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Law & Economics Working Papers

Tax Law

TCJA

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If Not Now, When? Us Tax Treaties With Latin America After Tcja, Reuven S. Avi-Yonah May 2019

If Not Now, When? Us Tax Treaties With Latin America After Tcja, Reuven S. Avi-Yonah

Law & Economics Working Papers

Since the 1990s, the US tax treaty network has expanded to include most large developing countries. However, there remains a glaring exception: The US only has two tax treaties in Latin America (Mexico and Venezuela), and one pending tax treaty (Chile). The traditional explanation for why the US has no treaty with, for example, Argentina or Brazil is the US refusal since 1957 to grant tax sparing credits to developing countries. Before the Tax Cuts and Jobs Act of 2017 (TCJA), this explanation was wrong, because the combination of deferral and cross-crediting meant that tax holidays in a source country …


The International Provisions Of The Tcja: Six Results After Six Months, Reuven S. Avi-Yonah Aug 2018

The International Provisions Of The Tcja: Six Results After Six Months, Reuven S. Avi-Yonah

Law & Economics Working Papers

Over six months have passed since the enactment of the TCJA, so it is now possible to reach some preliminary conclusions on its impact. The main ones are:

1. The transition tax plus anticipated GILTI tax minus territoriality have resulted in higher GAAP effective tax rates for 2017. In some cases they approach 35% for large multinationals with a lot of offshore income. For the first six months of 2018, however, overall corporate tax revenues are sharply down because of the 21% rate plus expensing. This is the exact reverse of the situation before TCJA in which MNEs showed very …


The Elephant Always Forgets: Us Tax Reform And The Wto, Reuven S. Avi-Yonah, Martin G. Vallespinos Jan 2018

The Elephant Always Forgets: Us Tax Reform And The Wto, Reuven S. Avi-Yonah, Martin G. Vallespinos

Law & Economics Working Papers

The “Tax Cuts and Jobs Act” (TCJA) enacted on December 22, 2017 includes several provisions that raise WTO compliance issues. At least one such provision, the Foreign-Derived Intangible Income (FDII) rule, is almost certain to draw a challenge in the WTO and is likely to lead to another US loss and resulting sanctions. This outcome would be another addition to the repeated losses suffered by the US for export subsidies from the 1970s to 2004, which led to the imposition of sanctions and the ultimate repeal of the offending regime. The important question for 2018 and beyond is whether the …


Beat It: Tax Reform And Tax Treaties, Reuven S. Avi-Yonah Jan 2018

Beat It: Tax Reform And Tax Treaties, Reuven S. Avi-Yonah

Law & Economics Working Papers

The Tax Cuts and Jobs Act (TCJA) includes several provisions that may be viewed as potential violations of US tax treaties. However, most of those potential violations, such as new IRC section 951A and to a large extent new IRC section 59A, are covered by the Savings Clause (US model article 1(4)). The only remaining question is whether IRC section 59A (the “Base Erosion Anti-Abuse Tax”, or BEAT) violates the non-discrimination provision (article 24), which is exempted from the Savings Clause. The answer is no, because foreign related parties are not comparable to US related parties receiving interest or royalties.


How Terrible Is The New Tax Law? Reflections On Tra17, Reuven S. Avi-Yonah Jan 2018

How Terrible Is The New Tax Law? Reflections On Tra17, Reuven S. Avi-Yonah

Law & Economics Working Papers

Overall, TRA17 is not much worse than TRA86 or TRA14. It increases the deficit, but not by an impossible amount; it is distributionally skewed, but less so than is usually assumed; and its details are not terrible (on the international side they are a big improvement over prior law). There is one big problem, the pass through provisions, and we can only hope that as its horrible implications unfold it will be a prime candidate for repeal.


The Elephant Always Forgets: Tax Reform And The Wto, Reuven S. Avi-Yonah Jan 2018

The Elephant Always Forgets: Tax Reform And The Wto, Reuven S. Avi-Yonah

Law & Economics Working Papers

The “Tax Cuts and Jobs ACT” (TCJA) enacted on December 22, 2017, includes several provisions that raise WTO compliance issues. At least one such provision, the Foreign-Derived Intangible Income (FDII) rule, is almost certain to draw a challenge in the WTO and is likely to lead to another US loss and resulting sanctions. This outcome would be another addition to the repeated losses suffered by the US for export subsidies from the 1970s to 2004, which led to the imposition of sanctions and the ultimate repeal of the offending regime. The important question for 2018 and beyond is whether the …