E-Commerce and International Tax Planning

Carla Carnaghan ( University of Lethbridge) and Kenneth J. Klassen (University of Georgia) posted the paper "E-Commerce and International Tax Planning"

Here is the Abstract:

This paper investigates whether the increased flexibility afforded by e-commerce has allowed firms to increase their tax planning activities. We specifically address whether multinational firms that make greater use of e-commerce have greater sensitivity to tax incentives relative to firms making less use of e-commerce. Using proxies for e-commerce activity, we find that the relation between exports and tax incentives is increasing in the e-commerce measures.

Alternative tests of foreign tax expense and country-level trade activity corroborate the main test. This research is an important first step in understanding the larger impact of e-commerce on international tax planning behavior.

Available at SSRN: http://ssrn.com/abstract=557124 or DOI: 10.2139/ssrn.557124

Corporate Expatriations: The Tension Between Symbols and Substance in the Taxation of Multinational Corporations

The Congressional Response to Corporate Expatriations: The Tension Between Symbols and Substance in the Taxation of Multinational Corporations

Michael S. Kirsch (Notre Dame Law School) published this report at Virginia Tax Review, Vol. 24, 2005

Here is the Abstract:

During the past few years, several high-profile U.S.-based multinational corporations have changed their tax residence from the United States to Bermuda or some other tax haven. They have accomplished these expatriations, and the resulting millions of dollars of annual tax savings, merely by changing the place of incorporation of their corporate parent, without the need to make any substantive changes to their business operations or their U.S.-based management structure. Congress and the media have focused significant attention on this phenomenon. Despite this attention, Congress initially enacted only a non-tax provision targeting corporate expatriations - a purported ban on expatriated companies entering into contracts with the Department of Homeland Security.

This Article addresses this alternative sanction, concluding that it is prototypical symbolic legislation, with no instrumental effect. The Article also discusses the extent to which the initial Congressional debate over expatriations may have had indirect instrumental effects by furthering the informal enforcement of social norms. Ultimately, after almost three years of debate, Congress enacted a tax provision intended to deny the desired tax benefits to expatriating corporations. The Article also addresses the substantive tax policy implications of this response, concluding that it illustrates the tenuous normative underpinnings of the place-of-incorporation rule for determining corporate residence and the need for Congress to reconsider what makes a corporation American in an increasingly globalized world.

Available at SSRN: http://ssrn.com/abstract=647761