Taxation-Transnational Commons^™

Taxing Ai, Assaf Harpaz

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Artificial intelligence (AI) is poised to transform the distribution and sources of income, with some experts predicting widespread job displacement. Even under optimistic projections, AI is expected to exacerbate wealth inequality, given that the technology’s ownership and immense value are concentrated within a subset of Big Tech companies and AI startups. These outcomes will have far-reaching impacts on the federal tax system, which heavily relies on taxing individual labor income and payroll, rather than capital or consumption.

This Article argues that AI threatens to disrupt the tax system’s ability to fulfill its fundamental goals of raising revenue, redistributing income, and …

Un Tax Negotiations: North-South Tensions And The Challenge Of Institutional Legitimacy, Assaf Harpaz

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The drafting process for a United Nations Framework Convention on International Tax Cooperation, along with two early protocols, is now underway. A UN framework convention represents a Global South effort to shift international tax policymaking from the OECD to the UN. For developing countries, the UN has long been viewed as a more inclusive space for tax policy negotiations, producing more favorable but historically less influential standards compared to the OECD.

Support for the UN framework convention, including its terms of reference, has been sharply divided across traditional Global North-South lines. The backlash following the OECD’s recent two-pillar reform triggered …

Global Tax Wars In The Digital Era, Assaf Harpaz

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The digital economy fundamentally disrupts international tax principles that rely on physical presence. When a business earns income abroad, the country of residence (where the taxpayer resides) and the country of source (where income is generated) both have legitimate, competing claims to tax that income. The international tax system tends to favor residence-based taxation. The source country has the right to tax business profits only if the enterprise carries on a permanent establishment within its borders, which typically requires physical presence. The permanent establishment standard becomes flawed in a digital economy where profit shifting practices are abundant and businesses no …

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

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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 …

Taxing Dirty Luxuries, Victoria J. Haneman

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Dirty luxuries are items that are pleasant or nice to have, not necessities, that absolutely bludgeon the environment. From the merely affluent to the ultra-rich, consumers enjoying dirty luxuries, such as luxury clothing, private jets, superyachts, SUVs, and vacation cruises, drive one of the most polluting types of consumption on the planet. This Article explores the climate costs of dirty luxuries, considers the current and proposed international efforts to address the climate impact of these luxuries, and proposes structures by which these luxuries may be taxed to either reduce consumption or compensate for negative externalities.

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

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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, …

The Rapidly Evolving Universe Of Us State Taxation Of Cross-Border Online Sales After South Dakota V Wayfair, Inc., And Its Implications For Australian Businesses, Walter Hellerstein

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The US Supreme Court’s 2018 decision in South Dakota v. Wayfair, Inc. dramatically expanded the subnational states’ power to require remote suppliers to collect taxes on in-bound sales to local consumers by repudiating the pre-existing, judicially created constitutional rule limiting the states’ authority to enforce such collection obligations to those suppliers with an in-state physical presence and replacing it with a ‘nexus’ rule based on ‘economic and virtual contacts’. The state legislatures reacted quickly and almost unanimously to the Wayfair decision by adopting rules imposing sales tax collection obligations on remote suppliers whose sales exceeded specified dollar or transaction thresholds. …

Digital Taxation Lessons From Wayfair And The U.S. States’ Responses, Walter Hellerstein, Jeffrey Owens, Christina Dimitropoulou

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This article provides a detailed and structured synthesis of the discussion that took place in the context of the "fireside chat" event held by the WU Global Tax Policy Center at the Institute of Austrian and International Tax Law on December 17, 2018, at which Hellerstein was the guest speaker. The event was one of the initiatives of the Digital Economy Tax Network, a multi-stakeholder forum, which organized a workshop on the VAT/goods and services tax and the digital economy December 17-18, 2018, in Vienna. In this article, the authors examine the lessons that the U.S. Supreme Court's Wayfair decision …

Reflections On The Cross-Border Tax Challenges Of The Digital Economy, Walter Hellerstein

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In this article, Hellerstein discusses common problems confronting national and subnational jurisdictions in addressing the cross-border tax challenges of the digital economy. This article is based on the author's November 21 inaugural lecture as a visiting professor at the Vienna University of Economics and Business.

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

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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.

Taxing Remote Sales In The Digital Age: A Global Perspective, Walter Hellerstein

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This Article addresses three fundamental questions raised by the taxation of remote sales in the digital age from a global perspective, but focuses on the implications, if any, of the answers to these questions in the global context for the U.S. subnational retail sales tax. First, should remote sales be taxed under a consumption tax? Second, if the answer to the first question is “yes,” where should such sales be taxed? Third, how can remote sales be taxed effectively under a consumption tax in the digital age?4

A Hitchhiker’S Guide To The Oecd’S International Vat/Gst Guidelines, Walter Hellerstein

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The OECD’s International VAT/GST Guidelines, which were released in their consolidated form at the OECD’s Global Forum on VAT in Paris in late 2015, are the culmination of nearly two decades of efforts to provide internationally accepted standards for consumption taxation of cross-border trade, particularly trade in services and intangibles. This article provides a roadmap to the Guidelines, especially for readers who may be unfamiliar with consumption tax principles, in general, or VATs in particular. Part II of the article provides the background to the Guidelines, describing the basic features of a VAT, the problems with which the Guidelines are …

An Introduction To The Oecd’S International Vat/Gst Guidelines, Walter Hellerstein

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U.S. tax professionals can bene/it by becoming acquainted with the OECD’s new guidelines for the design and implementation of value added tax (VAT) regimes

International Income Allocation In The Twenty-First Century: The Case For Formulary Apportionment, Walter Hellerstein

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From an international perspective, formulary apportionment has traditionally been viewed as little more than transfer pricing’s “poor relation” as a division-of-income methodology. It receives only grudging recognition as a method of attributing the profits to a permanent establishment under Article 7 of the OECD Model Tax Convention; it receives no mention at all in Article 9 as a method for distributing the profits of associated enterprises among the contracting states in which they conduct their activities; and it was assailed by the international business community and by the EU Member States as out of step with internationally excepted norms in …

The European Commission’S Report On Company Income Taxation: What The Eu Can Learn From The Experience Of The Us States, Walter Hellerstein

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The European Union Commission has proposed using consolidated base taxation and formulary apportionment to tax the EU-source income of multinational companies. This paper examines US state experience with a similar approach. Despite some positive lessons, especially the need to consolidate income of affiliated companies, lessons are mostly negative, especially regarding the choice of apportionment formula, the use of economic criteria to define the group whose income is to be consolidated, and complexity caused by lack of uniformity. US experience says nothing about using value added to apportion income—an approach that is conceptually attractive, but subject to transfer pricing problems.