Taxation-Transnational Commons^™

A Critical Reassessment Of The Role Of Neutrality In International Taxation, David Elkins

Northwestern Journal of International Law & Business

Neutrality plays a central role in the literature on international taxation. In its most prevalent form, the concept of neutrality posits that in order to maximize aggregate global welfare, capital needs to flow to where it would produce the highest pretax return. The thesis of this Article is that neutrality is ordinarily inapplicable in the field of international taxation.

When considering neutrality in the international arena, the problem that one encounters is that the term “international taxation” is commonly used to describe a number of very different types of tax regimes (what the Article refers to as “intranational taxation,” “supranational …

How Countries Seek To Strengthen Anti-Money Laundering Laws In Response To The Panama Papers, And The Ethical Implications Of Incentivizing Whistleblowers, Carmina Franchesca S. Del Mundo

Northwestern Journal of International Law & Business

The Panama Papers is currently the world’s largest whistleblower case that involved 11.5 million leaked documents and over 214,000 offshore entities. It all linked back to one Panamanian law firm, Mossack Fonseca. In 2016, over 400 investigative journalists collaboratively and simultaneously published stories that exposed the money laundering and tax-evading schemes committed by the rich and powerful. This included political figures and heads of states, celebrities, sports figures, criminal organizations, and terrorist groups.

This article aims to dissect the innerworkings of Mossack Fonseca’s asset-shielding strategy and investigate how the Panamanian law firm was able to circumvent the tax and anti-money …

Why The Mli Will Have Limited Direct Impact On Base Erosion Profit Sharing, Joseph Morley

Northwestern Journal of International Law & Business

No abstract provided.

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 …

Taxing The International Athlete: Working Toward Free Trade In The Americas Through A Multilateral Tax Treaty, Jeffrey Dunlop

Northwestern Journal of International Law & Business

At first glance, it does not appear that taxation issues facing the international athlete and developing free trade between North and South America are closely related; they represent very different aspects of cross-border transactions and investment. On the other hand, they may be related when viewed as sequential steps in the process toward developing sustained economic relationships. This article will attempt to bridge that gap. First, Part II of this article discusses the current United States approach toward taxation of international athletes. Next, Part III reviews the history and issues facing tax treaty negotiations between the United States and developing …

The $4 Billion Question: An Analysis Of Congressional Responses To The Fsc/Eti Dispute Under Wto Export Subsidy Standards, William Chou

Northwestern Journal of International Law & Business

During the decade-long relationship between the United States and the World Trade Organization (WTO), perhaps no controversy has fomented as long and bitterly as the dispute over the U.S. tax benefits for exporters. This article analyzes two competing bills before the House of Representatives, both devised to bring the United States in compliance with the WTO's ruling against the U.S. Foreign Sale Corporation (FSC) and Exterritorial Income (ETI) tax regimes as prohibited export subsidies. Hit with a $4 billion retaliatory tariff by the European Union, the House sought new tax legislation that would preserve at least some of the tax …

Fight Or Flight Of U.S.-Based Multinational Businesses: Analyzing The Causes For, Effects Of, And Solutions To The Corporate Inversion Trend, Hale E. Sheppard

Northwestern Journal of International Law & Business

When a person is confronted by a threat, he or she experiences a psychological and physiological response commonly known as "fight or flight." In general, this innate survival mechanism causes the body to direct blood to vital areas and to release lactic acid, adrenaline and other chemicals in order to prepare a person to either face the threat or flee immediately. Multinational corporations based in the United States, likewise, have recently displayed similar fight-or-flight behavior when faced with the threat of high taxes. Unfortunately for the U.S. economy, a growing number of these American corporations have chosen the latter: flight. …

Optimal International Taxation And Tax Competition: Overcoming The Contradictions, William B. Barker

Northwestern Journal of International Law & Business

This paper presents a theory of international taxation based on a new approach to source taxation that reflects world development and synthesizes the objectives of economic efficiency, fairness to taxpayers, and fairness to governments. Adoption of this model results in the preservation of comprehensive income taxation to capital-exporting nations and an expenditure tax base for capital-importing nations. The system would reduce much of the distortion caused by tax competition, eliminating the tax incentive for businesses to use productive assets and technologies outside the country of their development and saving the jobs of many workers.

The Proposed E.U. Vat On Electronically Transmitted Services: Enforcement And Compliance Issues, Thomas Fawkes

Northwestern Journal of International Law & Business

This paper will begin by discussing the current VAT system in the E.U. It will also describe in detail the provisions of the proposed VAT amendments as they affect electronic commerce transactions with respect to both B2B and B2C transactions. Next, the practical effects of the VAT amendments in terms of increased VAT revenue for the E.U. and its mem-ber states will be discussed. Following will be a discussion on the past and present failures of the E.U. and its Member States in encouraging and en-forcing compliance under the current VAT Directive, and the implication of such failures on the …

New Transfer Pricing Rules In Brazil, Alexandre Tadeu Seguim

Northwestern Journal of International Law & Business

Through transfer price, the organization aims to evaluate and improve the performance of the related entity. The idea that transfer pricing is a mechanism designed only to avoid taxes is misleading. Actually, to transfer price is a sound and positive way to increase value. The 1979 OECD Report on Transfer Pricing and Multinational Enterprises emphasized that the term is neutral: "the consideration of transfer pricing problems should not be confused with the consideration of problems of tax fraud or tax avoidance, even though transfer pricing policies may be used for such purposes." The 1995 OECD Report went even further by …

Should Advance Pricing Agreements Be Published?, Kristin E. Hickman

Northwestern Journal of International Law & Business

The purpose of this comment is to review the role and function of the advance pricing agreement process, to examine the merits of both sides' arguments in the BNA suit, and to discuss the policy implications should BNA prevail. While advance pricing agreements are not the ultimate solution to transfer pricing disputes and tax jurisdiction issues, they are a dispute resolution tool worth maintaining, at least until Congress or Treasury provides greater guidance in this area. Sufficient legal basis exists for the courts to find against BNA and rule that advance pricing agreements are exempt from publication under IRC § …

The United States' Response To Tax Havens: The Foreign Base Company Services Income Of Controlled Foreign Corporations, Eric T. Laity

Northwestern Journal of International Law & Business

This article is a detailed study of the taxation by the United States of foreign base company services income. Foreign base company services in- come is defined generally as the income derived by a controlled foreign corporation from the performance of services for a related person.2 Con- trolled foreign corporations, in turn, generally are the foreign subsidiaries of U.S. parent corporations.3 A controlled foreign corporation's foreign base company services income is taxed to its U.S. parent corporation, subject to various exclusions and qualifications. This article defines the class of sus- pect relationships between the controlled foreign corporation and its related …

The Limitation On Benefit Clause Of The U.S.-German Tax Treaty And Its Compatibility With European Union Law, Dietmar Anders

Northwestern Journal of International Law & Business

This comment details why the limitation on benefits clause of the U.S.- German Treaty is contrary to European Union law.5 Part I describes the discriminatory situation which German companies may face and illustrates how tax treaty abuse could occur and how to prevent it. Part I also contains an introduction to the U.S.-German Treaty and provides an example of the conflict between U.S. tax treaties and European Union law. Part II analyzes in detail the Treaty's discriminatory features with respect to European Union aw and discusses potential justifications for this discrimination based on the case law of the European Court …

The Forgotten Link: "Control" In Section 482, Wayne M. Gazur

Northwestern Journal of International Law & Business

The foundation of international taxable income allocations between related parties is formed by the imposition of an arm's length standard. The presence of "control" over a person invokes this measure. The author examines the implications of control presented by continuing developments in the global business environment, including the rise of cooperative interfirm arrangements.

Foreign Taxation: The Section 367(E) Regulations -- No Place To Hide, Walter D. Schwidetzky

Northwestern Journal of International Law & Business

Foreign taxpayers have long been a thorn in the side of Congress. Not only is the proper incidence of tax a far greater issue than in the domestic context, so is whether that tax will ever be collected. The average foreign taxpayer, with little the IRS can readily attach, is not overly concerned with whether the United States tax bill has been paid. Consequently, the Internal Revenue Code of 1986 (the Code) has a number of provisions designed to overcome the reluctance of foreign taxpayers to pay United States tax.

Indirect Taxation And 1992, Michel V.M. Van Beek

Northwestern Journal of International Law & Business

Since June 1985, when the Commission of the European Communities ("Commission") presented to the European Council its "White Paper" on completing the Internal Market by the elimination of physical, technical, and fiscal barriers inside the European Communities ("EC" or "Community"), the harmonization of indirect taxation has become a main topic in the European press. In this article an attempt will be made to clarify the impact of indirect taxation, or more correctly, the obstacles created by indirect taxes to the realization of the Internal Market, by looking at the past, the present and the future. However, what indirect taxes create …

The Status Of United States International Taxation: Another Fine Mess We've Gotten Ourselves Into, Karen V. Kole

Northwestern Journal of International Law & Business

United States international tax policy in the 1980s and beyond, where are we going and why? The federal income tax has arguably taken a consistent approach to basic international issues since its inception. To this allegedly well balanced compromise between theory and practicality, an increasingly complex maze of rules has been added without much direction. The result is chaos with little apparent benefit. Contrary to the alleged intent of these piecemeal amendments, the changes have complicated, not simplified, the area of the international tax law. In trying to make an inherently imperfect system perfect, monumental administrative burdens have been imposed …

The Termination Of The United States-Netherlands Antilles Tax Treaty: What Were The Costs Of Ending Treaty Shopping, Frith Crandall

Northwestern Journal of International Law & Business

On June 29, 1987 the United States Treasury Department terminated the United States-Netherlands Antilles Tax Treaty (the "Treaty"). The United States and the Netherlands Antilles had attempted to preserve the Treaty for eight years. However, negotiations ended because of a loggerhead over the extent to which the Netherlands Antilles would maintain any tax haven status. Termination of the Treaty was a victory for the United States since third parties to the Treaty could no longer misuse it to evade United States taxes. Furthermore, the termination significantly advanced the continuing United States policy to eliminate "treaty shopping." The purpose of this …

Book Review

Northwestern Journal of International Law & Business

When a corporation enters foreign markets it must confront the complications of foreign currency exchange. Foreign exchange management ("forex management") taxes the skills of the most creative corporate financial managers. Achieving tax advantages through forex management, or at least avoiding financial disasters, requires the talents of a prophet. To maintain profits, the tax efficient forex manager must reduce taxes while reducing foreign exchange risks. In Tax Efficient Forex Management, John Chown supplies forex managers with the knowledge required to achieve significant tax advantages from managing foreign currency and asset exchange. According to Mr. Chown, the book is intended for both …

A Primer For Incorporating Under The Income Tax Laws Of France, Germany, Or The United Kingdom, Francene M. Augustyn

Northwestern Journal of International Law & Business

This article discusses the income tax considerations relevant to a decision to incorporate a business abroad. The article provides an overview of some of the more important aspects of the corporate income tax laws of France, the Federal Republic of Germany, and the United Kingdom. The provisions of the countries' respective tax codes are contrasted and compared; included in this comparison are analogous provisions contained in the Internal Revenue Code of the United States. Due to the ever-changing character of the provisions of the countries' respective tax codes, this article is not an exhaustive study of any one country's tax …

Recapture Of Past Foreign Branch Losses On Transfer Of Branch Assets To A Foreign Corporation, E.C. Jr. Lashbrooke

Northwestern Journal of International Law & Business

A domestic corporation operating in a foreign country through a branch office includes income from that operation in its worldwide income and deducts losses from its worlwide income. Net losses from foreign branch operations reduce the amount of income subject to the federal income tax. If at a future date the domestic corporation incorporates its foreign branch and transfers the branch assets to the foreign corporation in exchange for its stock or securities, any future unearned income of the foreign corporation is removed from United States tax jurisdiction, provided that the foreign corporation does not engage in the conduct of …

New Developments In The Foreign Tax Credit: The Treasury Department Attempts To Define And Income Tax, David F. Nitschke

Northwestern Journal of International Law & Business

In order to alleviate the double taxation of income earned overseas by United States taxpayers, the Internal Revenue Code contains aforeign tax credit. This provision, which enables a taxpayer to credit certain foreign taxes he haspaid or accrued, has been reinterpreted recently by the Depart- ment of the Treasury. In this article, Mr. Nitschke discusses several 1978 revenue rulings andproposed regulations issued in 1979 that have altered the definition of aforeign tax that qualifies as an "income tax" and, thereby, have reduced signficantly the kind offorein taxes eligible for the credit. Upon examination ofprior rulings and case law, Mr. Nitschke …

Newly Revised Income Tax Treaty With France: A Breakthrough In U.S. Tax Treaty Law, Stephanie H. Simonard

Northwestern Journal of International Law & Business

In 1979, the United States and France revised their 1967 Income Tax Treaty Developed along the lines of the Organization of Economic Co-Op- eration and Development Model Convention, the revised Treaty adopts a unique method of calculating the U.S. foreign tax credit limitation. The re- vised Treaty changed the definition of "source" of income to permit the for- eign tax credit against what would otherwise be termed "U.S. source income. " In this article, Mrs. Simonard examines the revised Treaty and its effects on U.S. citizens residing in France

Hoover Company V. Commissioner: A Judicial One Way Street, Raymond J. Jr. Slomski

Northwestern Journal of International Law & Business

Recently, the tax court in Hoover Company v. Commissioner,' re- fused to apply the Corn Products doctrine3 and found that a corpora- tion's forward sales agreements in foreign currencies were not hedging agreements.4 The court concluded that such sales did not constitute an integral part of the business,5 and thus losses from such transactions fell outside the protection of Corn Products and were afforded capital treat- ment.6 This note will suggest that the Hoover court, in focusing its deci- sion on the form of the taxpayer's transaction (i.e., whether it was a "bona fide" hedge), failed to properly apply the …