Tax Law Commons^™

Back To Basics: Rethinking Normative Principles In International Tax, Shay Moyal

SJD Dissertations

This dissertation is comprised of the following articles:

• Moyal, Shay Shimon, Back to Basics: Rethinking Normative Principles in International Tax (May 11, 2019). The Tax Lawyer, Volume 73, Issue: 1 (Fall 2019), Also available at SSRN: https://ssrn.com/abstract=3386678 or http://dx.doi.org/10.2139/ssrn.3386678
• Moyal, Shay Shimon, Don't Stop the BEAT (February 03, 2020). “Don’t Stop the BEAT,” Tax Notes Federal, Feb. 3, 2020, pp. 721-735 and Tax Notes International, Feb. 3, 2020, pp. 533-547., also available at SSRN: https://ssrn.com/abstract=3539601
• Moyal, Shay Shimon, Section 267a and the Taxation of Hybrid Mismatches Under the Code (September 10, 2020). The Tax Lawyer, Vol. 74, No. 2, also …

The Digital Consumption Tax, Reuven S. Avi-Yonah, Nir Fishbien

Articles

Amid rising tension between the United States and France over the Digital Services Tax (DST), this article propositions the imposition of a Digital Consumption Tax, rather than the gross-receipts DST. The Digital Consumption Tax is not a new tax. It is a consumption tax (i.e. Value-Added Tax, or VAT, in Europe and sales tax in the United States) that is imposed on digital transactions. Such consumption tax would be applied on the seemingly free interaction between Facebook (and other companies alike) and its Users. This interaction, under which Users gain access to the Facebook platform for ‘free’ – should be …

Constructive Dialogue: Beps And The Tcja., Reuven Avi-Yonah

Articles

From its inception, the international tax regime was heavily influenced by the United States. The regime is traditionally traced back to the work of the four economists for the League of Nations in 1923, who came up with the orig- inal compromise underlying the tax treaty network, i.e., that passive income should be taxed primarily at residence and active income primarily at source (the “benefits principle”). Arguably, this compromise between the claims of res- idence and source countries was made possible by the U.S. unilateral adoption of the foreign tax credit in 1918, because the United States (already the world’s …

Tax Policy And Our Democracy, Clinton G. Wallace

Michigan Law Review

Review of Anthony C. Infanti's Our Selfish Tax Laws: Toward Tax Reform That Mirrors Our Better Selves.

Why Study Tax History?, Reuven S. Avi-Yonah

Reviews

Since the beginning of this century, John Tiley organized an annual tax history conference at Cambridge, a tradition that was continued after his death under the leadership of Peter Harris. These are the papers from the ninthCambridge Tax Law History Conference, held in July 2018. In the usual manner, the papers have been selected from an oversupply of proposals for their interest and relevance, and scrutinized and edited to the highest standard for inclusion in this prestigious series. The result is an outstanding book, with many high quality contributions to historical tax research.

Us And Capital Flight, Reuven S. Avi-Yonah

Articles

The recent leaks of the Panama and Paradise Papers have highlighted the difficulty of taxing the income of residents of developed and developing offshore countries. The basic problem is that such income is subject to neither withholding at source nor information reporting. In the absence of both withholding and reporting, it is easy to use tax havens to hide such income from tax authorities. Estimates of the scope of the problem vary widely, but it is certainly larger than the $200 billion in estimated losses from legal corporate tax avoidance.

This article explains the historic roots of this problem, which …

Toward A 21st-Century International Tax Regime, Reuven S. Avi-Yonah

Law & Economics Working Papers

The OECD has been struggling to respond to countries that wish to tax large US technology companies on the basis of where their consumers live. The current OECD work program on digitalization is unlikely to produce a stable consensus or prevent countries from following the lead of France, India, Italy and the United Kingdom toward digital services taxes. The United States response should not be to target French, Indian, Italian or British companies for retaliation. Instead, the United States should consider adopting a sales-based formulary apportionment (SFA) solution that would apply to all large enterprises. Such a move is more …

Response To 'Reverse Al Capone-Ism' And The Tax Treatment Of Marijuana Businesses, Douglas A. Kahn, Howard J. Bromberg

Other Publications

Mr. Silverberg’s comment stresses that the proponents of the legalization of marijuana have not been able to convince Congress to legalize it, and so it is appropriate for Congress to penalize trafficking in that drug. Apparently, he sees our contention that the penalty adopted in I.R.C. § 280E is irrational and contravenes established punitive jurisprudence as a backdoor attempt to accomplish indirectly, by weakening the penalties on the marijuana businesses, what has not been able to be accomplished by those seeking its federal legalization. That was not the motive for our proposal and is not a fair reading of our …

Response To Dude, Where's My Deduction?, Douglas A. Kahn, Howard J. Bromberg

Other Publications

Mr. Pullin’s thesis is that marijuana should be excluded from § 280E when it is operated legally under state law. However, his preferred solution is that the federal government remove marijuana from Schedules I and II of the Controlled Substances Act of 1970 (CSA), thereby legalizing it for federal law purposes. Either action would exclude the marijuana business from § 280E.

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

Articles

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 …

Toward A 21st-Century International Tax Regime, Reuven S. Avi-Yonah, Kimberly A. Clausing

Articles

The international tax regime is almost a century old, and it is showing its age. In recent decades, the regime could be maintained despite increasing evidence that some of its key components, such as the arm’s-length standard or permanent establishment threshold, were unfit for a 21st-century economy. However, starting with the U.K. diverted profits tax (2015), Australia’s multinational anti-tax-avoidance law (2015), and India’s equalization levy (2016), it has become clear that many countries are unwilling to live with a situation in which large U.S. technology companies (such as Amazon, Apple, Facebook, Google, and Netflix) earn billions in profits by exploiting …

India's New Profit Attribution Proposal And The Arm's-Length Standard, Reuven S. Avi-Yonah, Ajitesh Kir

Articles

A recent Indian public consultation document on amending India’s rules for profit attribution to permanent establishments represents the first time a national government has proposed abandoning the arm’s-length standard. In this article, the authors discuss that document, as well as the OECD’s recent consideration of using formulas to allocate profits to market jurisdictions, and they ponder whether those developments indicate a larger movement away from the arm’s-length standard in favor of a unitary tax system.

Should The United States Adopt Crs?, Noam Noked

Michigan Law Review Online

The United States' one-sided approach to tax transparency might lead to an unprecedented clash with the European Union (EU) in the near future. In light of the EU's deadline for the United States, the U.S. Treasury and Congress should urgently engage in a discussion on whether the United States should adopt the Common Reporting Standard (CRS) for automatic exchange of financial account information. A recent report from the U.S. Government Accountability Office considered this issue and did not recommend adopting CRS. This Essay discusses the contents of the report, as well as important considerations that were left out of the …

Amazon Goldcrest Project And The Relevance Of Comparability Analysis Under The Arm's Length Principle, Reuven S. Avi-Yonah

Articles

The arm’s length principle, which has long been the guiding rule in the area of transfer pricing, in recent years is increasingly challenged. One of the focus points of discussion is the comparability analysis of intra-group and independent transactions. Especially intangibles do not lend themselves to such analysis, because they are unique in a way that does not match with existent market equilibria. The analysis of the Amazon case in this article reflects this argument.

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 …

Does Customary International Tax Law Exist?, Reuven S. Avi-Yonah

Law & Economics Working Papers

Customary international law is law that “results from a general and consistent practice of states followed by them from a sense of legal obligation.” “International agreements create law for states parties thereto and may lead to the creation of customary international law when such agreements are intended for adherence by states generally and are in fact widely accepted.” Does customary international law (CIL) exist in tax? There are over 3,000 bilateral tax treaties, and they are about 80% identical to each other, but do they create CIL that binds in the absence of a binding treaty, like for example the …

Taxation And Human Rights: A Delicate Balance, Reuven S. Avi-Yonah, Gianluca Mazzoni

Book Chapters

This chapter assesses the appropriate balance between strengthening tax revenue collection tools to ensure states have adequate resources to meet their human rights obligations, and protecting taxpayer rights to privacy and data security. On the one hand, the ability of rich residents of developing countries and multinational corporations operating in those countries to evade or avoid taxation is directly linked to violations of human rights in those countries, especially from the perspective of social and economic rights like health and education. Providing such countries with the means to fight back and collect adequate revenues is essential in advancing such rights. …

Stock Market Reactions To India's 2016 Demonetization., Vikramaditya S. Khanna, Dhammika Dharmapala

Articles

On November 8, 2016, the Indian government made a surprise announcement that certain currency notes (representing 86 percent of the currency then in circulation) would no longer be legal tender (although they could be deposited in banks over a limited period). The stated reason for this sudden “demonetization” was to combat tax evasion and corruption associated with “unaccounted for” cash. We compute abnormal returns for different subsamples of firms—defined by industry, ownership structure, and other characteristics—on the Indian stock market around this event. There is little evidence that sectors thought to be associated with greater tax evasion or corruption experienced …

Complete Distributive Rules And The Single Tax Principle: A Review Of Recent Italian Case Law, Reuven S. Avi-Yonah, Gianluca Mazzoni

Articles

The authors, in this article, examine the application of complete distributive rules as set out in various tax treaties as it relates to the single tax principle by reference to recent Italian case law.

On 11 October 2018, in Decision No. 25219, the Italian Corte Suprema di Cassazione (Supreme Court, CSC) confirmed that treaty provisions limiting the exercise of the domestic power to tax by the source state also apply where the residence state does not actually tax the relevant item of income. In that case, where a tax treaty attributes exclusive tax jurisdiction over an item of income to …

The Games They Will Play: Tax Games, Roadblocks, And Glitches Under The 2017 Tax Legislation, David Kamin, David Gamage, Ari Glogower, Rebecca Kysar, Darien Shanske, Reuven S. Avi-Yonah, Lily Batchelder, J. Clifton Fleming, Daniel Hemel, Mitchell Kane, David Miller, Daniel Shaviro, Manoj Viswanathan

Articles

The 2017 tax legislation brought sweeping changes to the rules for taxing individuals and business, the deductibility of state and local taxes, and the international tax regime. The complex legislation was drafted and passed through a rushed and secretive process intended to limit public comment on one of the most consequential pieces of domestic policy enacted in recent history. This Article is an effort to supply the analysis and deliberation that should have accompanied the bill’s consideration and passage, and describes key problem areas in the new legislation. Many of the new changes fundamentally undermine the integrity of the tax …

Beps, Atap And The New Tax Dialogue: A Transatlantic Competition?, Reuven S. Avi-Yonah, Gianluca Mazzoni

Book Chapters

The Tax Cuts and Jobs Act (TRA17) signed into law by President Trump on 22 December 2017 contains multiple provisions that incorporate the principles of the OECD/G20 Base Erosion and Profit Shifting Action Plan (BEPS) into domestic US tax law. Together with the changes in the 2016 US Model Tax Treaty, 1 these provisions mean that the United States is following the European Union in implementing BEPS and particularly its underlying principle, the single tax principle (all income should be subject to tax once at the rate derived from the benefits principle, i.e., active income at a minimum source tax …

9th Circ. Got Cost-Sharing Right In Altera V. Commissioner, Reuven S. Avi-Yonah

Other Publications

On June 7, the U.S. Court of Appeals for the Ninth Circuit released its long-awaited opinion in Altera Corp. v. Commissioner. Like its predecessor, the new panel chosen after Judge Stephen Reinhardt's death reversed the U.S. Tax Court and held that the regulation requiring multinationals that enter into a qualified cost-sharing agreement, or QCSA, to share the cost of employee stock options is valid.

Crisis-Driven Tax Law: The Case Of Section 382, Albert H. Choi, Quinn Curtis, Andrew T. Hayashi

Articles

At the peak of the 2008 financial crisis, the Internal Revenue Service (IRS) issued Notice 2008–83 (the Notice), administrative guidance that limited Internal Revenue Code (the Code) section 382, an important tax rule designed to discourage tax-motivated acquisitions. Although styled as a mere interpretation of existing law, the Notice has been widely viewed as an improper exercise of the IRS’s authority that undermined its legitimacy. But did the Notice work? There were many extraordinary interventions during the financial crisis that raised questions about eroding the rule of law and the long-term destabilizing effects of bail­outs. In a financial crisis, regulators …

Review Of Double Taxation And The League Of Nations, Reuven S. Avi-Yonah

Reviews

Should we continue adapting the OECD Model to address tax challenges arising from digitalization of the economy or has the time come for radical reform? Sunita Jogarajan asked that question in her last study of the League of Nations' work on double taxation in the 1920s. The historical analysis provided in her book seems to suggest that the international tax regime will continue to inevitably evolve and the OECD Model can adapt. Her extensive archival research, conducted at the League of Nations Archives, the United Kingdom National Archives (London) and the Seligman Archives, Columbia University (New York), clearly demonstrates that …

The Persistent Appeal Of S Corporations: How Tax Cuts Might Not Help Small Corporations, Manas Kumar

Michigan Business & Entrepreneurial Law Review

This Note will first review the tax preferences for entity choice under the old tax regime for the sake of context. It will then compare the tax benefits of electing to C and S corporation status under the regime created by the Act. The Note will conclude with an analysis of the factors sustaining the tax appeal of pass-through firms for lower-earning businesses with special attention to the largely unaltered state of tax law and business entity choice. It proposes that the Act did not sufficiently reform the Internal Revenue Code to close up the tax advantage that high-earning corporations …

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 Beat And Treaty Overrides: A Brief Response To Rosenbloom And Shaheen, Reuven S. Avi-Yonah, Brett Wells

Law & Economics Working Papers

In a recent paper posted on SSRN, Profs. David Rosenbloom and Fadi Shaheen argue that the Base Erosion Anti-Abuse Tax (BEAT) (IRC section 59A), as enacted in 2017, is a potential violation of Articles 23 and 24 of US tax treaties. In addition, they argue that the BEAT does not override those treaties and therefore the treaties can be relied upon to overcome the effects of the BEAT. In our opinion, this conclusion is wrong, for two reasons. First, we believe that the BEAT is not a treaty violation. Second, we believe that even if the BEAT were found to …

Perils Of Tax Reform, James R. Hines Jr.

Articles

Tax reforms dangle possibilities of improving the tax system, but are fraught with perils that are evident from the 2017 U.S. experience and caution against frequent reforms of its ilk. The first peril is that reforms containing tax provisions selected simply on the basis of their projected revenue contributions will produce less tax revenue than anticipated, illustrative calculations suggesting shortfalls of roughly 8–16 percent. The second peril is that reforms will not advance the objectives of efficiency and tax equity to the extent that they include provisions intended to influence future tax legislation or government spending. The third peril is …

Perpetual Motion Machines: Esops Don’T Pay For Themselves, Andrew Stumpff Morrison

Law & Economics Working Papers

In this article, Stumpff addresses policy issues regarding employee stock ownership plans and demonstrates how some claims in support of ESOPS aren’t supported by the math.

Reworking The Revolution: Treasury Rulemaking & Administrative Law, David Berke

Michigan Journal of Environmental & Administrative Law

How administrative law applies to tax rulemaking is an open and contested question. The resolution of this question has high stakes for the U.S. tax system. The paradigm is shifting away from so-called “tax exceptionalism”—where Treasury action is considered effectively exempt from the Administrative Procedure Act (the “APA”) and related administrative law doctrines. This paradigm-shift is salutary. However, currently prevailing anti-exceptionalist theory—an administrative framework for tax that is rapidly gaining credence within both the federal judiciary and the legal academy—threatens to destabilize the U.S. tax system. This formalistic approach to administrative law in tax rulemaking has the potential to invalidate …