Law and Economics Commons^™

Of Coase, Calabresi, And Optimal Tax Liability, Kyle D. Logue, Joel Slemrod

Articles

The Article proceeds as follows. Part II offers a primer on the Coase Theorem, beginning with the classic case of neighbor externalizing on neighbor (farmer and rancher), and it explains the basic invariance propositions. Part III shifts the focus to Coasean situations involving buyers and sellers in a market or contractual relationship, buyers and sellers whose market interactions cause harm to third parties. Using supply-and-demand diagrams, we illustrate (in a new way) some of the most basic findings of the economic analysis of law, including both the Coasean invariance and efficiency propositions and the Calabresian least-cost avoider idea. Also in …

Tax Reform In The Aftermath Of The Financial Crisis, Stephen Utz

Faculty Articles and Papers

No abstract provided.

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, …

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 …

Corporate And Business Law, Laurence V. Parker

University of Richmond Law Review

No abstract provided.

Mtic Fraud Infects Tradable Carbon Permits, Richard Thompson Ainsworth

Faculty Scholarship

Missing trader intra-community (MTIC) fraud has been slowly morphing from cell phones and computer chips to other commodities. In the last few months however MTIC made a dramatic appearance in tradable CO2 permits. It closed exchanges and prompted France and the Netherlands to unilaterally change their tax treatment of CO2 trades. The UK has followed the French treatment in large measure. On Monday June 8, 2009 rumors of MTIC fraud in carbon emission permits closed the main European exchange for spot trading of European Union carbon emissions permits and Kyoto offsets. When BlueNext began trading permits again on Wednesday, June …

Massachusetts Zappers - Collecting The Sales Tax That Has Already Been Paid, Richard Thompson Ainsworth

Faculty Scholarship

No other New England state is as vulnerable to Zappers as is the State of Massachusetts. Zappers and related software programming, Phantom-ware, facilitate an old tax fraud – skimming cash receipts. In this instance skimming is performed with modern electronic cash registers (ECRs).

Zappers are a global revenue problem, but to the best of this author’s knowledge they have not been uncovered in Massachusetts. A global perspective says: it is highly unlikely that Zappers are not in the Commonwealth – we just need to find them. In fact, using a Quebec template, tax losses from Zappers and related frauds in …

Vat Derogations In Germany, Austria, Denmark, And Estonia: Use And Enjoyment Rules, Richard Thompson Ainsworth

Faculty Scholarship

When the Czech Republic elected (effective January 1, 2009) to derogate from the standard rules for determining the place of supply for intangible services, pursuant to Article 58 of the Recast VAT Directive (RVD), it was following the lead of ten other Member States. This paper considers four of those other jurisdictions - Germany, Austria, Estonia, and Denmark - and compares their derogations with that of the Czech Republic.

In each instance a use and enjoyment standard determines the place of supply for certain intangible services. The affected transactions are (potentially) wide ranging. In each instance non-EU countries are on …

Incidence And Accidents: Regulation Of Executive Compensation Through The Tax Code, Joy Mullane

Working Paper Series

Congress has enacted a number of tax provisions that aim to penalize companies and their executives when the executive is paid more than Congress thinks is desirable. Congress was motivated to enact these provisions by intense public sentiments regarding executive compensation levels during times of economic turmoil. This article demonstrates, however, that not only are these provisions ineffective at reducing executive compensation levels, but they penalize the wrong people. This article reveals that the penalties do not significantly fall on the executives that Congress was targeting with enactment of the penalties. Instead, these penalties impose costs on a variety of …

Changes To The Czech Republic's Vat Act: The Use And Enjoyment Rules, Richard Thompson Ainsworth

Faculty Scholarship

On January 1, 2009 a minor change in the Czech Republic VAT became effective. A use and enjoyment standard was added to modify the sourcing of certain service transactions. Traditional proxy-based rules, derived from Articles 43 and 56(1) of the Recast VAT Directive (RVD), are set aside by this modification when the customer receiving the services has a permanent establishment (PE) in the Czech Republic. The modification is authorized by RVD 58.

This change is a limited adoption of RVD 58(b), and functions like a full force of attraction principle in direct taxation. If caught by these rules, transactions that …

Quebec's Module D'Enregistrement Des Ventes (Mev): Fighting The Zapper, Phantomware And Tax Fraud With Technology, Richard Thompson Ainsworth

Faculty Scholarship

On January 28, 2008 the Quebec Minister of Revenue, Jean-Marc Fournier, announced that by late 2009 the MRQ will begin testing a device, the module d'enregistrement des ventes (MEV) that is projected to substantially reduce tax fraud in the restaurant sector. By 2010 or 2011 MEVs will be mandatory in all Quebec restaurants, where they will assure accuracy and retention of business records within electronic cash registers (ECRs).

This paper moves beyond a discussion of the variety of sales suppression programs in use - zappers and phantom-ware. The concern here is on enforcement efforts, particularly the MEV. The intent is …

California Biometrics: A Second Proposal For California's Commission On The 21st Century Economy, Richard Thompson Ainsworth

Faculty Scholarship

This proposal takes a long view to revenue reform. It seeks to fundamentally align the sales tax with the digital foundation of the 21st Century economy.

The core policy question is whether California is willing to change the way it defines sales tax exemptions; is it willing to move from product-centric to person-centric exemptions. Certified tax determination systems can be relied upon. A key element in this proposal is the encryption of exemption certificates in IDs (smart cards with biometric identifiers that will allow the poor or handicapped to make certain purchases tax free).

This proposal suggests that (for example) …

Transfer Pricing In Vat/Gst Vs. Direct Taxation: A Paper On The Topic Of Relations Between Associated Companies, Richard Thompson Ainsworth

Faculty Scholarship

This paper considers transfer pricing in VAT/GST and direct taxes, one of a range of tax relationships that flow between associated companies. The topic necessarily proposes an inquiry into vertical harmonization of transfer pricing norms alongside an assessment of present efforts to horizontally harmonize transaction values.

Stated differently, the vertical inquiry is: should the same transaction between the same associated enterprises be valued in the same manner by a single country in VAT/GST and direct taxes? The horizontal effort is: should two jurisdictions treat transactions between associated enterprises within their respective jurisdictions in the same manner in VAT/GST and direct …

California Zappers: A Proposal For The Commission For The 21st Century Economy, Richard Thompson Ainsworth

Faculty Scholarship

California has not uncovered a single instance of technology-assisted cash skimming - there are no zappers, and no phantomware in California. Is this because Californians are not skimming cash sales with technology, or is this because the California technology works so well that the fraud cannot be detected?

The record in foreign jurisdictions is reasonable clear. Automated sales suppression technology is widely used to skim cash sales, denying the state revenues from consumption taxes that have been paid by the consumer, reducing taxable business profits, and funding a cash hoard out of which unreported employee wages are paid. Government studies …

Cash Businesses And Tax Evasion, Susan Morse, Stewart Karlinsky, Joseph Bankman

Faculty Publications

This Article attempts to provide a qualitative picture of tax evasion in the small business sector. It provides details from almost 275 field study interviews with cash business owners and with tax preparers and bankers who serve cash business clients. Our research suggests answers to the questions of who evades taxes, what taxes they evade, and why and how they evade taxes. This Article proceeds in three additional parts. Part II summarizes the main threads of relevant social science research on small business tax compliance. Part III describes the methodology and results of this interview study. Part IV concludes.

The Intellectual Foundations Of The Modern American Fiscal State, Ajay K. Mehrotra

Articles by Maurer Faculty

No abstract provided.

Peter Mieszkowski And The General Equilibrium Revolution In Public Finance, James R. Hines Jr.

Articles

The importance of understanding the implications of general equilibrium is by now abundantly clear to researchers analyzing public fi nance issues. What is perhaps less apparent is that this was not always so. The study of public fi nance was radically transformed during the 15 years between 1959 and 1974 by the pioneering efforts of a small number of leading scholars, notably including Peter Mieszkowski. Thanks to their efforts, the analysis of applied problems in public finance moved from partial equilibrium to general equilibrium, providing the methods and insights that characterize modern public economics. The transformation began with the publication …

Canada's Evolving Tax Treaty Policy Toward Low-Income Countries, Kim Brooks

Articles, Book Chapters, & Popular Press

Relative to at least some high-income countries, Canada has been willing to negotiate tax treaties that leave greater jurisdiction to tax (ie. more source jurisdiction) to low-income countries in its tax treaties. Nevertheless, Canada's tax treaty policy has not been overwhelmingly generous. This essay takes as its starting point Alex Easson's 1988 paper, The Evolution of Canada's Tax Treaty Policy Since the Royal Commission on Taxation. Focusing on the evolution of Canada's tax treaty policy since 1988, the essay examines three aspects of Canada's tax treaties that might increase the scope for source-based taxation by low-income countries. First, it examines …

Taxation, Craig D. Bell

University of Richmond Law Review

No abstract provided.

Electronic Tax Fraud - Are There "Sales Zappers" In Japan?, Richard Thompson Ainsworth

Faculty Scholarship

Although there is no public acknowledgement - in the press, in a court case, though any announcement by the Japanese National Tax Administration, or in any academic studies or papers - that Zappers and Phantom-ware are a fraud problem in Japan, a number of factors suggest that Japan may be very fertile ground for technology-assisted cash skimming fraud. Those factors include: (1) a high concentration of small to medium sized businesses; (2) the fact that the retail economy is highly cash-based; and (3) the high level of technology acceptance in the Japanese retail sector - electronic cash registers (ECRs) and …

Zappers And Phantomware: Are State Tax Administrators Listening Now?, Richard Thompson Ainsworth

Faculty Scholarship

When the Federation of Tax Administrators (FTA) held a national Compliance and Education Workshop in Louisville, Kentucky (February 25-27, 2001) one of the invited speakers was Kevin Pratt, Manager, Underground Economy, Canadian Customs and Revenue Authority (CCRA). He spoke on Zappers.

To the best of anyone's present recollection, this was the first time zappers had been discussed with a large group of state-level US tax compliance professionals. However, most of the information that the CCRA presented to the FTA in 2001 was not its own - it was derivative. Zapper investigations were not an in-house specialty of the CCRA (although …

Zappers And Phantomware: The Need For Fraud Prevention Technology, Richard Thompson Ainsworth

Faculty Scholarship

There is a demand-market for technology that facilitates tax fraud. By all accounts the providers in this market are working in a growth industry.

In the short term this is bad news for those concerned with tax policy and information privacy. In the long term however, the fight against technology-assisted fraud is stimulating the development of a more robust technology base within tax administrations, and this is good news for those who believe that a sophisticated technological infrastructure is needed to resolve difficult questions of tax design.

This paper focuses on two technology-accelerants of SME tax fraud - zappers and …

Risk, Return, And Objective Economic Substance, Charlene Luke

UF Law Faculty Publications

The economic substance doctrine is a judicial method used to assess transactions suspected of being nothing more than elaborate (and illicit) tax avoidance. Courts vary in their formulation of the doctrine. Generally, the test consists of (1) a subjective inquiry into the taxpayer's motivations for entering the suspect transaction and (2) an objective inquiry into whether the transaction accomplished anything beyond tax effects. Both inquiries frequently revolve around the profit potential of the suspect transaction. In making an objective inquiry into profit, courts focus on the profit potential exclusive of taxes - the pre-tax landscape. This Article suggests that although …

Mtic (Carousel) Fraud: Twelve Ways Forward; Two Ways "Preferred" - Has The Technology-Based Administrative Solution Been Rejected?, Richard Thompson Ainsworth

Faculty Scholarship

In a May 31, 2006 Communication to the Council, the European Parliament, and the European Economic and Social Committee, the European Commission indicated a need to develop a co-ordinated strategy to improve the fight against fiscal fraud [COM(2006) 254 final]. Although the Communication considers fiscal fraud broadly (VAT, excise duties and direct taxes) the most pressing need seems to be for a VAT strategy that will effectively deal with MTIC (Missing Trader Intra-Community) or carousel fraud. To this end the Commission hosted a conference: Fiscal Fraud - Tackling VAT Fraud: Possible Ways Forward. The March 29, 2007 conference was constructed …

Zappers: Tax Fraud, Technology And Terrorist Funding, Richard Thompson Ainsworth

Faculty Scholarship

"Zappers," or automated sales suppression devices, have brought unheard of efficiencies and economies of scale to a very simple tax fraud - skimming cash sales at point of sale (POS) terminals (electronic cash registers). Until recently the largest tax fraud case in Connecticut, also the "largest computer driven tax-evasion case in the nation," was a zapper case. Stew Leonard's Dairy in Norwalk Connecticut skimmed $17 million in receipts and hid the cash in St. Martin (a Caribbean island). Talal Chahine and his wife, Elfat El Aouar, owners of the La Shish restaurant chain in Detroit Michigan have the dubious honor …

It-Apas - Vertical Harmonization Of Transfer - Pricing Standards, Richard Thompson Ainsworth

Faculty Scholarship

The World Customs Organization (WCO) and the Organization of Economic Cooperation and Development (OECD) have begun considering the harmonization of transfer pricing norms among income tax, customs and VAT regimes. Two conferences have been organized in May of 2006 and 2007.

These conferences have concluded so far: (a) that more analysis is needed; (b) that harmonization will require adjustments on all sides; and (c) that pilot projects (real world statutory and administrative efforts to harmonize) or case studies in harmonization (hypothetical fact patterns) are needed to facilitate consideration. This paper assesses the three basic paths being pursued at the present …

The Future Of Social Security: Principles To Guide Reform, 41 J. Marshall L. Rev. 1061 (2008), Kathryn L. Moore

UIC Law Review

No abstract provided.

The Vesting, Modification, And Financing Of Public Retiree Health Benefits In Light Of New Accounting Rules, 41 J. Marshall L. Rev. 1147 (2008), John Sanchez

UIC Law Review

No abstract provided.

The Tax Treatment Of Cancelled Interest And Penalties On Consumer Debt, Richard C.E. Beck

NYLS Law Review

No abstract provided.