Law Commons^™

It-Apas: Harmonizing Inconsistent Transfer Pricing Rules In Income Tax - Customs - Vat, Richard Thompson Ainsworth

Faculty Scholarship

In most jurisdictions there are three separate spheres of transfer pricing analysis - income tax, customs and VAT. Although they share policy objectives, terminology and frequently borrowing methodologies from one another these domestic transfer pricing systems are not in harmony.

Businesses find this lack of harmony costly, problematical, but also a planning opportunity. The door is open for arbitrage.

What if the transfer pricing rules within a jurisdiction were harmonized? The World Customs Organization (WCO) and the Organization of Economic Cooperation and Development (OECD) are considering this question.

This paper synthesizes the range of transfer pricing regimes currently in use, …

From Federal Rules To Intersystemic Governance In Securities Regulation, Robert B. Ahdieh

Faculty Scholarship

In this brief essay, prepared as part of a symposium on The New Federalism: Plural Governance in a Decentered World, I explore the regulatory dynamics at work: (1) in the operation of Securities Exchange Act Rule 14a-8, (2) in the interventions of then-Attorney General Eliot Spitzer in the national securities markets, and (3) in recent steps by the Securities and Exchange Commission to reconcile U.S. and international accounting standards. In each case, a distinct dynamic of regulatory interaction - what I term intersystemic governance - can be observed. In such cases, overlapping jurisdiction combines with various sources of interdependence to …

Uk Car-Flipping: The Vat Fraud Market-Place And Certified Solutions, Richard Thompson Ainsworth

Faculty Scholarship

Missing Trader Intra-Community (MTIC) fraud and its offspring carousel fraud and contra trading fraud are siphoning huge amounts of VAT revenue from the UK Treasury. This fraud is not a function of the goods involved. It is a function of the market-place. Recently another type of market-place dependent VAT fraud has taken hold in the UK - car-flipping.

In some instances the market-place where these frauds festers is a pre-existing or natural market-place, one that grows out of legitimate commercial practices. Fraudsters enter this market-place (so the argument goes) and take advantage of legitimate businesses who unwittingly get caught up …

Creeping Impoverization: Material Conditions, Income Inequality, And Erisa Pedagogy Early In The 21st Century, Maria O'Brien

Faculty Scholarship

To say that poverty remains one of the most pressing issues of our time is a colossal understatement. A staggering number of people on the planet live in poverty. In the United States alone, the working poor and those living at or below the poverty line make up 12.6 percent of our populace.' While these individuals may not all be in imminent danger of starving or homelessness, they often lack basic safeguards that those in the upper socio-economic levels of society take for granted: basic health insurance, access to pension programs, disability coverage, and the certainty of a living wage …

Symposium: Current Issues In Community Economic Development: Foreword: Entrepreneurship, Race, And The Current Environment For Community Economic Development, Eric J. Gouvin

Faculty Scholarship

On March 30, 2007, the Western New England College School of Law and the School of Business jointly hosted the second annual academic conference on Current Issues in Community Economic Development, sponsored by the Western New England College Law and Business Center for Advancing Entrepreneurship. The Conference promotes the two primary goals of the Law and Business Center: (1) to provide technical legal and business assistance to entrepreneurs and (2) to sponsor educational and outreach events focused on entrepreneurship and economic development. The Law and Business Center is a unique resource in Western Massachusetts. The combination of legal and business …

Copyright In An Era Of Information Overload: Toward The Privileging Of Categorizers, Frank Pasquale

Faculty Scholarship

Environmental laws are designed to reduce negative externalities (such as pollution) that harm the natural environment. Copyright law should adjust the rights of content creators in order to compensate for the ways they reduce the usefulness of the information environment as a whole. Every new work created contributes to the store of expression, but also makes it more difficult to find whatever work one wants. Such search costs have been well-documented in information economics. Copyright law should take information overload externalities like search costs into account in its treatment of alleged copyright infringers whose work merely attempts to index, organize, …

Least Cost Avoidance: The Tragedy Of Common Safety, Nuno M. Garoupa, Giuseppe Dari-Mattiacci

Faculty Scholarship

This paper shows that the least cost avoider approach in tort is not necessarily the optimal way to attain least cost avoidance when accidents can be avoided by either of two parties. When parties do not observe each other's costs of care at the time of the accident and are unable to determine which party is the least cost avoider, they fail to anticipate the outcome of the adjudication. Under these circumstances, accident avoidance becomes a commons problem because care by each individual party reduces the prospect of liability for both parties. As a result parties suboptimally invest in care. …

Economic Policy In The Public Interest, Jagdish N. Bhagwati

Faculty Scholarship

Economists, whose discipline has always had a strong relationship to moral philosophy (Adam Smith, the author of The Wealth of Nations, also wrote the celebrated Theory of Moral Sentiments), have always seen their role in society as that of pursuing the public good. They properly see themselves as guardians of the public interest, and to be engaged in public-policy debates against special interests who wish to ‘capture’ policy to advance their narrowly circumscribed, self-serving agendas.

Lawyers And Community Economic Development, William H. Simon

Faculty Scholarship

The Articles in this symposium and the experiences they report show that, for lawyers, Community Economic Development (CED) has become a more expansive and more complex subject than it was when we discovered it two decades or so ago.

The Articles and the experiences are particularly revealing about what I would guess have been the two central preoccupations of lawyers in the field. The first, of course, is what we mean by community, and more specifically, how a community can become – or be regarded as – a legal and political actor. The second concerns lawyer accountability. Progressive lawyers have …

Transactional Economics: Victor Goldberg's Framing Contract Law, Mark P. Gergen, Victor P. Goldberg, Stewart Macaulay, Keith A. Rowley

Faculty Scholarship

Professor Mark Gergen: Thank you. It is an honor to speak to this group and to be on a panel with Stewart Macaulay, Keith Rowley, and Victor Goldberg. I have an enormous amount of respect for the three. Keith had the misfortune of being a student of mine in Federal Income Tax.

Framing Contract Law offers a wealth of information about familiar cases. Victor argues that in construing contracts, courts should be attentive to how people engineer contracts to minimize transaction costs. He shows that courts often err in this regard, imposing unnecessary costs. To make his case, Victor delves …

Classified Boards And Firm Value, Michael D. Frakes

Faculty Scholarship

Classified boards constitute one of the most potent takeover defenses for U.S. firms today. However, as with takeover defenses more generally, economic theory offers an ambiguous prediction as to the effect that classified boards have on bottom-line firm value. A resolution of this ambiguity will require sound and convincing empirical methodology. In an effort to address limitations in the existing empirical literature, this article approaches the relationship between corporate governance and firm value while taking various measures to account for unobserved sources of heterogeneity across firms. Using the instrumental variables model developed by Hausman and Taylor, I find evidence of …

Mission Possible: Reciprocal Deference Between Domestic Regulatory Structures And The Wto, Elizabeth Trujillo

Faculty Scholarship

One of the goals of Article III of GATT is to invalidate domestic regulatory measures, including taxes and non-fiscal policies that amount to non-tariff barriers to trade (NTB) and therefore violate the principles of national treatment. While internal policies that directly discriminate between products based on nationality or origin are clearly in violation of national treatment principles, it is the facially neutral regulatory measures with protectionist and discriminatory effects that are more difficult to assess, even within transparent regulatory processes. However, with their emphasis on the likeness of the products in question, WTO panels run the risk of alienating member …

Reconfiguring Industrial Policy: A Framework With An Application To South Africa, Ricardo Hausmann, Dani Rodrik, Charles F. Sabel

Faculty Scholarship

The main purpose of industrial policy is to speed up the process of structural change towards higher productivity activities. This paper builds on our earlier writings to present an overall design for the conduct of industrial policy in a low- to middle-income country. It is stimulated by the specific problems faced by South Africa and by our discussions with business and government officials in that country. We present specific recommendations for the South African government in the penultimate section of the paper.

Bankruptcy Decision Making: An Empirical Study Of Continuation, Edward R. Morrison

Faculty Scholarship

Many small businesses attempt to reorganize under Chapter 11 of the U.S. Bankruptcy Code, but most are ultimately liquidated instead. Little is known about this shutdown decision. It is widely suspected that the bankruptcy process exhibits a continuation bias, allowing failing businesses to linger under the protection of the court, which resists liquidation even when it is optimal. This paper examines the shutdown decision in a sample of Chapter 11 bankruptcy cases filed in a typical bankruptcy court over the course of a year. The presence of continuation bias is tested along several dimensions – the extent of managerial control …

Lawyers Asleep At The Wheel? The Gm-Fisher Body Contract, Victor P. Goldberg

Faculty Scholarship

In the analysis of vertical integration by contract versus ownership one event has dominated the discussion – General Motors' merger with Fisher Body in 1926. The debates have all been premised on the assumption that the ten-year contract between the parties signed in 1919 was a legally enforceable agreement. However, it was not. Because Fisher's promise was illusory the contract lacked consideration. This note suggests that GM's counsel must have known this. It raises a significant question in transactional engineering: what is the function of an agreement that is not legally enforceable.

Law And Capitalism: What Corporate Crises Reveal About Legal Systems And Economic Development Around The World, Curtis J. Milhaupt, Katharina Pistor

Faculty Scholarship

This book explores the relationship between legal systems and economic development by examining, through a methodology we call the institutional autopsy, a series of high profile corporate governance crises around the world over the past six years. We begin by exposing hidden assumptions in the prevailing view on the relationship between law and markets, and provide a new analytical framework for understanding this question. Our framework moves away from the canonical distinction between common law and civil law regimes. It emphasizes the constant, iterative, rolling relationship between law and markets, and suggests that how a given country's legal system rolls …

Controlling Family Shareholders In Developing Countries: Anchoring Relational Exchange, Ronald J. Gilson

Faculty Scholarship

In recent years, corporate governance scholarship has begun to focus on the most common distribution of public corporation ownership: outside of the United States and the United Kingdom, publicly owned corporations often have a controlling shareholder. The presence of a controlling shareholder is especially prevalent in developing countries. In Asia, for example, some two-thirds of public corporations have one, most of whom represent family ownership. The law and finance literature, exemplified by a series of articles by Rafael La Porta, Florencio Lopez-de-Silanes, Andrei Shleifer, Robert Vishny and others, treats the prevalence of controlling shareholders as the result of bad law; …

Unpacking Backdating: Economic Analysis And Observations On The Stock Option Scandal, David I. Walker

Faculty Scholarship

The corporate stock option backdating scandal has dominated business page headlines since the summer of 2006. The SEC has launched investigations of more than one hundred companies with respect to the timing and pricing of stock options granted during the boom years of the late 1990s and early 2000s, and the number of firms caught up in the scandal continues to increase. This Article contributes to our understanding of the backdating phenomenon by analyzing the economics of backdating and the characteristics of the firms under investigation. Its main points are the following: First, given the high volatilities of the stocks …

Exchange Asymmetries Incorrectly Interpreted As Evidence Of Endowment Effect Theory And Prospect Theory?, Charles R. Plott, Kathryn Zeiler

Faculty Scholarship

Systematic asymmetries in exchange behavior have been widely interpreted as support for endowment effect theory, an application of prospect theory positing that loss aversion associated with ownership explains observed exchange asymmetries. We offer an alternative explanation. Specifically, we conjecture that observed asymmetries can be explained by procedure-driven theories grounded in classical preference theory. To test this alternative explanation, we alter the procedures to preserve the predictions of endowment effect theory while ruling out procedure-driven explanations grounded in classical preference theory. The data reject endowment effect theory in favor of procedure-driven theories.

Biomedical Ethics And The Law: A Critical Perspective, Keith N. Hylton

Faculty Scholarship

Health law, a fast growing field of scholarship, appears to consist largely of two schools. One focuses on health care antitrust, taking as its fundamental premise the notion that health care markets should be distinguished from and treated differently than other markets. This premise underlying health care antitrust is based on a few recurring features of health care markets, such as informational asymmetry, that are taken as sufficient bases for treating them differently.¹ The other school of health law is biomedical ethics, which has taken on increasing importance in view of the many tradeoffs that arise when health care …

Dividend Taxation In Europe: When The Ecj Makes Tax Policy, Alvin C. Warren, Michael J. Graetz

Faculty Scholarship

This article analyzes a complex line of recent decisions in which the European Court of Justice has set forth its vision of a nondiscriminatory system for taxing corporate income distributed as dividends within the European Union. We begin by identifying the principal tax policy issues that arise in constructing a system for taxing cross-border dividends and then review the standard solutions found in national legislation and international tax treaties. Against that background, we examine in detail a dozen of the Court's decisions, half of which have been handed down since 2006. Our conclusion is that the ECJ is applying a …

Tax Reform Unraveling, Michael J. Graetz

Faculty Scholarship

The Tax Reform Act of 1986 was widely heralded as the most significant change in our nation’s tax law since the income tax was extended to the masses during World War II. It was the crowning domestic policy achievement of President Ronald Reagan, who proclaimed it “the best antipoverty measure, the best pro-family measure and the best job-creation measure ever to come out of the Congress of the United States” (Reagan, 1986). This journal published a symposium on the Tax Reform Act in its first issue. The law’s rate reductions and base broadening reforms were mimicked throughout the countries belonging …

Timbers Of Inwood Forest, The Economics Of Rent, And The Evolving Dynamics Of Chapter 11, Edward R. Morrison

Faculty Scholarship

The Supreme Court's decision in Timbers of Inwood Forest occupies an unhappy position in bankruptcy case law. It is often remembered as a troubled interpretation of the Code, denying undersecured creditors compensation for an important source of depreciation – depreciation in the real value of a creditor's claim during a lengthy reorganization process. But Timbers was not a simple case in which a bank was denied adequate protection for lost investment opportunities. It was instead a case in which the bank tried to opt out of the bankruptcy process itself. The debtor was an apartment complex. After it entered bankruptcy, …