Taxation-Transnational Commons^™

A Gdpr-Compliant Fatca Structure?, Michael Hatfield

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A 2025 Belgian Data Protection Authority (DPA) decision and ensuing preliminary questions referred by the Belgian Market Court to the Court of Justice of the European Union (CJEU) highlights the tension between the General Data Protection Regulation (GDPR) and the US Foreign Account Tax Compliance Act (FATCA) structure in Europe. The FATCA structure relies on intergovernmental agreements (FATCA IGAs) between the US and EU Member States. Under these agreements, Member State tax authorities transfer personal data of their citizens and residents to the US Internal Revenue Service (IRS). It may be determined that these transfers violate some or all of …

How The U.S. Constitution Shapes International Tax Law: Instrument Choice In Tax Agreements, Noam Noked, Young Ran (Christine) Kim, Reuven Avi-Yonah

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The U.S. Constitution’s Treaty Clause, which requires Senate approval by a two-thirds vote for treaties, has significantly influenced the development of international tax law. This Article examines the implications of Senate supermajority requirements on bilateral and multilateral tax treaties and agreements, alternative instruments, relevant international tax standards, and global tax governance.

Historically, tax treaties have been approved exclusively as Article II treaties requiring Senate approval. The difficulty of entering into treaties with the United States has influenced the instrument choice and design of U.S. and international tax standards. To address this challenge, several U.S. and international tax reforms have employed …

Dividend Distribution Tax: More Than Meets The Eye - A Critical Analysis Of Polycab India Ltd. V. Assistant Commissioner Of Income-Tax, Ashrita Prasad Kotha

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The case emanates from the dividend distribution tax (DDT) paid by Polycab on shares held by International Finance Corporation (IFC), one of its shareholders. IFC was set up by an international agreement to support the private sector in developing countries and was granted tax immunity on its income and transactions under the founding multilateral treaty and supporting domestic law. Polycab sought refund of DDT owing to IFC's immunity. The Income Tax Appellate Tribunal (ITAT) ruled in favour of Polycab by considering dividend distribution within the immunity clause and reading in an exemption into the income tax legislation. Significantly, the DDT …

The Forgotten Weapon: Section 891 And The Origins Of U.S. Retaliatory Tax Policy, Reuven S. Avi-Yonah, Gianluca Mazzoni

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The original version of the One Big Beautiful Bill Act (P.L. 119-21) included section 899, which would have imposed retaliatory taxes on individuals and corporations from countries that apply “discriminatory or extraterritorial” taxes to U.S. corporations, defined specifically to include digital services taxes and the undertaxed profits rule of pillar 2.

However, on June 26 Treasury Secretary Scott Bessent announced that a compromise was reached on the UTPR, and as a result, section 899 was removed from the OBBBA. Now that section 899 is gone, section 891 is the most important part of the United States’ legislative armory against “discriminatory …

Should The Oecd Accept Gilti As A Valid Iir?, Reuven S. Avi-Yonah

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On June 26 Treasury Secretary Scott Bessent announced a deal with the G7 to accept the global intangible low-taxed income tax as a valid income inclusion rule tax and not apply the undertaxed profits rule to U.S. multinational enterprises. Bessent said a “joint understanding” among the United States and other countries will be announced soon. “OECD pillar 2 taxes will not apply to U.S. companies, and we will work cooperatively to implement this agreement across the OECD-G20 inclusive framework in coming weeks and months,” Bessent wrote. Soon after, Senate Finance Committee Chair Mike Crapo, RIdaho, and House Ways and Means …

Proposed Cloud Services Sourcing Rule: The Right Direction, Reuven Avi-Yonah, Jeffery M. Kadet, Karen Sam

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This past January, in conjunction with the issuance of a final regulation (T.D. 10022) that treats income from defined cloud transactions as income from services, Treasury and the IRS released a proposed regulation (REG-107420-24) on the sourcing of that income. In 2019 a Treasury official had asked the tax community for feedback on whether specific cloud transaction sourcing rules were needed, and the preamble to a 2019 proposed regulation asked for comments on “administrable rules for sourcing income from cloud transactions in a manner consistent with sections 861 through 865.” The feedback was “split almost evenly with regard to whether …

Weaponization Of Taxation: Sovereign Tax Immunity As A National Security Tool, Vinita R. Singh

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Amidst calls to reconceptualize taxation as a national security tool, legislators are reexamining how the United States taxes foreign governments. Federal income taxation of foreign governments—what this Article terms “the law of immunity from taxation” or “sovereign tax immunity”—strongly influences whether and how foreign governments pursue investment in the United States. This impact on international business transactions indicates sovereign tax immunity has the potential to be a powerful national security tool. Yet, despite its import, the law of immunity from taxation has been underexplored and undertheorized. This Article steps into this gap in discourse by challenging the way recent legislative …

Is The Obbba Compatible With Pillar 2?, Reuven S. Avi-Yonah

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In this installment of Reflections With Reuven Avi-Yonah, Avi-Yonah compares House and Senate sections of the One Big Beautiful Bill Act and examines the potential effect on international tax relations. On May 22 the House of Representatives passed the One Big Beautiful Bill Act (OBBBA). The House version of the OBBBA extended the Tax Cuts and Jobs Act tax cuts but did not significantly change its international provisions. It did, however, contain proposed section 899, which would have imposed enhanced taxation on residents and corporations from countries that have “discriminatory or extraterritorial taxes,” defined to include primarily the undertaxed profits …

Eliminating Qbai - One Step Forward, Two Steps Back?, Reuven S. Avi-Yonah

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In this installment of Reflections With Reuven Avi-Yonah, Avi-Yonah explains what makes an effective U.S. tax regime and uses those attributes to evaluate the One Big Beautiful Bill Act. There is plenty to criticize about the One Big Beautiful Bill Act (OBBBA, P.L. 119-21), signed into law by President Trump on July 4. It increases the deficit by about $4 trillion when the interest costs from the additional borrowing are included, and by about $5.5 trillion if its provisions are made permanent in 2029, like the Tax Cuts and Jobs Act provisions were in 2025. It is distributionally skewed to …

Us Policy And Pillar 2: The Evolution Of Us Tax Policy Toward Oecd Pillar 2 And Its Global Implications, Reuven S. Avi-Yonah

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This paper analyzes the United States’ evolving position on OECD Pillar 2, focusing on the Trump administration’s initial rejection and subsequent negotiations to exempt US multinationals from the Undertaxed Profits Rule (UTPR). It examines the legislative and diplomatic strategies that led to international acceptance of GILTI as a valid IIR. The analysis concludes that the resulting compromise preserves US tax sovereignty while maintaining the global framework’s integrity.

Taxation’S Limits, Luís C. Calderón Gómez

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Countless pages have been devoted to the question of why everyone should pay tax, yet its opposite has gone largely unnoticed: why should some people and organizations not pay tax? Our tax system exempts from ordinary income taxation a wide and diverse array of people and organizations engaged in significant economic activity—from parents providing childcare services for their family to consular activities and charities operating animal shelters—seemingly without a convincing explanation. Perhaps because of the dizzying diversity of tax-exempt activities, scholars and policymakers have avoided comprehensively or coherently justifying our exemption regimes.

This Article develops a novel normative theory that …

A Global Wealth Tax?, Reuven S. Avi-Yonah

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Mitt Romney famously said during his 2012 presidential campaign that “corporations are people.” Mindy Herzfeld’s column comparing the proposed 2 percent global wealth tax on billionaires with the corporate minimum tax (pillar 2) raises the opposite question: Are people like corporations for tax purposes? I would say no, for several reasons.

Crypto And The Exit Tax, Reuven S. Avi-Yonah

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Robert Goulder has devoted one of his excellent columns to the fascinating case of “Bitcoin Jesus.” As explained by Goulder:

Another billionaire was in the news recently for reasons that relate to taxation, although it’s doubtful he will be accused of much virtue. The man known internationally as “Bitcoin Jesus” got himself arrested in Spain on April 27. He now faces extradition to the United States, where an eight-count criminal tax indictment awaits him. Bitcoin Jesus is coming home.

This is a far cry from the Jesus born in Bethlehem who once said that it was easier for a camel …

Sourcing Derivatives: Time To Reverse The Rule?, Reuven S. Avi-Yonah

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In their excellent Tax Notes article on the application of withholding taxes on derivatives, Lorenz F. Haselberger and Michael B. Shulman write that:

A taxpayer entering into a derivative may derive income of a kind that is different from the kind of income that would have been realized had the taxpayer instead acquired the underlying asset, resulting in different U.S. withholding tax treatment.

For example, when a foreign taxpayer enters into a swap referencing an equity security or interest rate, amounts it receives that correspond to dividends or interest generally are characterized as periodic payments on a financial contract rather …

Once More: Digital Services Taxes Should Be Creditable, Reuven S. Avi-Yonah

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In a previous column, I argued that digital services taxes should be creditable as in-lieu-of taxes under section 903. A new analysis by Jane Gravelle sheds further light on this topic but does not change the outcome.

Gravelle makes three arguments against the creditability of DSTs. First, she argues that the whole concept underlying both pillar 1 and DSTs (allocating value to market jurisdictions) is wrong, and therefore they cannot be justified. Second, she argues that DSTs are passed on in full to consumers and that this precludes creditability. Finally, she argues that DSTs are discriminatory excise taxes on U.S. …

The Usefulness Of Pillar 1, Reuven S. Avi-Yonah

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Many commentators have declared that pillar 1 of the base erosion and profit-shifting project 2.0 is dead. By its explicit terms, the multilateral tax convention (MLC) implementing pillar 1 cannot go into effect this year without ratification by the United States, and the chances of the United States ratifying it before or after the election are low given massive opposition in Congress. If the MLC does not go into effect by December 31, 2024, over 30 countries will likely impose digital services taxes on January 1, 2025, making the whole pillar 1 project (which was aimed at preventing the spread …

Limitation On Benefits Or Principal Purpose Test? Part 2, Reuven S. Avi-Yonah

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Part 1 of this column discussed the choice between the limitation on benefits and principal purpose test (PPT) and the history of the LOB in U.S. tax treaty policy.

How effective is the LOB article in U.S. tax treaties, now that it no longer includes the PPT from the original U.S. LOB?

Limitation On Benefits Or Principal Purpose Test? Part 1, Reuven S. Avi-Yonah

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An interesting recent column by Tax Notes’ Lee Sheppard criticizes the principal purpose test (PPT) that was adopted as a minimum standard in the OECD’s base erosion and profit-shifting project 1.0 and has since been incorporated into many tax treaties through the multilateral instrument. Sheppard explains:

Readers will recall that BEPS 1.0 had a set of minimum standards for participating countries, one of which was a treaty amendment to cement the purpose of the treaty to prevent both double taxation and double nontaxation. Participants could choose between a seemingly simple, subjective principal purpose test (PPT) and a complicated but objective …

Has Cost Sharing Outlived Its Usefulness?, Reuven S. Avi-Yonah

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In her thoughtful column on cost sharing, Mindy Herzfeld explains the history of costsharing arrangements (CSAs) going all the way back to 1966, and then asks several questions, including: “Should the existing CSA regs be scrapped in favor of another regime, or simply eliminated as a choice for taxpayers?”

Pillar 2 And Specific Benefits For Multinationals, Reuven S. Avi-Yonah

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In a recent column, Tax Notes’ Martin Sullivan asked whether a country that wishes to neutralize the effect of pillar 2 on its investment incentives can get around the OECD prohibition on a multinational enterprise receiving what amounts to a refund of the pillar 2 tax it pays to that country. He writes that:

It would make a mockery of the pillar 2 taxation system if an investment hub imposed a 15 percent minimum tax on a company — thereby shielding profit in that hub from other jurisdictions’ pillar 2 tax — and then, through a separate mechanism, unconditionally returned …

Schrodinger's Dissent: The Hybrid Authority Of A Dissenting Opinion, Christina Frohock

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A dissenting opinion is the Schrodinger's cat of authorities: both the law and not the law simultaneously. Courts and scholars often clarify that a dissenting opinion is not binding. Outside the universe of precedent, that authority defies easy description. Emerging from the pen of a judge wearing a black robe and acting in an official capacity, a dissenting opinion exhibits the form of the law. Yet, beneath that lofty sheen, a dissent exhibits the substance of commentary. A dissenting judge writes to undercut the law, providing a case law coda. This Article describes the traditional categories of authority, primary and …

Rethinking Taxing Excess Profits, Reuven S. Avi-Yonah, Tamir Shanan

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This article discusses the application of excess profit taxes (EPTs, also referred to as windfall taxes) that have gained renewed interest and popularity over the past several years. The revival of these windfall taxes gained renewed interest following the COVID-19 outbreak, which led to a sharp price increase in corporate revenues of medical equipment and within pharmaceutical industries. However, the revival of such taxes was also used following the recent rise in energy prices mainly in Europe, leading to a sharp increase in corporate revenues of energy corporations and the recent surge in borrowing interest rates that was not accompanied …

Crypto: The Prospect Of Regulatory Competition, Charles M. Yablon

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No abstract provided.

Jotwell's Thirteenth Birthday Celebration, A. Michael Froomkin

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No abstract provided.

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

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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 (Christine) Kim, Karen Sam

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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 …

Responding To Mass, Computer-Generated, And Malattributed Comments, Steven J. Balla, Reeve Bull, Bridget C.E. Dooling, Emily Hammond, Michael A. Livermore, Michael Herz, Beth Simone Noveck

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A number of technological and political forces have transformed the once staid and insider dominated notice-and-comment process into a forum for large scale, sometimes messy, participation in regulatory decisionmaking. It is not unheard of for agencies to receive millions of comments on rulemakings; often these comments are received as part of organized mass comment campaigns. In some rulemakings, questions have been raised about whether public comments were submitted under false names, or were automatically generated by computer “bot” programs. In this Article, we examine whether and to what extent such submissions are problematic and make recommendations for how rulemaking agencies …

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

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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 …

Lecture In Human Rights: Tax Policy, Global Economics, Labor And Justice In Light Of Covid-19, Reuven S. Avi-Yonah

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International Tax Law has extensive ramifications on the wealth gap between wealthy developed nations and poor developing nations. This divide in prosperity has been made clear again in the global response to the COVID-19 pandemic. Developing nations are currently ill-equipped to adapt to, and regulate, an equitable system of taxation on a domestic level. A further challenge is the difficulty of ensuring that foreign investors, especially multinational corporations, are able to comply with tax regulations. Developed nations such as the United States and members of the European Union must continue to work with developing nations to reduce tax evasion and …

The Ingenious Biden Tax Plan, Reuven S. Avi-Yonah

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In this article, the author considers the Biden administration’s Made in America Tax Plan, which would overhaul the corporate and international tax provisions of the Tax Cuts and Jobs Act and represents a long-overdue effort to more fairly tax U.S.-based multinationals.