Tax Law Commons^™

Incremental International Tax Reform: A Review Of Selected Proposals, David L. Cameron, Philip F. Postlewaite

Northwestern Journal of International Law & Business

Business people, tax practitioners, and legal academics generally agree that the United States' international tax regime is broken. Criticisms abound that the system is overly complicated, disadvantageous to American businesses competing in a global economy, and frequently subject to manipulation and abuse. In the recent past, individuals and groups across the political spectrum have proposed numerous reforms to address these problems, some of which seek simply to modify current requirements while others jettison the current system in favor of dramatic alternatives. Two of the more ambitious proposals regarding international tax reform have centered on implementing changes that would significantly modify …

Inversions Under Section 7874 Of The Internal Revenue Code: Flawed Legislation, Flawed Guidance, Jefferson P. Vanderwolk

Northwestern Journal of International Law & Business

The Obama Administration's international tax proposals would, if enacted, be likely to increase the U.S. tax costs of many multinational groups that are owned by a U.S. entity. One possible response by the managers or owners of such a group would be to restructure the group via an inversion transaction so that the group would have a foreign corporate parent instead of a US parent entity. Inversions were in vogue in the late 1990s and the early years of this decade until Congress passed the American Jobs Creation Act of 2004, adding section 7874 to the Internal Revenue Code. The …

Credit Vs. Exemption: A Comparative Study Of Double Tax Relief In The United States And Japan, Lawrence Lokken, Yoshimi Kitamura

Northwestern Journal of International Law & Business

The overriding issue in international taxation is the problem of double taxation. Under the tax laws of most countries, income may be taxed on the basis of either residence or source. That is, a country may tax residents of the country on worldwide income and may tax nonresidents on income from sources within the country. Thus, if a resident of one country has income from a business activity or investment in another country, the person may be taxed on the income on a residence basis by its home country and on a source basis in the other country. Most countries …

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 …

Sovereignty, Integration And Tax Avoidance In The European Union: Striking The Proper Balance, Lilian V. Faulhaber

Georgetown Law Faculty Publications and Other Works

As the need to raise revenue becomes more pressing and public opposition to tax avoidance increases, the European Court of Justice has made it more difficult for the twenty-seven Member States of the European Union to prevent tax avoidance and shape fiscal policy. This article introduces the new anti-avoidance doctrine of the European Court of Justice and analyzes it from the perspective of taxpayers, Member States and the European Union legal order as a whole. This doctrine is problematic becasue it has created a legislative vacuum in Europe. No European Union institution has the authority to regulate direct taxation without …

Sovereignty, Integration, And Tax Avoidance In The European Union: Striking The Proper Balance, Lilian Faulhaber

Faculty Scholarship

As the need to raise revenue becomes more pressing and public opposition to tax avoidance increases, the European Court of Justice has made it more difficult for the twenty-seven Member States of the European Union to prevent tax avoidance and shape fiscal policy. This article introduces the new anti-avoidance doctrine of the European Court of Justice and analyzes it from the perspective of taxpayers, Member States and the European Union legal order as a whole. This doctrine is problematic becasue it has created a legislative vacuum in Europe. No European Union institution has the authority to regulate direct taxation without …

President's Economic Recovery Advisory Board: Suggested Considerations In Fundamental Reform Of The United States Tax Treatment Of Income From Cross Border Trade And Investment, Robert H. Dilworth

Northwestern Journal of International Law & Business

The President's Economic Recovery Advisory Board ("PERAB") has as part of its mandated inquiry the reform of the U.S. tax treatment of income from cross border trade and investment. This paper sets forth a short set of recommendations as to tax reform methodology and some substantive proposals. Tax reform should not "start over," or undertake significant changes, without a fairly detailed understanding of what the present regime actually does, or does not do, and identifying the relationship (if any) between the various existing provisions and whatever "the problem" is perceived to be. The present architecture results from the striking of …

International Tax Reform Should Begin At Home: Replace The Corporate Income Tax With A Territorial Expenditure, William B. Barker

Northwestern Journal of International Law & Business

The present U.S. system of international taxation is riddled with problems because it does not satisfy critical principles of economics, justice, or common sense. It fails to accomplish the most important goals that an international system should achieve - that is, protecting the domestic tax base in a way that fosters domestic economic development and the creation of jobs. This paper explores alternatives to the present system to see if they do a better job. Some of the alternatives fail for the same reasons as the present system because they are predicated on the same outmoded theories. Some are clearly …

U.S. International Tax System At A Crossroads, Barbara Angus, Tom Neubig, Eric Solomon, Mark Weinberger

Northwestern Journal of International Law & Business

The current U.S. international tax system, the administration's international tax proposals, and other potential international tax reforms all have ramifications for U.S. businesses, American workers, and the U.S. economy that must be fully discussed and understood. This report focuses on some of the most important facts and perspectives that should be considered as part of that discussion. This process starts by asking, at a minimum, questions like these: (1) How have the dynamics of the global economy changed? (2) What role should differences between the U.S. tax system and those of other countries play in determining an advantageous international tax …

Transfer Pricing And Fin 48: Removing Uncertainty Through The Advanced Pricing Agreement Process, Christopher Capuzzi

Northwestern Journal of International Law & Business

The increasing globalization of companies is indisputable, and the multinational enterprise offers many heuristic challenges. Among these are jurisdiction-specific taxation and accounting standards and principles. Enterprises often operate without regard to legal entity structures but rather along business lines. While entities may operate without regard to jurisdictional lines, local taxing and accounting regimes are steadfast on ensuring adherence to their respective principles. Chief among these is ensuring that there is a proper allocation of the tax base. The proper allocation of the tax base has long been at the forefront of concerns, so much so that normative transfer pricing principles …

United States Of America Experience With And Administrative Practice Concerning Mutual Assistance In Tax Affairs, Henry Ordower

All Faculty Scholarship

This report was part of the project for the 2009 meeting of the European Association of Tax Law Professors in Santiago de Compostela, Spain. The general reporter for the project was Professor Dr. Roman Seer, Ruhr Universität, Bochum, Germany. The report identifies and discusses United States cooperation with the member states of the European Union through treaties and other agreements on matters of sharing tax and taxpayer information and assisting in assembling tax information and collecting tax revenue. The United States report responds to questions that the general reporter posed and provides additional information concerning United States tax procedure.

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 …

More Cooperation, Less Uniformity: Tax Deharmonization And The Future Of The International Tax Regime, Steven A. Dean

Faculty Scholarship

Efforts to foster improved international tax cooperation have become preoccupied with tax harmonization. Deharmonization offers the possibility of harmony without uniformity By exploring two examples of tax deharmonization in practice and considering the origins and limitations of tax harmonization, this Article brings the traditional emphasis on harmonization into question. It then makes the case that deharmonization--cooperation without uniformity--could provide a viable alternative. Achieving tax deharmonization potential would require revisiting some of the most basic elements of our current international tax regime, particularly the benefits principle.

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 …

Shooting Blanks: The War On Tax Havens, Timothy V. Addison

Indiana Journal of Global Legal Studies

The United States Treasury conservatively estimates that tax havens cost the United States over $100 billion annually in lost tax revenue. In response to this epidemic, the United States and the Organization for Economic Cooperation and Development entered into Tax Information Exchange Agreements with states considered to be tax havens. These agreements received widespread recognition as a means of remedying this growing problem. These agreements, however, are largely symbolic and provide very few additional weapons to combat tax evasion enabled by tax havens. As evidence of this, the estimated annual loss of tax revenue due to tax havens has increased …

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 …

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 …

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 …

The New Poor At Our Gates: Global Justice Implications For International Trade And Tax Law, Ilan Benshalom

Faculty Working Papers

The Article explains why international trade and tax arrangements should advance global wealth redistribution in a world of enhanced economic integration. Despite the indisputable importance of global poverty and inequality, contemporary political philosophy stagnates over the controversy of whether distributive justice obligations should extend beyond the political framework of the nation state. This stagnation results from the difficulty of reconciling liberal impartiality with notions of state sovereignty and accountability. The Article offers an alternative approach that bypasses the controversy of the current debate. It argues that international trade results in relational distributive duties when domestic parties engage in transactions with …

Combating Global Climate Change: Why A Carbon Tax Is A Better Response To Global Warming Than Cap And Trade, Reuven S. Avi-Yonah, David M. Uhlmann

Articles

Global climate change is the most significant environmental issue facing our nation and the world. There no longer is any question that global warming is occurring. Nor is there any serious debate about whether human activity is the root cause. If we fail to make significant reductions in greenhouse gas emissions over the next ten to twenty years, we face the possibility of catastrophic environmental harm by the end of this century.

Are You Not Entertained - Is This Not Why You Are Here - U.S. Taxation Of Foreign Athletes And Entertainers, Stephen Taylor

Jeffrey S. Moorad Sports Law Journal (1994 - )

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 …

The Incomplete Global Market For Tax Information, Steven A. Dean

Faculty Scholarship

No abstract provided.

The Incomplete Global Market For Tax Information, Steven A. Dean

Faculty Scholarship

No abstract provided.

Taxation As A Global Socio-Legal Phenomenon, Steven A. Dean, Allison Christians, Diane Ring, Adam H. Rosenzweig

Faculty Scholarship

No abstract provided.

Taxation As A Global Socio-Legal Phenomenon, Allison Christians, Steven Dean, Diane Ring, Adam H. Rosenzweig

Faculty Scholarship

This essay makes a proposal that may not be controversial among those with a particular interest in international law, but may be less accepted among those primarily interested in tax law: that international social and institutional structures shape, and are shaped by, historical and contemporary domestic policy decisions. As a result, to incorporate these lessons, tax scholarship should turn to fields such as international relations, organizational theory, and political philosophy to provide a broader framework for understanding the rapid changes that are taking place in tax policy and politics in the United States and around the world.

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 …