Tax Law Commons^™

Tax Arbitration And The Rule Of Law: A Challenge For The Coordination Of International Taxation, Gianluigi Bizioli, Frederico Bertocchi

Akron Law Review

Tax arbitration mechanisms, which are provided both at the international and EU level, play a significant role in solving international tax disputes. However, such mechanisms do not seem to be fully compliant with the concept of Rule of Law that seems to arise from International and EU Laws. In fact, tax arbitration mechanisms appear to lack —mainly— certain due process guarantees that allow such procedures to comply with the equality principle.

More specifically, tax arbitration involves almost only the States, which are the party to it, allowing them to exercise relevant powers and influence —for instance— over the arbitration body …

The Foundations Of International Taxation: Knocked From Post To Pillars, Yariv Brauner

Akron Law Review

After a century of convergence and consolidation, the international tax regime is at a crossroads. A recent program promoted by the OECD, known as the two pillars program, departs in many ways from long standing norms of the regime. But the OECD and many states insist that the foundations of the regime have not changed, portraying the two pillars as a negotiated, pragmatic compromise that responds mainly to the challenges that the digital economy presented to the old rules. This article rejects this portrayal, arguing that the program is far from being a balanced or a truly negotiated compromise between …

Should The States Return To Worldwide Combined Reporting?, Reuven S. Avi-Yonah

Articles

On February 20 the Institute on Taxation and Economic Policy (ITEP) released a report on the revenue implications of states adopting worldwide combined reporting (WWCR). WWCR refers to a method of taxation that several states (for example, California) applied from the 1970s to the 1990s. Under WWCR, the state takes the entire worldwide profit of a multinational operating in the state and multiplies it by a formula that traditionally combines payroll, tangible assets, and sales in the state divided by worldwide payroll, assets, and sales. The result is the amount of profit taxable in that state.

Corporate Tax: Best Tool For Taxation's Regulation Goal, Reuven S. Avi-Yonah

Articles

In this installment of Reflections With Reuven Avi-Yonah, Avi-Yonah explains the three primary goals of taxation — revenue, redistribution, and regulation — and shows how VAT, the individual tax, and the corporate tax each uniquely match one of the goals. On January 20 President Trump signed two executive orders related to international taxation, marking a sharp policy shift from the prior administration. The first renounced any prior U.S. commitments to the OECD/inclusive framework global anti-base-erosion (GLOBE) project, stating that “the Global Tax Deal has no force or effect in the United States.” The order argued that the GLOBE project infringed …

The U.N. Framework Tax Convention: Can It Bridge The North-South Divide?, Assaf Harpaz

Scholarly Works

The United Nations recently concluded the second session of negotiations on terms of reference for a framework convention on international tax cooperation. The framework convention presents an opportunity to multilaterally address pressing global tax issues. Its goal is to “strengthen international tax cooperation and make it fully inclusive and more effective.” The extensively negotiated terms of reference make several substantive commitments, including the fair allocation of taxing rights; tax evasion and avoidance by high-net worth individuals; sustainable development; mutual administrative assistance in tax matters; tax-related illicit financial flows; and prevention and resolution of tax disputes. The ongoing multilateral effort brings …

Oecd Two-Pillar Globe Rules: Is It Time To Abandon Hope For International Cooperation On A Global Minimum Corporate Income Tax?, Willem Vandermeulen

Emory International Law Review

No abstract provided.

The Elusive Reform Of International Tax Dispute Settlement, Yariv Brauner

UF Law Faculty Publications

This short article examines the consequences of a lack of an effective international tax dispute resolution regime. The bilateral treaties based, and OECD-dominated international tax regime is at crossroads as the illegitimacy of the OECD and the anachronism of some of the norms of the regime are being exposed and challenged, especially by developing states and the UN. The weak dispute settlement procedure in tax treaties (mutual agreement procedure) has proven to be ineffective, further contributing to the destabilization of the regime. The article argues that a stronger, multilateral and more legalized regime such as mandatory tax treaty arbitration is …

Corporate Tax Competition: An Examination Of National Tax Reaction Functions To Corporate Tax Rate Reductions In Other Countries, Yaw O. Awuah

Graduate Theses, Dissertations, and Problem Reports (ETD)

This dissertation primarily examines tax competition at the national level, with a particular focus on the tax reaction functions of countries within the Organization for Economic Cooperation and Development (OECD). There are three different studies in the dissertation. The first study uses the Tax Cuts and Jobs Act of 2017 (TCJA) as a setting to empirically examine whether members of the OECD reduced their own statutory corporate tax rates in response to the US statutory corporate tax cut ushered in by the TCJA in a process of tax competition. The second study is a non-empirical examination of tax competition and …

Building The Gateway: Why The Two Pillars Need Each Other., Reuven S. Avi-Yonah, Ajitesh Kir

Articles

There is a reason the OECD proposed two pillars for its gateway to a better tax future. A gateway requires both pillars, and neither can stand without the other. Pillar 2 is a fait accompli, but it needs countries to implement Pillar 1 as well because in the absence of a clear sourcing rule there is no limit to countries implementing the Qualified Domestic Minimum Top-Up Tax (QDMTT), which would turn off the other parts of Pillar 2 and potentially result in double taxation. Pillar 1 is not going forward in the absence of a Multilateral Tax Convention (MLC), but …

Tax Reporting As Regulation Of Digital Financial Markets, Young Ran (Christine) Kim

Washington and Lee Law Review

FTX’s recent collapse highlights the overall instability that blockchain assets and digital financial markets face. While the use of blockchain technology and crypto assets is widely prevalent, the associated market is still largely unregulated, and the future of digital asset regulation is also unclear. The lack of clarity and regulation has led to public distrust and has called for more dedicated regulation of digital assets. Among those regulatory efforts, tax policy plays an important role. This Essay introduces comprehensive regulatory frameworks for blockchain-based assets that have been introduced globally and domestically, and it shows that tax reporting is the key …

After Pillar One, Reuven S. Avi-Yonah

Law & Economics Working Papers

Pillar One is unlikely to succeed for three reasons. First, it requires an MTC to be implemented because Amount A requires overriding Articles 5 (Permanent Establishment, PE), 7 (Business Profits) and 9 (Associated Enterprises) of every tax treaty to abolish the PE and Arm’s Length Principle (ALP) limits enshrined therein. But negotiating an MTC is hard, especially when over 100 countries are involved and there are fundamental disagreements among them.

Second, because Pillar One (despite its October 2021 expansion) is still aimed primarily at taxing the US digital giants (Big Tech), it is hard to envisage it being implemented without …

International Tax Reform: Who Gets A Seat At The Table?, Assaf Harpaz

Scholarly Works

The international tax framework relies on early-twentieth-century principles and favors the interests of the Global North, which created it. It bases taxing rights on a corporation’s physical presence and mostly allocates profits to the country of residence. Moreover, it has been slow to adapt to modern business practices. In the digital economy, companies shift profits with relative ease and often do not require a physical presence in the location of their consumers. International taxation needs reform, but leading proposals do not reflect meaningful input from the Global South and are unlikely to serve the needs of developing countries.

In 2021, …

Lower-Income Countries’ Ongoing Quest For International Tax Justice: A Case Study Of The Oecd’S Tax Allocation Proposal, Okanga Ogbu Okanga, Kim Brooks

Articles, Book Chapters, & Popular Press

The viability of our international tax system hinges on two things: (1) safeguarding the effective flow of international activities and (2) ensuring that countries can adequately collect tax on the income derived from those activities. Each of these fundamentals relies on a defensible/fair allocation of taxing rights between countries with competing tax jurisdiction (inter-nation equity).

The recent Organisation for Economic Co-operation and Development (OECD)-led multilateral effort to transform international tax rules to ensure that countries can adequately tax multinational enterprises (MNEs) operating in the global digital economy (OECD proposal) has reignited inter-nation equity conversations. Although important to all countries, inter-nation …

Tax Harmony: The Promise And Pitfalls Of The Global Minimum Tax, Reuven Avi-Yonah, Young Ran (Christine) Kim

Michigan Journal of International Law

The rise of globalization has become a double-edged sword for countries seeking to implement a beneficial tax policy. On one hand, there are increased opportunities for attracting foreign capital and the benefits that increased jobs and tax revenue brings to a society. However, there is also much more tax competition among countries to attract foreign capital and investment. As tax competition has grown, effective corporate tax rates have continued to be cut, creating a “race-to-the-bottom” issue.

In 2021, 137 countries forming the OECD/G20 Inclusive Framework on BEPS passed a major milestone in reforming international tax by successfully introducing the framework …

Tax Harmony: The Promise And Pitfalls Of The Global Minimum Tax, Reuven S. Avi-Yonah, Young Ran (Christine) Kim

Law & Economics Working Papers

The rise of globalization has become a double-edged sword for countries seeking to implement a beneficial tax policy. On one hand, there are increased opportunities for attracting foreign capital and the benefits that increased jobs and tax revenue brings to a society. However, there is also much more tax competition among countries to attract foreign capital and investment. As tax competition has grown, effective corporate tax rates have continued to be cut, creating a “race-to-the-bottom” issue.

In 2021, 137 countries forming the OECD/G20 Inclusive Framework on BEPS passed a major milestone in reforming international tax by successfully introducing the framework …

A New Framework For Digital Taxation, Reuven S. Avi-Yonah, Young Ran (Christine) Kim, Karen Sam

Law & Economics Working Papers

The international tax regime has wide implications for business, trade, and the international political economy. Under current law, multinational enterprises do not pay their fair share of taxes to market countries where profits are generated because market countries are only allowed to tax companies with a physical presence there. Digital companies, like Google and Amazon, can operate entirely online, thereby avoiding market country taxes. Multinationals can also exploit existing tax rules by shifting their profits to low-tax jurisdictions, thereby avoiding taxes in the residence country where their headquarters are located.

Recently, a global tax deal was reached to tackle these …

A New Framework For Digital Taxation, Reuven S. Avi-Yonah, Young Ran Kim, Karen Sam

Utah Law Faculty Scholarship

The international tax regime has wide implications for business, trade, and the international political economy. Under current law, multinational enterprises do not pay their fair share of taxes to market countries where profits are generated because market countries are only allowed to tax companies with a physical presence there. Digital companies, like Google and Amazon, can operate entirely online, thereby avoiding market country taxes. Multinationals can also exploit existing tax rules by shifting their profits to low-tax jurisdictions, thereby avoiding taxes in the residence country where their headquarters are located.

Recently, a global tax deal was reached to tackle these …

Do Gilti + Beat + Bmt = Globe?, Mindy Herzfeld

UF Law Faculty Publications

The enactment by the United States in August 2022 of a minimum tax on the global book earnings of large corporations (the book minimum tax, or BMT) raises the question of how the US minimum taxes – including the global intangible low-taxed income (GILTI), the base erosion and anti-abuse tax (the BEAT) and the BMT – interact with the global minimum tax, or GloBE, agreed to by over 135 countries under an OECD framework. Particularly important are questions regarding the hierarchy in application of different regimes. In the context of multiple agreements for global minimum taxes, how to determine who …

How To Think About How The Us Congress Thinks About International Tax Reforms, Mindy Herzfeld

UF Law Faculty Publications

The US Treasury has negotiated a multilateral tax deal under the framework of the OECD that includes Pillar 1, a plan to reallocate global profits of multinationals to market jurisdictions, and Pillar 2, a proposal for a global minimum tax. Global adoption of Pillar 1 directly hinges on US legislative action, and wide take-up of Pillar 2 may also depend on US modification of existing laws to conform to the OECD agreement. But while widespread implementation of the OECD agreement depends on US legislative action, uncertainty remains as to whether a deal negotiated by the Biden administration will be accepted …

A New Framework For Digital Taxation, Reuven S. Avi-Yonah, Young Ran (Christine) Kim, Karen Sam

Articles

The international tax regime has wide implications for business, trade, and the international political economy. Under current law, multinational enterprises do not pay their fair share of taxes to market countries where profits are generated because market countries are only allowed to tax companies with a physical presence there. Digital companies, like Google and Amazon, can operate entirely online, thereby avoiding market country taxes. Multinationals can also exploit existing tax rules by shifting their profits to low-tax jurisdictions, thereby avoiding taxes in the residence country where their headquarters are located.

Recently, a global tax deal was reached to tackle these …

Tax Harmony: The Promise And Pitfalls Of The Global Minimum Tax, Reuven Avi-Yonah, Young Ran Kim

Utah Law Faculty Scholarship

The rise of globalization has become a double-edged sword for countries seeking to implement a beneficial tax policy. On one hand, there are increased opportunities for attracting foreign capital and the benefits that increased jobs and tax revenue brings to a society. However, there is also much more tax competition among countries to attract foreign capital and investment. As tax competition has grown, effective corporate tax rates have continued to be cut, creating a “race-to-the-bottom” issue.

In 2021, 137 countries forming the OECD/G20 Inclusive Framework on BEPS passed a major milestone in reforming international tax by successfully introducing the framework …

Tax Harmony: The Promise And Pitfalls Of The Global Minimum Tax, Reuven Avi-Yonah, Young Ran (Christine) Kim

Articles

The rise of globalization has become a double-edged sword for countries seeking to implement a beneficial tax policy. On one hand, there are increased opportunities for attracting foreign capital and the benefits that increased jobs and tax revenue brings to a society. However, there is also much more tax competition among countries to attract foreign capital and investment. As tax competition has grown, effective corporate tax rates have continued to be cut, creating a “race-to-the-bottom” issue.

In 2021, 137 countries forming the OECD/G20 Inclusive Framework on BEPS passed a major milestone in reforming international tax by successfully introducing the framework …

Filing While Black: The Casual Racism Of The Tax Law, Steven Dean

Faculty Scholarship

The tax law's race-blind approach produces bad tax policy.' This Essay uses three very different examples to show how failing to openly and honestly address race generates bias, and how devastating the results can be.² Ignoring race does not solve problems; it creates them. ProPublica has shown, for example, that because of the perils of filing income taxes while Black, the five most heavily audited counties in the United States are Black and poor.

The racial bias long tolerated-and sometimes exploited-by tax scholars and policymakers affects all aspects of the tax law. In 1986, Sam Gilliam was denied tax …

The New International Tax Regime, Reuven S. Avi-Yonah

Law & Economics Working Papers

On October 8, 2021, over 130 countries committed themselves to the most far-reaching changes in the international tax regime since its inception in 1923. Slated to begin on the anniversary year of 2023, this new regime (ITR 2.0) adopts significant changes from the old one (ITR 1.0). Specifically, ITR 2.0 eliminates the physical presence requirement and the arm’s length standard for a significant portion of the profits of large multinationals that have been essential elements of ITR 1.0 since the 1930s, in a way that is more consistent with ITR 1.0’s Benefits Principle (BP). ITR 2.0 also explicitly implements the …

Tax Incentives And Sub-Saharan Africa, Karen B. Brown

Pepperdine Law Review

The OECD’s Base Erosion Profit Shifting (BEPS) project has taken a powerful and welcome look at many of the tax avoidance strategies that proliferate in a world where multinational enterprises are in the business of exploiting gaps in the tax laws of different countries to minimize their ultimate tax bills. The focus on international consensus and prescriptions for reform has not been an unqualified good for the nations in Sub-Saharan Africa, which find themselves in the position of reacting to standards and taking on compliance burdens set without sufficient consideration of their special circumstances. Because the path for the BEPS …

Has Tax Competition Been Curbed? Reaction To L.Ahrens, L. Hakelberg & T. Rixen, Reuven Avi-Yonah

Articles

This excellent article shows that contrary to the dire predictions of many observers, tax cooperation is still possible among OECD member countries and that such cooperation can overcome the trilemma of maintaining democracy, sustaining globalization and accepting some tax competition. Specifically, the authors show that in the realm of individual tax evasion, the advent of Automatic Exchange of Information (AEol) after the financial crisis of 2008-9 has enabled OECD countries to maintain a higher level of tax on capital than was possible before the crisis. This, in turn, enabled such countries to reduce inequality and maintain the social safety net …

A Major Simplification Of The Oecd’S Pillar 1 Proposal, Michael J. Graetz

Faculty Scholarship

In this report, Graetz suggests major modifications to the OECD’s pillar 1 blueprint proposal to create a new taxing right for multinational digital income and some product sales that would greatly simplify the proposal. The modifications rely on readily available existing financial information and would achieve certainty in the application of pillar 1, while adhering to its fundamental structure and policies.

A Different Unified Approach To Global Tax Policy: Addressing The Challenges Of Underdevelopment, Tarcisio Magalhaes, Ivan Ozai

Articles & Book Chapters

Experts from the North have long tried to teach countries in the South how to tax. For decades, they assumed the main challenges were domestic and there was a right answer to be found somewhere in the developed world that could be replicated everywhere else. Only more recently have they dedicated more attention to the international realm, yet their solutions remain tied to technical rules designed by a few specialists, as exemplified by the OECD Secretariat’s “Unified Approach” for the taxation of the digital economy. From a critical and historical socio-legal perspective, this Article argues that such technocratic approaches are …

Taxation Of The Digital Economy: Adapting A Twentieth-Century Tax System To A Twenty-First-Century Economy, Assaf Harpaz

Scholarly Works

This Article analyzes the tax challenges of digitalization and the potential solutions to address them. This Article argues in favor of a multilateral approach and proposes applying a new tax nexus based on market thresholds subject to a global de minimis amount. As more companies conduct business online, current international tax law and its principles have failed to adapt to global commercial practices. Digital-tech giants such as Facebook, Google and Amazon have been able to exploit the international tax framework by avoiding a physical presence in the jurisdiction of their consumers. As a result, profits of highly digitalized enterprises can …

Taxing Book Profits: New Proposals And 40 Years Of Critiques, Mindy Herzfeld

UF Law Faculty Publications

This paper considers recent domestic and international proposals to use financial statement earnings as the basis for imposing additional or minimum taxes on corporate income and to reallocate corporate profits among jurisdictions. It reviews prior research undertaken in the context of previous proposals to partially substitute financial accounts for taxable income and considers how valid critiques of prior proposals are with respect to current initiatives. It concludes by noting that the concerns raised about earlier proposals have neither been fully considered nor addressed in the recent initiatives.