Articles
Vol. 5, No. 2
5 Colum. J. Tax. L. 133
The Use of Cross-Border Corporate Profits and Losses and “Global Corporate Tax Information”: A Game Theory Approach

The paper, proposes a game theory approach based on a concept of Global Corporate Tax Information and analyzes the unilateral strategies a country can select from to regulate cross-border profits and losses in its capacity as a residence-country or as a source-country. A description of the strategies available to residence-countries when there is no exchange of Global Corporate Tax Information is developed in section 2. Section 3 then looks at the interactions of those unilateral strategies of residence and source countries when there is no exchange of Global Corporate Tax Information, and shows that they lead to a stable uncooperative equilibrium as the result of “dominant strategies.” Section 4 emphasizes the strategic importance of Global Corporate Tax Information insofar as it is conducive to effective cooperation in enforcement that prevents aggressive strategies by global taxpayers and shows that such coordination can be backed by multilateral commitment. Section 4 also demonstrates that the Common Consolidated Corporate Tax Base (“CCCTB”) can be viewed as a multilateral method for the exchange of Global Corporate Tax Information if approved by at least nine EU countries (i.e. the minimum number of parties required under the “enhanced cooperation” procedure.) Section 5 concludes by proposing that the U.S. could become a party to pre-existing multilateral systems for exchange of Global Corporate Tax Information such as the CCCTB.

 

5 Colum. J. Tax. L. 170
The U.S. as Tax Haven? Aiding Developing Countries by Revoking the Revenue Rule
Over the years, many OECD countries, including the United States, have identified tax havens as a significant problem, and have acted to limit the ability of their taxpayers to use tax havens to reduce their taxes. The United States has implemented tax regimes, including subpart F and the passive foreign investment company rules, and disclosure regimes, such as the recently-enacted FATCA rules, to prevent U.S. taxpayers from taking advantage of tax haven jurisdictions.

But the intersection of a number of U.S. tax rules, it turns out, makes the United States an attractive place for foreigners to invest—and hide—their money. Principal among these is the revenue rule, an eighteenth-century common law rule that prevents the United States from recognizing and enforcing foreign tax judgments. As a result, if a foreign taxpayer hides money in the United States and fails to pay taxes at home, her government has no recourse to satisfy the tax debt with the taxpayer’s U.S. assets. Such hidden money disparately impacts developing countries by reducing their ability to finance government through developing tax infrastructure, and instead forcing them to remain dependent on foreign aid.

The revenue rule stands in stark contrast to the general default rule that U.S. courts will enforce foreign final judgments. But the revenue rule is not grounded in any compelling policy considerations. Moreover, to the extent that the U.S. revokes the revenue rule, not only will the U.S. aid other countries—including, especially, developing countries—but it may receive reciprocal aid in collecting taxes from U.S. taxpayers with assets held overseas. This Article argues that the U.S. should revoke the revenue rule, both from a moral obligation to aid developing economies in becoming self-sufficient and to receive reciprocal aid in collecting taxes being held overseas.

5 Colum. J. Tax. L. 207
The Intricacies of Tax and Globalization: Reviewing: Global Perspectives on Income Taxation Law by Reuven S. Avi-Yonah, Nicola Sartori, & Omri Marian (Oxford, 2011)

This article reviews Avi-Yonah, Sartori, and Marian’s Global Perspectives on Income Taxation Law (Oxford, 2011). It outlines the book’s key features and strengths in the quest for understanding the effect of globalization on taxation. In this process, the article also looks into available data to explore global trends in taxation over the past three and a half decades to evaluate whether and to what extent globalization leads to convergence or divergence of national tax policies.The article concludes that as Global Perspectives on Income Taxation Law illustrates, while globalization may lead to at least some observed trends in taxation—including the flattening of income tax rates and the move toward the taxation of less mobile sources, and thus more regressive, tax schemes—there is clearly far more than meets the eye. Here, Global Perspectives on Income Taxation Law provides a valuable reference for how different countries confront challenges that are common among tax systems. Keeping in mind that differences among national tax systems nonetheless exist and understanding how tax systems converge and diverge constitutes a vital first step toward crystallizing the necessary actions to better coordinate between multiple tax systems while retaining national sovereignty in tax design. Over the long run, this could also lead to better evaluation of the net benefit or cost of globalization, allowing policymakers to respond effectively to the fiscal challenges that globalization presents.

Vol. 5, No. 1
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5 Colum. J. Tax. L. 1
Income Tax Treaty Policy in the 21st Century: Residence vs. Source
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The United States has repeatedly attempted to stop tax base erosion for almost the entire post-World War I era, and yet the same problems exist today.  The need for fundamental tax reform is front-page material in the major newspapers with the US transfer pricing rules and US multinationals portrayed as public enemy #1.  The OECD this month issued a report entitled “Addressing Base Erosion and Profit Shifting,” and in a competing fashion several important developing countries have initiated their own pact to develop cooperative strategies on these issues outside of the framework of the OECD and UN.The attached manuscript studies the historical record and sets forth a competing model for dealing with these matters which pre-dated the existing model treaties and transfer pricing paradigm.  This earlier paradigm was offered by the International Chamber of Commerce’s but was prematurely abandoned by the League of Nations in favor of the existing paradigm.  In light of the fact that the existing paradigm has failed so miserably, the earlier proposal should be re-considered.

In the inevitable re-examination process, there will be a fascinating range of political, economic, and business issues to be addressed. Tax administrations will need to ascertain how their resources could be redeployed to foster economic growth. MNEs will need to assess the impact of new treaty concepts on their global effective tax rate planning models.

The critical question is who will initiate the evolution to come. All countries are anxious to protect their respective tax bases. At the present time, it appears that the BRICS and Source Countries have planted their stake in the sand, rejecting the existing order and declaring an intention to update the rules that apply to their own tax base defense. The OECD appears to be principally driven by the need to defend its Member country tax bases, hoping, no doubt, that BRICS and Source Countries will ultimately follow its lead.  Whichever organization emerges as the new-found thought leader on these questions, it is now time to give the original International Chamber of Commerce recommendation a fair consideration on its merits (which, interestingly, addresses the current concerns of BRICS and Source Countries).

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5 Colum. J. Tax. L. 41
The Influence of Historical Tax Law Developments on Anglo-American Laws and Politics
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This article highlights the influence of historical Anglo-American tax law developments on the formation of new political institutions and laws.  In critical periods of English and U.S. history, individuals rebelled against arbitrary royal taxes.  In turn, they demanded new tax laws that became embedded in documents from the Magna Carta to the English Bill of Rights to the Declaration of Independence that promoted democratic constraints on the use of state power to assess and collect taxes.  Over time, the idea that individuals are entitled to equal treatment under the law, and possess inalienable human rights, emerged in part as a result of these tax law developments.  The discussion in this article supports the view that pragmatic concerns over property and taxation drove important English and American political and legal reforms.
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5 Colum. J. Tax. L. 70
The Charitable Deduction Games: Are the Laws in Your Favor?
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The article considers why the United States only grants a deduction for charitable contributions made to US charities from a historic standpoint and why doing so is problematic in the fight against global ills.  The Charitable Deduction Games examines an alternative approach to cross-border giving that is currently spreading throughout the European Union (“EU”) as a result of the 2009 landmark case Hein Persche v. Finanzamt Ludenscheid.  After an examination of Persche, the article explores the UK model that has resulted in response to the decision and considers why the US should adopt a similar model.  Next, the article considers why the Netherlands has been reluctant to adopt a similar model in light of its historic stance.  Finally, The Charitable Deduction Games examines the responses of various EU Member States to Persche and concludes with a proposal of how Persche should affect US laws governing cross-border giving.
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5 Colum. J. Tax. L. 101
Designing a Legal Vehicle for Social Enterprises: An Issue Spotting Exercise
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Social entrepreneurship is at the juncture of creative capitalism and social innovation.  It aims at combining the best of two sectors, and thus is cramped in the traditional vehicles designed for either world in isolation. Although the social bottom line of these enterprises can usually meet the broad charitable purpose requirement of the Internal Revenue Code, tax-exempt vehicles have proven to be unable to hose the financial one.  Conversely, the advantages of for-profits stem from their flexibility, but their failure to receive funding from tax-exempts and the lack of a social enterprise brand have made it necessary to design new vehicles.
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