PwC´s Report on Canada´s International Tax Advantage

The Advisory Panel on Canada's System of International Taxation released its long-awaited final report on December 10, 2008. The report offers seventeen main recommendations, which, together with ancillary recommendations and suggestions, are intended to be "pragmatic, balanced and actionable advice to the Minister of Finance toward improving Canada's international tax system for the benefit of our country."A PricewaterhouseCoopers Tax Memo discusses the Panel's recommendations under the following headings:A. Taxation of Outbound Direct InvestmentB. Taxation of Inbound Direct InvestmentC. Non-Resident Withholding TaxesD. Administration, Compliance and Legislative Process.

Access the full PwC report on the Advisory Panel's recommendations here (pdf)

Regulating Tax Competition in Offshore Financial Centers

Regulating Tax Competition in Offshore Financial Centers

Craig M. Boise (Case Western Reserve University - School of Law) published this paper at Case Legal Studies Research Paper No. 08-26

Here is the Abstract:

One of the more entrenched issues in international taxation over the last thirty years has been how to define and respond appropriately to harmful tax competition among nations, especially competition from offshore financial centers (OFCs). The Organization for Economic Co-operation and Development (OECD) and the European Union (EU) have both mounted initiatives seeking to regulate such competition, and OFCs have strongly objected to these initiatives as an abrogation of their sovereignty in tax matters. This paper provides an introduction to the debate over the regulation of international tax competition, beginning with an overview of the essential architecture of international taxation and the way that its structure creates problems for developed countries and opportunities for OFCs, and continuing with an assessment of the arguments asserted in favor of, and against, regulating tax competition.

The paper then examines how developed countries, through the OECD and EU, have defined international tax competition, and the efforts made by both organizations to regulate such competition. Finally, the paper draws on the way the OECD and EU dealt specifically with the twin touchstones of virtually all definitions of tax havens-low or no income taxation and bank secrecy-to suggest the direction that regulation of tax competition is likely to take in the future.

Available at SSRN: http://ssrn.com/abstract=1266329

The Rise and Fall of Chinese Tax Incentives and Implications for International Tax Debates

Jinyan Li (York University) published in the Florida Tax Review, Forthcoming CLPE Research Paper No. 5/2008, the paper "The Rise and Fall of Chinese Tax Incentives and Implications for International Tax Debates".

Here is theAbstract:

China had no foreign direct investment (FDI) before 1979. Now, it is one of the world's largest recipients of FDI. China has been generous to a fault in granting tax incentives to foreign investors. As of January 1, 2008, however, these FDI-specific incentives are abolished or phased o ut. What explains the rise and fall? Were the tax incentives not effective in attracting FDI and promoting China's economic growth? What are the implications of the Chinese experience for international tax debates? This article examines these questions.

SSRN: http://ssrn.com/abstract=1087382

Book Review of 'Havens in a Storm: The Struggle for Global Tax Regulation'

Book Review of 'Havens in a Storm: The Struggle for Global Tax Regulation'

Anthony C. Infanti (University of Pittsburgh) posted this essay at U. of Pittsburgh Legal Studies Research Paper No. 2008-16

Here is the Abstract:

This short essay is a review of J.C. Sharman's book Havens in a Storm: The Struggle for Global Tax Regulation. In the essay, I first provide a brief overview of Sharman's book, which approaches the Organisation for Economic Co-operation and Development's struggle with tax havens over harmful tax competition from a political science perspective. I then describe how the book (and, by extension, this review) will be of interest not only to those in the fields of international tax and international relations, but also to those concerned more generally with the dynamics of struggles between the powerful and the weak. I conclude by offering a constructive critique of one aspect of the book.

Available at SSRN: http://ssrn.com/abstract=1118979

The Costs of International Tax Cooperation

Tsilly Dagan (Bar-Ilan University) published this 2002 article at Michigan Law and Economics Research Paper No. 02-007; and U of Michigan Law, Public Law Research Paper No. 13

Here is theAbstract:

This Article discusses the three levels of international tax (the unilateral, the bilateral and the multilateral). It describes the seemingly appealing arguments (based on cooperation) advocating neutrality, double taxation prevention, and harmonization. A closer look at these arguments, however, reveals that pursuing these goals often brings about completely different and sometimes undesirable results. While acknowledging the potential benefits of inter-nation cooperation for some, this article highlights the (sometimes hidden) costs of such cooperation for others. Thus, domestic interest groups tend to win or lose from adopting an (elusive) cooperative strategy as the unilateral mechanisms of their countries; developing countries tend systematically to lose tax revenue when they enter into the (more cooperative and thus seemingly benign) bilateral treaty regime; finally, the emerging multilateral regime, promoted as an all-benefiting cooperative strategy, also creates potential losers both among and within nations.

Based on this analysis, the paper argues that cooperation serves as a useful rhetorical tool that supports a certain contingent policy choice, but obscures other, potentially important, considerations and alternatives. Identifying the winners and losers of cooperative policies is necessary in order to evaluate such polices. Cooperation cannot be and is not the ultimate goal in international tax policy.

Available at SSRN: http://ssrn.com/abstract=315373 or DOI: 10.2139/ssrn.315373

Corporate Tax Policy and International Mergers and Acquisitions - Is the Tax Exemption System Superior?

Corporate Tax Policy and International Mergers and Acquisitions - Is the Tax Exemption System Superior?

Johannes Becker (University of Cologne) and Clemens Fuest (University of Cologne and CESifo (Center for Economic Studies and Ifo Institute for Economic Research) published this paper at CESifo Working Paper Series No. 1884

Here is theAbstract:

In this paper we ask whether recent claims that the US government should switch from the tax credit system to the exemption system are justified. We study corporate taxation in a model where international capital flows are either greenfield investment projects or acquisitions of existing firms, and where investment is motivated by either cost reduction or market entry reasons. The paper asks how corporate taxation affects the international allocation of capital under different double taxation regimes. We find that the standard view on international taxation only prevails in the case of cost driven greenfield investment. In all other cases the deduction system is no longer optimal from a national perspective and the foreign tax credit system fails to ensure neutrality. However, the desirability of the tax exemption system has to be qualified. We show that the cross border cash flow tax system dominates the exemption system in terms of optimality properties.

Available at SSRN: http://ssrn.com/abstract=959991

Note on International Tax Regimes

Note on International Tax Regimes
Mihir A. Desai (Harvard Business School) posted the note at HBS Publishing Case No.: 9-206-014

Here is the Abstract:

Provides a framework for understanding different types of international tax regimes. Examines how alternative tax regimes tax the foreign income of their citizens (including corporate citizens); how tax regimes define foreign and domestic income; and how foreign tax credits and deductions are used in worldwide tax regimes to mitigate double taxation. Discusses in detail the current U.S. system of worldwide taxation and the managerial incentives created by the U.S. tax system.

Available at SSRN: http://ssrn.com/abstract=924675

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

Cross-border Outsourcing: U.S. International Tax Pitfalls, Pratfalls, and Opportunities

Anthony C. Infanti (University of Pittsburgh) published "Cross-border Outsourcing: U.S. International Tax Pitfalls, Pratfalls, and Opportunities".

Here is the Abstract:

During the past decade, there has been a surge in outsourcing by businesses both in the United States and abroad. In the face of this surge in outsourcing as well as the trend toward outsourcing activities that come closer and closer to a business' "core," some commentators have underscored the need for businesses to make an educated decision about whether and what to outsource. This article, which, as its title indicates, is particularly concerned with cross-border outsourcing, is written in the same vein. It provides a non-exhaustive examination of the myriad of circumstances under which a decision to outsource the provision of goods or the performance of services to a foreign provider can affect the application of the U.S. international tax regime to the outsourcing business. The purpose of this article is to foster greater awareness of the sometimes dissonant tax aspects of cross-border outsourcing and thereby impel businesses and their legal advisors to take a more holistic view of the decision to outsource - a view that encompasses not only the potential business benefits and detriments of a decision to outsource, but also the potential tax benefits and detriments of such a decision.

Available at SSRN: http://ssrn.com/abstract=398680 or DOI: 10.2139/ssrn.398680