Banking and Finance Law Commons^™

Technology, Vat Compliance, And ‘Black Swan’ Blindness, Richard Thompson Ainsworth

Faculty Scholarship

There is fundamentally no difference between a value added tax (VAT), and a retail sales tax (RST) when it comes to collecting the tax on cross-border sales. If (under a VAT) a seller is allowed to “zero-rate” cross-border sales, or if (under a RST) a seller is exempt from collecting the tax on cross-border sales, the critical enforcement question is exactly the same – how does the system assure that the buyer will self-assess (and pay) the tax?

The simple answer is that the tax administration audits. The more complicated answer notes that the effectiveness of the audit (by the …

Refund Fraud? Real-Time Solution!, Richard Thompson Ainsworth

Faculty Scholarship

When seven million dependents vanished from the tax rolls in 1986 the IRS recovered three billion dollars in revenue. A simple enforcement measure was applied. Taxpayers were required to list the social security number (SSN) for any dependent they claimed on their tax return. Costing next to nothing to implement, the benefits of this enforcement action continue to this day.

A similar enforcement measure could be employed against refund fraud. Even though the solution is not as simple as that adopted in 1986, it is similar. The effort is worth making. The revenue loss is much larger. As before, the …

Transfer Pricing: Data Dumps And Comparability — Studies From The U.S., U.K., Canada, And Australia, Richard Thompson Ainsworth, Andrew B. Shact

Faculty Scholarship

Comparability is the heart of transfer pricing. The OECD, U.K., Canadian, Australian, and U.S. transfer pricing rules all echo one another on how critically important the comparability analysis is. Performing this analysis and proving comparability, however, is a demanding exercise.

What makes proving comparability so difficult is that the analysis is two sided. Both controlled and uncontrolled transactions must be thoroughly analyzed. Just as much effort needs to be applied to determine the functions, contract terms, risks and the economic conditions for the unrelated party comparables as is spent on analyzing the related parties (taxpayers).

But there is more to …

Go West: How The Irs Should Foster Innovation In Its Agents, T. Keith Fogg

Villanova Law Review (1956 - )

No abstract provided.

Ask For Help, Uncle Sam: The Future Of Global Tax Reporting, Susan C. Morse

Villanova Law Review (1956 - )

No abstract provided.

Offshore Accounts: Insider's Summary Of Fatca And Its Potential Future, J. Richard Harvey Jr.

Villanova Law Review (1956 - )

No abstract provided.

Contributor, Cassady V. Brewer

Faculty Publications By Year

No abstract provided.

Responsible Profitability? Not On My Balance Sheet!, Arthur Acevedo

Catholic University Law Review

No abstract provided.

Symposium Introduction: Offshore Accounts, Corporate Income Shifting, And Executive Compensation, Leslie Book

Villanova Law Review (1956 - )

No abstract provided.

Some Suggestions For Tax Reform, Michael C. Durst

Villanova Law Review (1956 - )

No abstract provided.

The Use Of Voluntary Disclosure Initiatives In The Battle Against Offshore Tax Evasion, Leandra Lederman

Villanova Law Review (1956 - )

No abstract provided.

An Industry-Specific Vat In Michigan - Objective Valuation In The Retail Gasoline Trade, Richard Thompson Ainsworth

Faculty Scholarship

New York adopted an industry-specific value added tax (VAT) to solve problems with virtual intermediaries (room remarketers) under its hotel accommodations tax. The New York VAT resembles the VAT used in the European Union (EU). It is a credit-invoice VAT that subjectively values supplies.

Michigan has also adopted an industry-specific credit-invoice VAT, however the targeted industry is the retail gasoline trade. The valuation method is objective, rather than subjective. In valuing supplies objectively rather than subjectively, the Michigan VAT resembles the exception provisions that are found in most VATs around the globe. Objective valuations are used in VATs when dealing …

Transfer Pricing And Business Restructurings — Intangibles, Synergies, And Shelters, Richard Thompson Ainsworth, Andrew Shact

Faculty Scholarship

Transfer pricing in business restructuring is attracting global attention. In the past two years two key policy-making groups have released three substantive documents on this topic. The Organization of Economic Cooperation and Development (OECD) issued two position statements while the Joint Committee on Taxation (JCT) issued one. While restructurings are a very common commercial practice, until recently it has been uncommon to apply transfer pricing criteria when examining them in detail.

Essentially, the OECD has overlooked that a unique and valuable intangible is created during the restructuring process. By not acknowledging that this intangible in the mix, the OECD fails …

New York Adopts A Vat, Richard Thompson Ainsworth

Faculty Scholarship

On August 13, 2010 the New York State Department of Taxation and Finance, Office of Tax Policy Analysis, Taxpayer Guidance Division released Amendments Affecting the Application of Sales Tax to Rent Received for Hotel Occupancy by Room Remarketers. The legislative revision it considers (Chapter 57 of the Laws of 2010) was effective September 1, 2010. The changes brought in by this Chapter effectively converted New York’s Hotel Room Occupancy Tax from a single-stage retail sales tax to multi-stage European-style VAT. This paper considers the New York VAT in hotel accommodations in three sections. The first defines a European-style credit-invoice VAT …

Will Cutting The Payroll Tax Increase Jobs In The U.S.? Empirical Evidence From The Eu Vat, Richard Thompson Ainsworth

Faculty Scholarship

Red Ink Rising, the Peterson–Pew Commission on Budget Reform’s report presents the country with a fiscal/employment dilemma – Congress must act immediately to stem the federal debt, but it must move carefully lest it harm employment in the fragile economy. In short, we must act fast and slow – we must decrease the debt and increase employment. This is a difficult task.

The Peterson-Pew dilemma (notably its jobs-creation aspect) was taken to heart by both of the reform commissions that issued reports soon thereafter (National Commission on Fiscal Responsibility and Reform, The Moment of Truth and The Debt Reduction Task …

Vat Fraud: The Tradable Services Problem, Richard Thompson Ainsworth

Faculty Scholarship

Tradable services – VoIP termination services, mobile minutes, software as a service (SaaS), or almost any service bought or sold in the “cloud” – are a distinct class of taxable supplies. These service-based supplies both resemble and differ fundamentally from goods. They also differ from services that are consumed-on-purchase (consumed services).

Tradable services are designed from the beginning for re-sale. They are hybrid supplies that behave commercially like goods, but have functional attributes that make them hard to distinguish from services generally. When determining the place of supply/ place of taxation for these kinds of supplies, their hybrid character presents …

Irs's Recent Uncertain Tax Positions Initiative: A Tangle Of Accounting, Tax And Privilege Issues, 9 Depaul Bus. & Comm. L.J. 401 (2011), Kathryn J. Kennedy

UIC Law Open Access Faculty Scholarship

Given the extremely limited source of resources available to the IRS in recent years, it's not surprising that it is exploring all sorts of avenues to increase its efficiency, particularly relying on corporate taxpayers to self report questionable tax positions. Under the banner of "corporate governance" and "transparency," the Service issued a series of proposals in 2010 requiring disclosure of uncertain tax positions ("UTPs") by corporate taxpayers. The Service essentially piggybacked on the recently imposed 2006 audit requirements that reserves be posted for contingent tax liabilities (i.e., tax positions that could later not be sustained, and therefore had to be …

Giving State Tax Incentives To Corporations: How Much Is Too Much?, Kathleen E. Mcdavid

South Carolina Journal of International Law and Business

No abstract provided.

Happiness In Business Or Law, Peter H. Huang

Publications

This article provides a short introduction to recent happiness research and its applications to business or law that is organized as follows. Section I briefly considers: (1) troubling and not so troubling reservations about happiness research, and (2) how money and happiness are related. Section II concisely surveys two sets of applications of happiness research to business, namely: (1) workplace well-being and meaning, and (2) marketing. Section III succinctly reviews two categories of happiness research implications for law: (1) business regulation, and (2) law student and lawyer happiness.

Pennsylvania's Sales And Use Tax: Has Nearly $1 Billion Been 'Zapped' Away In Fraud?, Richard Thompson Ainsworth

Faculty Scholarship

The Sales and Use Tax is an essential part of Pennsylvania’s revenue profile. Not only is it the State’s second largest revenue source, it has historically played a critical role in reducing the volatility of Pennsylvania’s overall tax collections. The sales tax is also critical to the city of Philadelphia, and Allegheny County. During the current economic downturn both the revenue and structural attributes of this levy should be pushing it to the front of the tax policy line.

The two topics that should rest atop Pennsylvania’s tax policy agenda should be: (1) joining the Streamlined Sales Tax initiative and …

Vat Fraud - Technological Solutions, Richard Thompson Ainsworth

Faculty Scholarship

Every VAT/GST allows missing trader fraud. The fraud is simple, and can be simply prevented (with technology). The fraud arises when a business makes a purchase without paying VAT, collects VAT on an onward sale, and then “disappears” without remitting the tax. Missing trader fraud is common in high-value/low-volume goods sold across borders – computer chips and cell phones are the classic examples. But the fraud easily migrates when pursued. It operates well with goods as wide ranging as xenon bulbs, automobiles, and earth moving equipment.

The recent appearance of MTIC fraud in tradable CO2 permits and VoIP is a …

Taxation As Regulation: Carbon Tax, Health Care Tax, Bank Tax And Other Regulatory Taxes, Reuven S. Avi-Yonah

Law & Economics Working Papers

This paper addresses three questions: 1. Is regulation a legitimate goal for taxation? 2. Which tax is best suited for regulation? 3. Would it be better to allocate just one goal per tax among the major taxes (individual and corporate income tax and VAT)? It then analyzes the proposed bank tax and the enacted health care tax as regulatory taxes, and concludes that the first is desirable (as is a carbon tax) but the second is not.

Transfer Pricing In Business Restructurings – Reasoning From Implausible Assumptions Issue Note 2 – (Oecd, Discussion Draft), Richard Thompson Ainsworth, Andrew Shact

Faculty Scholarship

The OECD’s Center for Tax Policy and Administration roundtable on business restructurings in January 2005 led to a Joint Working Group project later that year on permanent establishments and business restructurings. One of the results was the Discussion Draft on Transfer Pricing Aspects of Business Restructurings that was available for public comment between September 19, 2008 and February 19, 2009.

This paper concerns Issue Note No. 2 in the Discussion Draft – Arm’s Length Compensation for the Restructuring Itself.

Issue Note No. 2 is deeply flawed. It relies on an unproved correlation between structure and performance (profit/loss potential). The Discussion …

The Italian Job — Voice Over Internet Protocol Mtic Fraud In Italy, Richard Thompson Ainsworth

Faculty Scholarship

On February 8, 2010 a speculative paper on the likelihood that fraudsters proficient in missing trader intra-community (MTIC) fraud might move into voice over internet protocol (VoIP) was submitted to the Boston University School of Law Working Paper Series.

Prior to that paper there was very little (if any) public discussion of VoIP MTIC. There were no assessments, no arrests, and not a hint of litigation. Fifteen days later, and before final publication the financial press exploded with coverage of a massive VoIP MTIC fraud (the Operazione “phuncards-broker” investigation). The Wall Street Journal reported: An [Italian] judge…ordered the arrest of …

Voip Mtic — Vat Fraud In Voice Over Internet Protocol, Richard Thompson Ainsworth

Faculty Scholarship

In the beginning, the VAT fraud known as missing trader intra-community (MTIC) fraud appeared to be a UK problem concentrated in the cell phone and computer chip markets. MTIC has mutated (to other commodities) and migrated (to other Member States). This paper describes how this fraud operates in the VoIP market, and how in this mutation it is no longer confined to the EU, but can infiltrate any VAT/GST anywhere.

Canada, Botswana, Japan, Iceland and Jamaica (to mention a few jurisdictions) have consumption taxes that are just as vulnerable as is the EU VAT to VoIP missing trader fraud. It …

Zappers - Retail Vat Fraud, Richard Thompson Ainsworth

Faculty Scholarship

Zappers skim cash sales at retail. Zappers are add-on programs used by merchants with electronic cash registers (ECRs) or point-of-sale (POS) systems. Zappers are smart and selective. They do not skim all sales, and they never skim credit card transactions.

Although they are present in every jurisdiction, Zappers appear to be most widely used in developed economies that combine high levels of cash sales with high rates of consumption tax. Sweden, for example, has a cash-intensive economy, one of the world’s highest VAT rates (25%), and also reports that 70% of the ECRs in the country are either “… constructed …

Co2 Mtic Fraud — Technologically Exploiting The Eu Vat (Again), Richard Thompson Ainsworth

Faculty Scholarship

On February 1, 2010 Algirdas Šemeta is expected to be confirmed as the next European commissioner for taxation, customs union, audit and anti-fraud. If his nomination passes a confirmation hearing at the European Parliament he will succeed László Kovács. At the top of Mr. Šemeta’s list of things requiring attention should be MTIC fraud in tradable CO2 permits. Political and fiscal realities make CO2 MTIC fraud a top priority.

CO2 MTIC is a technology-driven fraud that takes advantage of the same weaknesses in the EU VAT that have become well known in the cell phone and computer chip trade. The …

Quebec's Sales Recording Module (Srm): Fighting The Zapper, Phantomware, And Tax Fraud With Technology, Richard Thompson Ainsworth

Faculty Scholarship

No abstract provided.

Tax Fraud In The Sales Tax: Zappers — What Are They? How Can Puerto Rico Block Them?, Richard Thompson Ainsworth

Faculty Scholarship

The Sales and Use Tax is an essential part of Puerto Rico’s revenue profile. Effective only recently (November 15, 2006) the Impuesto a las Ventas y Uso (IVU) was expected to raise between $2.3 and $1.05 billion annually, and has already become the Commonwealth’s fourth largest revenue source. Actual revenue results for 2007-2008 came in at $1.1 billion, which admittedly is closer to the low end than the high end of what is possible, but now that the tax is in place the next pressing question is how can its performance be improved?

This paper generally proposes that Puerto Rico …

Virtual Intermediaries Ii - Canadian Solutions (Drop Shipments) Compared With Us, Japanese & Eu Approaches, Richard Thompson Ainsworth

Faculty Scholarship

Virtual travel agents are opportunistic internet-based travel agents. They are intermediary businesses that create mutually beneficial three-party transactions that secure accommodations for a traveler that: (a) meet the basic needs of the traveler (at a discount), (b) fills vacant room for accommodation retailers with guests that pay below market, but above standard costs, and (c) profit from the extra cash, the margin in the transaction.

The virtual intermediary’s eye is always on the discount and the cash flow. One of the things that catches their attention are the accommodation taxes which they collect from the traveler in advance and remit …