Tax Law Commons^™

Fatca, The U.S. Congressional Black Caucus, And The Oecd Blacklist, Steven Dean

Faculty Scholarship

It may no longer be fashionable to refer to the United States as a melting pot, but it remains an incredibly heterogenous country. Both in terms of the race of those born there and the national origin of its immigrants, the United States has long enjoyed the benefits and burdens that come with diversity.¹ Its diversity can make even a seemingly simple story complicated, producing unexpected twists and surprise endings. This article tells a tale in which diversity helped change the face of international tax policy.

The United States has long wielded great power in international taxation. From the …

Source-Based Taxing Rights From The Oecd To The Un Model Conventions: Unavailing Efforts And An Argument For Reform, Oladiwura Ayeyemi Eyitayo-Oyesode

Articles, Book Chapters, & Popular Press

A significant number of scholars have written about the nexus between fairness in the allocation of taxing rights in double taxation treaties and sustainable development in developing countries. These scholars have argued for expansive taxing rights for developing countries, as against the current source- restricting provisions in taxation treaties between developed and developing countries based on the OECD and UN Model taxation treaties. They have also highlighted the need for developing countries to critically assess their treaty networks, and to consider gaps in their local laws and policies that encourage revenue loss. This paper contributes to this body of knowledge …

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 …

What Is Unilateralism In International Taxation?, Wei Cui

All Faculty Publications

The OECD recently emerged as the site of unprecedented, multilateral, and seemingly high-stakes negotiations about the future of international business income taxation. Judging by the political resources deployed in these negotiations, international tax has entered unchartered territory. Professor Ruth Mason offers a timely and balanced portrayal of the OECD process so far. But explanations of this process remain highly contestable. On the one hand, international institutions that address externalities from uncoordinated actions and produce mutual benefits for participating nations can be highly stable. On the other hand, the OECD has struggled, whether in its BEPS (Base Erosion and Profit Shifting) …

International Taxation In An Era Of Digital Disruption: Analyzing The Current Debate, Itai Grinberg

Georgetown Law Faculty Publications and Other Works

The “taxation of the digital economy” is currently at the top of the global international tax policymaking agenda. A core claim some European governments are advancing is that user data or user participation in the digital economy justifies a gross tax on digital receipts, new profit attribution criteria, or a special formulary apportionment factor in a future formulary regime targeted specifically at the “digital economy.” Just a couple years ago the OECD undertook an evaluation of whether the digital economy can (or should) be “ring-fenced” as part of the BEPS project, and concluded that it neither can be nor should …

Engineering Pass-Throughs In International Tax: The Case Of Private Equity Funds, Young Ran Kim

Utah Law Faculty Scholarship

Fund investment, or indirect investment, does not entail entity-level taxation domestically, so investors enjoy “tax neutrality” between direct and indirect investments made within a country. In contrast, when investments are made across borders, tax neutrality cannot be guaranteed because current international tax regimes are built upon bilateral tax treaties and lack pass-through tax rules for multinational fund investment schemes. This may put investors in a worse tax position than had they invested directly.

In response, investors have created many strategies to reduce tax liabilities internationally when investing indirectly. Sometimes those strategies enable investors to pay even less taxes than they …

The Oecd Unified Approach: Nexus, Scope, And Coexisting With Dsts, Assaf Harpaz

Scholarly Works

This article comments on the OECD Secretariat Proposal for a “Unified Approach” under Pillar One, released October 9, 2019. The article focuses on the proposal’s scope, nexus, administration and compliance, proposed “Amount C” and compatibility with unilateral digital service taxes. The article suggests a nexus that does not consider size-limiting worldwide revenue thresholds and offers an alternative de minimis country-specific sale-based proposal. Comments on the OECD proposal were submitted by the author as part of the OECD’s public consultation process in November 2019.

The Digital Services Tax On The Verge Of Implementation, Wei Cui

All Faculty Publications

France enacted the digital services tax (DST) in 2019, and similar legislation is pending in the United Kingdom, Spain, Italy, and other countries. The DST can be viewed as a tax on location-specific rent (LSR), and it arguably solves genuinely new problems in international taxation. The author briefly reviews this justification of the DST and further examines the DST design in light of three criticisms. The first criticism is that certain features of the DST render it similar to distortionary import tariffs. The second is that the DST would not be borne by digital platforms but would only be shifted …

User Participation In Value Creation, Itai Grinberg

Georgetown Law Faculty Publications and Other Works

This article examines HM Treasury’s proposal to account for the active participation of users in value creation in certain digital platforms. The first key question is whether there is any reason to believe, as HM Treasury suggests, that users only meaningfully or actively contribute to value creation in the context of certain digital platforms. The article accordingly explores the factors HM Treasury sets out for the attribution of income to active user participation, including features such as network effects, multisided business models, and a lack of physical presence in the jurisdiction of the user. It concludes that if a user …

How May The United States Leverage Its Fatca Iga Bilateral Process To Incentivize Good Tax Administrations Among The World Of Black Hat And Grey Hat Governments? A Carrot & Stick Policy Proposal, William Byrnes

Faculty Scholarship

Professor William Byrnes examines whether it is prudent for taxpayers to trust the governments of the 117 countries that scored a fifty or below on Transparency International’s corruption index. The complete information system invoked by the Foreign Account Tax Compliance Act (FATCA) encourages, even prolongs, the bad behavior of black hat governments by providing fuel (financial information) to feed the fire of corruption and suppression of rivals. Professor Byrnes recommends that the United States leverage a “carrot-stick” policy tool to incentivize bad actors to adopt best tax administration practices.

The Global Fight Against Base Erosion And Profit Shifting Under The Oecd’S Country-By-Country Reporting Rules: A Possible Solution?, Oladiwura Ayeyemi Eyitayo-Oyesode

LLM Theses

The base erosion and profit shifting (BEPS) phenomenon continues to create detrimental consequences in states. BEPS is engendered by two fundamental factors, namely, unhealthy fiscal policies of tax havens and preferential tax regimes, and transfer mispricing by multinational corporations (MNCs). The OECD, through its BEPS Project notes that the lack of transparency in the global activities of MNCs is a major cause of BEPS. To close this gap, the OECD released the CBCR Rules. This thesis discusses the severity of the BEPS phenomenon and assesses the anti-BEPS efforts of the OECD. Upon an assessment of these efforts, this thesis argues …

Heading Off A Cliff? The Tax Reform Man Cometh, And Goeth, Michael J. Graetz

Faculty Scholarship

The major tax policy challenge of the 21st century is the need to address the nation’s fiscal condition fairly and in a manner conducive to economic growth. But since California adopted Proposition 13 nearly forty years ago, antipathy to taxes has served as the glue that has held the Republican coalition together. Even though our taxes as a percentage of our economy are low by OECD standards and low by our own historical experience, anti-tax attitudes have become even more important for Republicans politically, since they now find it hard to agree on almost anything else. So revenue-positive, or even …

Proposals For International Tax Reform: Is There A Middle Road, Reuven S. Avi-Yonah

Articles

In this article, Avi-Yonah looks at two recent tax reform proposals and discusses plausible avenues for post-election tax reform, suggesting two proposals for solving the problems of the U.S. international tax regime. This article was originally prepared for the Century Foundation's November 17 conference, "Paying for Progress: A Tax Reform Agenda for the Next President." See https://tcf.org/content/report/proposals-international-tax-reform/. The author would like to thank Jeff Madrick and the Century Foundation staff for hosting the conference and revising the article.

International Tax Implications Of The Organisation For Economic Co-Operation And Development Proposal To Neutralize Hybrid Mismatch Arrangements, Dean Harris

Catholic University Law Review

The Organisation for Economic Co-operation and Development (OECD) has developed a sixteen part plan titled Base Erosion and Profit Shifting (BEPS). This comment focuses on the second part of that plan; Neutralizing Hybrid Mismatch Arrangements. Mismatches have become a useful tool for corporations to achieve double non-taxation in various jurisdictions. The comment begins by laying the groundwork of what a hybrid mismatch arrangement is and the current problems and complications with them in international tax. Next, this comment addresses various jurisdictional approaches to mismatches, including: Ireland, The United Kingdom, The United States, and Denmark. The paper moves forward onto a …

Book Review: International Tax Planning. By Barry Spitz. London, England: Butterworth & Co. Ltd., 1972. Pp. Xxiii, 159. $12.15 (U.S.)., Donald O. Clark

Georgia Journal of International & Comparative Law

No abstract provided.

Beps - A Primer On Where It Came From And Where It’S Going, Jeffrey M. Kadet

Articles

Governments throughout the world have been losing many billions of dollars of tax revenues from “legal” tax avoidance conducted by many multinational groups (MNEs) through aggressive structuring of operations and transactions that often lack economic reality so as to earn profits that are subjected to zero or low-taxation. The success of this “legal” tax avoidance motivated the G-20 and the OECD to initiate the two-year Base Erosion and Profit Shifting (BEPS) project, which took place from 2013 to 2015.

This discussion of the BEPS project is intended to give the reader an understanding of the project’s origin, its objectives, and …

Treaties In The Aftermath Of Beps, Yariv Brauner

UF Law Faculty Publications

The article argues that, despite the fanfare around it, the outcome of the BEPS project is unlikely to be dramatic, at least in the short term. Beyond a period of increased legal uncertainty and aggressive enforcement by some countries, it expects little substantive change in tax treaties. The challenges to the dominance of the OECD and the richest countries would likely be assuaged with marginal concessions, most or all of which not be affecting tax treaties. Yet, the article sees a silver lining in the non-substantive, structural, and instrumental outcomes of the BEPS project. It argues that even if unintended, …

Transfer Pricing Challenges In The Cloud, Orly Mazur

Faculty Journal Articles and Book Chapters

Cloud computing - the provision of information technology resources in a virtual environment - has fundamentally changed how companies operate. Companies have quickly adapted by moving their businesses to the cloud, but international tax standards have failed to follow suit. As a result, taxpayers and tax administrations confront significant tax challenges in applying outdated tax principles to this new environment. One particular area that raises perplexing tax issues is the transfer pricing rules. The transfer pricing rules set forth the intercompany price a cloud service provider must charge an affiliate using its cloud services, which ultimately affects in which jurisdiction …

Kill-Switches In The U.S. Model Tax Treaty, Allison Christians, Alexander Ezenagu

Brooklyn Journal of International Law

The new U.S. Model income tax treaty contains an unusual addition: mechanisms for the parties to unilaterally override the negotiated treaty rates in specified circumstances. Previewed last year in proposed form—a first for the Treasury—these new mechanisms work as kill-switches, partially terminating the treaty as to one or both treaty partners. The idea is to forestall a more problematic outcome, such as an enduring breach of one of the parties’ expectations, or the opposite, a complete termination of all the treaty terms in the face of such a breach. Yet embedding a kill-switch in a treaty creates distinct legal, procedural, …

Location Savings And Segmented Factor Input Markets: In Search Of A Tax Treaty Solution, Mitchell A. Kane

Brooklyn Journal of International Law

This article analyzes the proper bounds of source-based taxation of profits generated when firms outsource factor inputs, such as labor, to achieve cost savings. The article advances arguments grounded in efficiency, treaty text, and international distribution to justify greater source-based taxation than has historically been the case. To implement such expanded taxation, the article proposes a modification to transfer-pricing rules in instances where factor inputs are acquired from affiliates and a modification to the tax treaty rules regarding permanent establishments where factor inputs are acquired from unrelated parties. Finally, the article deals with a range of complications, particularly relating to …

Treaties In The Aftermath Of Beps, Yariv Brauner

Brooklyn Journal of International Law

The article argues that, despite the fanfare around it, the outcome of the BEPS project is unlikely to be dramatic, at least in the short term. Beyond a period of increased legal uncertainty and aggressive enforcement by some countries, it expects little substantive change in tax treaties. The challenges to the dominance of the OECD and the richest countries would likely be assuaged with marginal concessions, most or all of which not be affecting tax treaties. Yet, the article sees a silver lining in the non-substantive, structural, and instrumental outcomes of the BEPS project. It argues that even if unintended, …

The Two Faces Of The Single Tax Principle, Daniel Shaviro

Brooklyn Journal of International Law

Some argue that a “single tax principle,” said to underlie tax treaties, requires that cross-border income should generally be taxed once, rather than twice or not at all. Even if one accepts this principle, it is important to recognize the difference between “upside” departures, which occur when the same dollar of income is taxed more than once, and “downside” departures, which occur when it is not taxed at all. This article argues that a focus on barring upside departures from the single tax principle can be quite misguided. While over-taxing cross-border activity, relative to that occurring in one country, may …

Tax Treaties As A Network Product, Tsilly Dagan

Brooklyn Journal of International Law

The copiousness of tax treaties is often presented as proof, not only of their success but also of their desirability. In focusing on alleviating double taxation by allocating tax revenues, however, the treaties project is a missed opportunity. This article explains that an international tax standard is a network product and uses network theory to explore the potential advantages and drawbacks of the tax treaty network in entrenching such a standard. Networks facilitate stability and self-enforcement. By joining (and remaining in) a network, users benefit from the compatibility with other users; this, in turn, incentivizes new users to join and …

Breaking Beps: The New International Tax Diplomacy, Itai Grinberg

Georgetown Law Faculty Publications and Other Works

International tax avoidance by multinational corporations is now front-page news. In a time of public austerity, citizens and legislators around the world have focused on the erosion of the corporate income tax base. In response, in 2012 the G-20 — the gathering of the leaders of the world’s twenty largest economies — launched the “Base Erosion and Profit Shifting” (BEPS) project, the most extensive attempt to change international tax norms since the 1920s.

This article is the first to explain that in the course of the BEPS project, the field of international tax has adopted the institutional and procedural architecture …

All Or Nothing? The Obama Budget Proposals And Beps, Reuven S. Avi-Yonah

Articles

There is a wide bipartisan consensus that the U.S. international tax regime is broken. We have the highest corporate tax in the OECD, which at 35 percent imposes a real burden on corporations earning mostly U.S.-source income. At the same time, U.S.-based multinationals pay very low effective tax rates on foreign-source income earned through their subsidiaries, leading to a strong incentive to shift profits out of the United States. Finally, the United States is among the few countries to fully tax dividends paid by foreign subsidiaries to their domestic parents, leading to the “trapped income” phenomenon in which $2 trillion …

Annual Survey Of Developments In International Trade Law: 1986, Paul G. Justice, Hilda H. King, John R. Schneider

Georgia Journal of International & Comparative Law

No abstract provided.

The Oecd’S Flawed And Dated Approach To Computer Servers Creating Permanent Establishments, Monica Gianni

UF Law Faculty Publications

As the digital economy changes the way that we do business, tax laws have been challenged to adapt appropriately to this nontraditional business method. International tax rules were developed in a different technological era. To accommodate electronic commerce, existing tax rules either have to be applied to electronic-commerce transactions, or new rules have to be developed. The Organisation for Economic Co-operation and Development (OECD) has taken the lead in studying and recommending appropriate international taxation rules for electronic commerce.

This Article focuses on the original central tax issue that the OECD considered—jurisdiction to tax income from electronic commerce based on …

I Got 99 Problems And They’Re All Fatca, Nirav (Jonathan) Dhanawade

Northwestern Journal of International Law & Business

Offshore personal income tax evasion accounts for approximately $50 billion in annual lost revenue for the United States. These large sums of money are squirrelled away in tax havens—jurisdictions, such as Aruba, the Cayman Islands, and Dubai, whose laws allow some U.S. citizens to evade paying their U.S. income taxes. Before the Foreign Account Tax Compliance Act (FATCA) was enacted, U.S. citizens could avoid taxes on passive income by not reporting this income to the Internal Revenue Service (IRS). To detect tax evasion, the IRS pursued U.S. citizens with undeclared assets in foreign banks. But the IRS’s quest was largely …

The Oecd's Flawed And Dated Approach To Computer Servers Creating Permanent Establishments, Monica Gianni

Vanderbilt Journal of Entertainment & Technology Law

As the digital economy changes the way that we do business, tax laws have been challenged to adapt appropriately to this nontraditional business method. International tax rules were developed in a different technological era. To accommodate electronic commerce, existing tax rules either have to be applied to electronic-commerce transactions, or new rules have to be developed. The Organisation for Economic Co-operation and Development (OECD) has taken the lead in studying and recommending appropriate international taxation rules for electronic commerce. This Article focuses on the original central tax issue that the OECD considered--jurisdiction to tax income from electronic commerce based on …

Transfer Pricing: Un Guidelines — Brazil, Richard Thompson Ainsworth

Faculty Scholarship

The UN Practical Manual on Transfer Pricing for Developing Countries endeavors to provide “clearer guidance on the policy and administrative aspects of applying transfer pricing analysis.” Chapter 10 is particularly noteworthy. It sets out specific country practices. The rules in Brazil, China, India and South Africa are offered as templates for developing countries to follow.

This article considers the Brazilian contribution to Chapter 10. Although some writers believe that developing countries should adopt the Brazilian model this article suggests otherwise. Even though it is a theoretically simple system, some aspects of the Brazilian model consistently work to the fiscal disadvantage …