The US Section 301 trade actions against DSTs were strikingly effective in the short term. Section 301, however, is ill suited as a process for challenging taxes of other countries and lacks legitimacy. The sovereign power to tax is very broad and there is insufficient international agreement on taxation norms applicable to the full range of taxes to form a basis for unilateral action against a tax such as the DST. The Section 301 DST cases did not employ an objective standard and encourage skepticism that trade fora without tax policy experience or expertise are equipped to deal satisfactorily with novel tax instruments. The USTR’s tax policy analysis was weak and unpersuasive. US application of Section 301 to contest taxes of other countries risks longer term consequences that include undermining efforts to achieve a stable and sustainable international tax system.

This Guide seeks to provide information helpful to countries making policy decisions with respect to the Pillar Two Global Anti-Base Erosion (GloBE) minimum tax proposal. The GloBE initiative creates a pool of potential tax revenues on in-scope corporate multinationals’ incomes to be collected by GloBE participating countries (that host an entity in the MNE group) whenever the effective tax rate of an entity (or entities) within the MNE group in the country falls below 15 percent. Some domestic tax measures intended to attract and keep foreign investment may lose their effectiveness as a result. Further, some of GloBE’s impact may be indirect, providing lawmakers with an opportunity to consider policy reforms whether or not they adopt GloBE itself. It is in the interest of each country to examine the potential applicability of GloBE to its taxpayers and the interplay of GloBE rules with its domestic tax system in order to make informed decisions about whether and in what manner to respond.

This article outlines the traditional justifications for a residual profits business tax base and evaluates its role in the OECD/G20 Pillar One proposal to allocate income to market countries. The article concludes that basing the allocation of profits to market countries on multinationals’ residual profits would be inferior to allocating a portion of total corporate profits.

Copyright © 2001 by J. Clifton Fleming, Jr., Robert J. Peroni & Stephen E. Shay. All rights reserved.The ability-to-pay fairness concept is a key factor underlying the historic U.S. policy of relying principally on the income tax to finance federal government expenditures. Indeed a major justification for this reliance, as opposed to significant dependence on consumption levies, is that the income tax is a system for spreading the costs of government in a way that advances fairness by giving substantial deference to comparative ability-to-pay.Consequently, one would expect tax policy analysts to routinely examine the equity implications of international income tax rules by applying the fairness criterion with the same rigor as in the domestic context. But surprisingly, there has been relatively little discussion in the literature regarding the role of the ability-to-pay concept in analyzing international tax policy issues. This may be because the composition of international investment historically has been dominated by the direct foreign investments of multinational corporations, which pose perplexing issues in evaluating fairness concerns. Even if true, however, this is an inadequate reason to forego analysis of fairness considerations when scrutinizing the important international dimension of a modern income tax. In this article, we examine the role that fairness concerns, embedded in the abilityto-pay concept, play in justifying the U.S. policy of taxing U.S. residents on their worldwide incomes.

This comment letter addresses Senate Finance Committee Chair Ron Wyden’s International Tax Reform Framework Discussion Draft released August 25, 2021 (with Senators Brown and Warner) (the WBW Draft). The comment discusses why U.S. multinationals have competitive advantages compared to international competitors because of access to a favorable cost of capital in U.S. capital markets and other benefits of being based in the United States. Accordingly, it supports adopting the Biden Administration’s proposed international tax reforms. The comment explains why the United States should not wait for completion of the G20/OECD global minimum tax agreement. Finally, the letter makes comments directed at strengthening the WBW draft.

Allowing U.S. shareholder deductions for expenses allocable to exempt foreign dividends and the portion of GILTI exempted by deduction is an opaque subsidy for foreign investment. This article’s analysis concludes that gross income offset by deductions whose object is to exempt foreign income from U.S. tax (exemptive deductions) is a class of income wholly exempt from taxes for purposes of applying the deduction disallowance rule of Section 265(a)(1) to such deductions. The amounts potentially subject to disallowance are substantial. This analysis raises questions for taxpayers who have taken deductions for these expenses and have not established a financial statement reserve or reported the position. Based on the analysis in this article, a notice and comment regulation confirming the application of Section 265 to income offset by an exemptive deduction would reasonably interpret the statute. The Treasury Department’s Fiscal Year 2022 Revenue Proposals would amend Section 265 to disallow deductions allocable to a class of foreign gross income that is exempt from tax or taxed at a preferential rate through a deduction. The proposal states that no inference should be drawn regarding current law. Under the analysis in this article, the Treasury has authority to adopt a regulation irrespective of whether the legislative proposal is adopted. The contributions of this article are to identify exemptive deductions as an expense disallowance issue, to illuminate its effect as a subsidy and its revenue importance, and to show how different legal avenues, including statutory interpretation, regulation, legislation and their combinations, are available to the government to address the issue.

This article examines the financial relationship between Americans for Tax Reform (ATR) and Paycheck Protection Program (PPP) borrower Americans for Tax Reform Foundation (ATRF). ATRF is an apparently insolvent “zombie” foundation heavily indebted to ATR. ATR indirectly benefits from the ATRF PPP loan through the support for ATR employees who simultaneously are ATRF employees, though ATR was itself ineligible for a PPP loan under the CARES Act. The article critically evaluates ATR’s rationales for ATRF’s receipt of a PPP loan, notwithstanding their small government ideology, including that the loan it compensates for a “government taking.” ATR’s actions, if not its words, support a role for government helping those in need.

This comment was filed in response to the G20/OECD Inclusive Forum’s Public Consultation Document on Addressing the Challenges of the Digitalization of the Economy. The comment supports a re-alignment of the division of corporate income between source and residence countries that is not restricted to digitalized businesses. The comment seeks to contribute to the discussion by outlining a framework for taxing a nonresident taxpayer that is “heavily involved in the economic life of a jurisdiction without a significant physical presence” and includes description of a methodology for attributing income to a non-physical permanent establishment using existing income tax principles.

The purpose of this brief is to correct and respond to two arguments in Petitioner-Appellee Altera’s petition for rehearing en banc and briefs of amici supporting the petition for rehearing. First, Treasury’s regulation requiring cost sharing of stock-based compensation and the Ninth Circuit panel’s decision are entirely consistent with longstanding precedents, practices and understandings regarding the meaning of the arm’s length standard. Second, reversal of the U.S. Tax Court by a Court of Appeals is an ordinary occurrence that reflects the federal courts’ hierarchy and is not a basis for granting en banc review.

This article is slightly edited from a public comment letter originally submitted to Treasury and the IRS. The article argues that the proposed elective expansion of a high-tax exclusion from the reach of GILTI is inconsistent with the statute, loses revenue, and exacerbates the TCJA’s failure to allocate and disallow expenses incurred to earn foreign income exempted from U.S. taxation. The article explains that allowing a deduction for expenses incurred to earn exempt foreign income is a subsidy for the foreign investment. Taxation of the income to which the expense would be allocated by another country does not alter the character of the expense allowance, against other taxable income, as an unjustified subsidy by U.S. taxpayers of U.S. multinationals’ foreign investments.

The 21st Century has seen unprecedented levels of corporate tax aggressiveness and avoidance. This Article continues our exploration of second-best international tax reforms that would protect the U.S. corporate tax base and have some likelihood of adoption. In this case, we consider how a U.S. minimum tax on foreign income earned by a controlled foreign corporation should be designed to protect the United States against erosion of its corporate income tax base and to combat tax competition by low-tax intermediary countries. In the authors’ view, a minimum tax should be an interim levy that preserves the residual U.S. tax on foreign income, as distinguished from a final minimum tax that partially eliminates the U.S. residual tax. An interim minimum tax would be a significant improvement over current law and would more effectively limit incentives to seek low-taxed foreign income while ameliorating pressure to retain excess earnings abroad. To achieve the objectives of such a minimum tax, corresponding changes should be made to the U.S. corporate resident definition, the source taxation of foreign multinational corporations, and the residence taxation of U.S. portfolio investors in foreign corporations to reduce tax advantages under current law for investments in foreign corporations. These changes would reduce tax advantages for foreign parent corporate groups and thereby further protect the U.S. tax base, as well as reduce incentives for U.S. corporations to expatriate as a consequence of increased U.S. taxation of foreign income under an interim minimum tax.

The objective of this book is to change the terms of the debate so that societal values and goals are at the center of discussions about each reform proposal and process. This book rethinks international investment law as a key system in global economic governance that should incorporate principles of transparency, participation, reciprocity, accountability, and subsidiarity. The book critically evaluates the current system of investment governance in light of those principles and goals. And finally, it proposes possible reforms – including multilateral reforms – that would realign the governance of international investment with 21st century goals including reduction of poverty and inequality, and protection of human dignity, the environment, and the planet.

In this foreword to International Tax Policy in a Disruptive Environment: A Special Issue, the authors provide an overview of the two-day interdisciplinary conference that took place in Munich on 14-15 December 2017, and offer a synopsis of the articles in this special edition of the Bulletin for International Taxation.

This amicus curiae brief in Altera Corporation v. Commissioner supports the government's position and the view of the majority in a 9th Circuit opinion issued on July 24, 2018 and later withdrawn. Amici are tax law professors who conclude that the stock-based compensation cost sharing regulations at issue in this case are not arbitrary and capricious, but rather are consistent with the arm's length standard and are valid and reasonable under Section 482 of the Internal Revenue Code.

The recent U.S. international tax reforms are a hodgepodge of nominal and effective tax rate reductions, a poorly designed export subsidy and unnecessarily complex revenue raising tax base protections. The most significant “international” change in the 2017 U.S. tax legislation is the “permanent” reduction in the U.S. corporate tax rate. The base protections were jerry built on existing architecture. There was no effort to address the pervasive issue of remote sellers into the U.S. market. The overall result is very complex, lacks policy coherence, and, over the longer term, loses revenue. While reduced rates moderate incentive effects the revised rules manage nonetheless to encourage offshore shifting of real investment as well as profits.

One of the principal US tax policy issues leading up to the Tax Cuts and Jobs Act was how foreign-source active business income of US multinational enterprises should be taxed by the United States if the system of deferring US tax on active foreign income of a foreign subsidiary was ended. Much of the US multinational business community urged that the United States adopt a territorial or exemption system, while others, including many labor-backed groups, favored adopting an expanded worldwide tax regime. As others have observed, Congress chose both. This report takes a preliminary look at the extent to which the TCJA's purely outbound international provisions caused a degree of movement in either direction.