yonah argues that the legal academic debate about fundamental tax reform from 1974 onward has been skewed by the assumption that a consumption tax must replace the income tax. He addresses three of the major issue in recent writings on the income/consumption tax debate, and shows how none of the arguments in favor of the consumption tax are conclusive. Avi-Yonah also addresses the various consumption tax proposals that have been made and shows that they are all deficient in comparison with a VAT, as well as failing to achieve the goals of an income tax. Finally, …

Globalization And Tax Competition: Implications For Developing Countries, Reuven S. Avi-Yonah

Articles

The current age of globalization can be distinguished from the previous one (from 1870 to 1914) by the much higher mobility of capital than labor (in the previous age, before immigration restrictions, labor was at least as mobile as capital). This increased mobility has been the result of technological changes (the ability to move funds electronically), and the relaxation of exchange controls. The mobility of capital has led to tax competition, in which sovereign countries lower their tax rates on income earned by foreigners within their borders in order to attract both portfolio and direct investment. Tax competition, in turn, …

If Taxpayers Can't Be Fooled, Maybe Congress Can: A Public Choice Perspective On The Tax Transition Debate, Kyle D. Logue

Reviews

In When Rules Change: An Economic and Political Analysis of Transition Relief and Retroactivity , Shaviro takes the various strands of the existing literature on retroactivity and weaves them together, applying his unique combination of legal expertise, political pragmatism, and theoretical sophistication in public finance economics as well as political science. The result is a subtle, balanced, and scholarly treatise on transition relief and retroactivity that should serve as the starting point for all future research in the field. In its stated objectives, the book is admirably ambitious.

This Review will, in a broad sense, follow Shaviro's characterization of the …

U.S. International Treatment Of Financial Derivatives, Reuven Avi-Yonah, Linda Swartz

Articles

The current proposals to substitute consumption for income as the principal U.S. tax base have already been the topic of considerable commentary in these pages. However, one issue has received relatively little attention in the discussion of the various reform proposals: What potential complications are likely to arise if a single major player in the world's economy unilaterally adopts radical tax reform? The global economy is becoming more and more unified, with multinational corporations dominating world trade and trillions of dollars in portfolio investment flowing across national boundaries. In this economy, what would be the consequences if a single country, …