TAX, SOCIETY & CULTURE

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Tomorrow at McGill Law: Panel on Distributive and Labour Justice

Published Mar 13, 2014 - Follow author Allison Christians: - Permalink

Catherine Lu of McGill and Pablo Gilabert of Concordia will be presenting on the topic of global principles of distributive and labour justice tomorrow at 12:30 pm as part of McGill Law's Speaker Series on Economic Justice, sponsored by the Centre for Human Rights and Legal Pluralism. I will be moderating the discussion. This event is free and open to all, details:

Date: 14 March 2014
Time: 12:30-14:30
Location: Room 609 New Chancellor Day Hall
3644 rue Peel
Montreal Quebec Canada , H3A 1W9

I have started reading Catherine Lu's 2006 book, Just and Unjust Interventions in International Law: Public and Private. In it, she argues that the concept of state-to state intervention as a moral problem rests on an image of sovereignty as privacy, and therefore uses the same imagery of intrusion that we see in the domestic privacy context as a basic element. The domestic case against government intrusion into private affairs of individuals and social groups (family) involves balancing between curbing domestic abuse and government intruding too deeply into family lives.  Lu argues that the same principles animate the question of legitimacy in intervention, making similar normative claims to privacy accorded to families in the domestic realm. Lu thus argues that:

The concept of intervention .. assumes some distinction between private and public domains. In the Westphalian model of interstate relations, the posited sovereignty of states functions like privacy to give states a right to be free from interference by outside parties --especially other states, as well as non citizens, nongovernmental organizations, and even the international community -- in their own internal affairs."
The public/private argument is an interesting and I think controversial position that adds to a discourse about sovereignty that we see being challenged all the time in taxation, including (especially of late) in taxation. Consider the OECD's project on BEPS, the US imposition of FATCA on the rest of the world, the rise of global tax justice activism, the addition of taxation to the corporate social responsibility discourse, and the UN tax group's attempt to change the conversation on transfer pricing. There are many other examples in recent and not so recent history.

It will be interesting to discuss the pressures involved in the area of labour. I have viewed it as essentially necessary for states to trap labour in order to extract enough revenues to pay for the state (in the form of taxation or otherwise). It is clear that governments have come to rely on labour as their primary resource of such revenues over the past century, so cannot let labour move as capital does, footloose and free of obligation.

Tagged as: conference human rights institutions justice McGill scholarship

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FATCA in Canada-constitutional challenge mounting

Published Feb 28, 2014 - Follow author Allison Christians: - Permalink

A group of Canadians has put together a campaign to explore the constitutional violations posed by FATCA in Canada. Some of these issues were raised by pre-eminent constitutional scholar Peter Hogg, in this letter to Finance. Others arise because of the adoption of the intergovernmental agreement (IGA), which bypasses data protection laws and lacks even the minor anti-discrimination clause seen in other IGAs.

I've been asked if these issues are serious. I think they are. The issue FATCA raises for me is not so much sovereignty--though I perfectly understand the instinct on that front--but rather it is the problem of serious mismatch between the goals targeted and what will be attained by FATCA when law on the books meets law in practice. The constitutional challenge is a signal that something is seriously awry with FATCA. As with most activism, this effort demonstrates that a not-small number of people are experiencing some not-small violation of fundamental principles, and in light of government failure to respond, are forming grassroots responses in an effort to achieve a remedy.

Let's have a look at why this might be so.

The goals of FATCA are clear and the law writes a clear narrative that is palatable to the public: we must stop tax evasion. Who would possibly speak out against that goal? I don't know too many people that would.

However, the law in practice is a completely different story, with a normative dimension unique to the United States. This dimension has, as far as I can see, been completely ignored by lawmakers both in America and internationally. It involves the attempt by the United States to impose taxation of persons based on their legal status instead of their actual inclusion in American society.

I know that this s difficult to understand conceptually. An example might help.

A was born in Illinois to a Swedish mother and an American father. The family moved to Sweden when A was 6 months old, and she spent her whole life in Sweden, working there, paying taxes there, using the schools and the health care system there, and getting married to a fellow Swede. A is a US national, and therefore subject to US taxation as if A had done all of those things in America. A has always been subject to US taxation, and FATCA doesn't change that in the slightest. But A never paid any attention to US law or politics, decisions of the US Supreme Court, or Congressional hearings. Why would she? She is a resident of Sweden paying high taxes and living her life. A has bank accounts at her neighbourhood bank, and tax-deferred savings account sponsored by her government.

In the eye of FATCA, A is an offshore tax evader.

Since she is an evader, she must be monitored to ensure she is caught and brought to justice, and further that she goes forward in full compliance with all US tax laws. Since she cannot be trusted to come forward, her bank must disclose her personal and financial information, and that of her spouse (guilty by association), to the IRS. Since the bank has no incentive to do that, it must be threatened with sanctions if it fails to do so. Since banks don't want to work under that threat, Sweden must be compelled to step in and facilitate the data transfer.

As I have said often, this is an extraterritorial jurisdictional claim that requires the help of other countries. Getting help is not a choice, it is a necessity. One country simply cannot assert its jurisdiction over people who live in another country, without that other country's help. American scholars know this, and they say America should ask for the help it needs. The problem that we have seen FATCA reveal is that this help necessarily involves America's needs trumping domestic laws that apply to targeted persons in the country of their residence.

I do not think America should be demanding help from other countries in taxing the residents of those countries. America needs to learn to tax its own residents, like every other country must do. If the world's biggest economy cannot figure out how to make its own people pay for their own public goods, it is difficult to see why other countries should be enlisted to help it along.

This is why the mismatch between the law on the books and the law in practice is so troubling in the case of FATCA. Looking past the use of legal status instead of residence as a jurisdictional claim, a regime that requires financial institutions to report nonresident accounts to these account holder's home countries is absolutely necessary to protect the income tax base from widespread tax evasion facilitated by foreign bank secrecy laws.  Of that there is simply no doubt. To the extent FATCA can do that, it is to be applauded and most of all extended globally because this is a global issue. I explain and advance this argument here

Most countries cannot act alone in instituting this necessary regulatory structure, since foreign financial institutions would simply shun a given market rather than comply. This is the potentially positive side of what makes the United States different from most, maybe all, other countries. This also explains why the OECD is very very quickly trying to ride the coattails of FATCA (before it is too late and the US changes its mind about being part of a global data exchange system, as it has before), by gearing up to create a global FATCA, or call it a GATCA

GATCA is FATCA minus two key aspects: the normatively unjustifiable legal-status based tax, and most of the economic sanctions. The UK has done something similar with those same parameters with respect to a selected list of countries. (The OECD's GATCA is also fully reciprocal, but that deficiency in FATCA is another issue). These differences make a GATCA supportable exactly where FATCA is not (both systems have other major flaws but we can leave those aside for the big picture here).

FATCA's enforcement of legal-status based taxation renders it normatively unjustifiable. It violates the residence principle, which Reuven Avi-Yonah has gone so far as to call an international customary law. It is also of course completely unworkable on a global scale: imagine if other countries decided to learn from the US example and started smoking out their own disapora to enforce their own FATCA regimes. It is unimaginable that if the OECD countries got together and seriously debated status-based taxation, they would agree on a global standard to enforce it for all countries. The common reporting standard GATCA they have devised, which is so obviously based fundamentally on the residence principle, shows that the OECD recognizes that enforcing status-based taxation is not and should not be a goal of any project to counter tax evasion.

Yet no conversation is being had about the outlier, whose demands will make enforcement of GATCA more extensive and more expensive for every other country.

Residence based taxation is not perfect by any means but it is the least worst alternative if governments want to continue to use personal income taxes in a world in which individuals are to be allowed the freedom to move. FATCA deserves to fail to the extent it ignores this reality. A constitutional challenge will at minimum open a desperately needed political conversation about why this is so.

Tagged as: Canada citizenship FATCA international law Tax law tax policy

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Tax, Law and Development

Published Feb 06, 2013 - Follow author Allison Christians: - Permalink

Yariv Brauner and Miranda Stewart have posted their introductory chapter to Tax, Law and Development, a book to which I am contributing with a chapter on global tax activism.  Here is the abstract:

This book is the first collection of independent legal scholarship exploring the relationship between tax, law and the quest for human development. While acknowledging fully the challenge of tax competition in a global economy, this book rejects calls to end taxation of mobile capital even if this may be perceived to be a theoretical economic inevitability due to the difficulty of collection in an uncooperative environment. New approaches to economic development suggest we must abandon – or significantly downplay – the dominant normative approaches to tax policy, replacing these with contextualized, diverse, partial and incremental tax law reform approaches that take seriously the legal, social and political context. The innovative scholars who contribute to this book examine the role of law in national and international tax regimes across a range of topical tax issues, from the perspective of countries including China, Brazil, South Africa, India and the United States. Chapters discuss the reform of tax laws that are central to economic globalization, including tax incentives for foreign direct investment, their relationship with tax treaties and other international tax law, the problem of how to address fundamental equity concerns, and institutions of budgeting, tax law making and administration in a global era.
They conclude:
The variety of chapters presented in this book forcefully demonstrate the deep need and the wealth of opportunities for progress in this avenue of study of tax, law and development. The primarily economic and ‘one size fits all’ focus of tax policy to date has not been sufficiently matched by detailed legal, historical and contextual policy analysis that can fortify and enrich it, supporting the implementation of tax reforms within real world social and legal structures. A range of alternative approaches to development arise out of the critique presented by the authors in this book and surveyed in this Introduction. The chapters call for a direct acknowledgement of the challenges and contradictions of tax law reform for development, and emphasize patience, diversity, a trial-and-error approach, transparency, legitimacy or ‘ownership’ and constant feedback and evaluation in tax reform approaches. Although less apparently streamlined and ‘correct’, these alternative approaches to tax, law and development do not imply a loss of focus, even if they are slow, difficult to implement, and lack the appeal of promised panacea. Moreover, they often require careful coordination within and between countries that does not exist in the current international tax regime. This new approach does, however, promise some actual success. The goal of this book is unashamedly idealistic, to serve as the foundation that would jump-start further scholarship, and support real change in the global and national tax laws for economic development.
I'm looking forward to seeing the book in print.

Tagged as: development globalization international law scholarship tax culture tax policy

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Tax transparency activism-Australia

Published Jun 09, 2012 - Follow author Allison Christians: - Permalink

Via TJN, a new campaign in support of country-by-country reporting in Australia called Shine the Light, introduced in this video:



More at the link.



Tagged as: CBCR corporate tax disclosure tax policy transparency

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New Paper on Global Civil Society

Published May 16, 2012 - Follow author Allison Christians: - Permalink

John S. Dryzek has published "Global Civil Society: The Progress of Post-Westphalian Politics," in the Annual Review of Political Science.  Abstract:

Despite lingering ambiguity surrounding the concept, global civil society is acclaimed by those who think they belong to it, and validated by international governmental organizations seeking legitimation for their activities. Its enthusiasts believe global civil society presages a more congenial kind of politics that transcends the system of sovereign states. Its critics deride its unrepresentativeness and complicity in established power relations. The critics can be answered by more subtle accounts of representation and by highlighting contestatory practices. Appreciation of the promise and perils of global civil society requires moving beyond preconceptions rooted in dated ideas about civil society and democracy as they allegedly function within states. Irrespective of the sophistication of such post-Westphalian moves, global civil society remains contested terrain, involving interconnected political and intellectual disputes. International relations theory proves less useful than it should be in clarifying what is at stake. Democratic theory can be brought to bear, and this encounter sheds new light on what democracy itself can entail.
This is important in the context of thinking about occupy wall street, the uncut movement, and global tax activism more generally, against the broader backdrop of how individuals and institutions work to gain influence over tax policy nationally and internationally.


Tagged as: civil society institutions international law lobbying

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Law and Diplomacy

Published May 06, 2012 - Follow author Allison Christians: - Permalink

Peter Spiro directs us to Ian Hurd, "Law and the Practice of Diplomacy," calling it
"maybe the only piece of IR theory that I've read that really seems to get the dynamic element of international law.  It also centers international law to what I suspect is an unprecedented extent, as both a "resource" for and a constraint on state actors.  "[S]tates are limited in their agency by the legal resources that they find around them. Their strategic behaviour around diplomacy and international law is therefore tightly structured by the legal environment. This is not a domain of free choice."
Quoting from Hurd's article:
[t]he social nature of diplomacy ensures that these changes are never fully under the control of any single actor, and that the strategic direction of diplomatic activism is always uncertain. The meaning of precedents depends on how states and others choose to use them. As a social practice, diplomacy has these three formal qualities: sociality, statecentrism, and a productive effect.
It is a law and society approach to the question of international law,  saying the positive question (do states comply) is the wrong one; rather we need to "look at how the actors use the rules, and how the rules shape the actors and their possibilities."

Spiro likes the article but dislikes that it brackets non-state actors, who "are obvious players on the international stage."  He gives a few examples: "the Kimberley Process and the Equator Principles, in which NGOs and corporations are the key actors ...[when] Greenpeace goes after the Forest Stewardship Council about logging in the Congo or Human Rights Watch presses the International Olympic Committee on Saudi discrimination against women."  For international tax the list would include the well established influence of OECD's Business & Industry Advisory Council (BIAC) and the International Chamber of Commerce on the development of international tax norms, and perhaps the relative newcomers Action Aid and Christian Aid, with respect to the emerging issue of country-by-country reporting.   

Tagged as: institutions international law scholarship

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Borders among Activists

Published Apr 21, 2012 - Follow author Allison Christians: - Permalink

International Law blog points us to Borders among Activists: International NGOs in the United States, Britain, and France, by Sarah S. Stroup (Cornell Univ. Press 2012).  Abstract:

In Borders among Activists, Sarah S. Stroup challenges the notion that political activism has gone beyond borders and created a global or transnational civil society. Instead, at the most globally active, purportedly cosmopolitan groups in the world—international nongovernmental organizations (INGOs)—organizational practices are deeply tied to national environments, creating great diversity in the way these groups organize themselves, engage in advocacy, and deliver services. 
Stroup offers detailed profiles of these "varieties of activism" in the United States, Britain, and France. These three countries are the most popular bases for INGOs, but each provides a very different environment for charitable organizations due to differences in legal regulations, political opportunities, resources, and patterns of social networks. Stroup's comparisons of leading American, British, and French INGOs—Care, Oxfam, Médecins sans Frontières, Human Rights Watch, Amnesty International, and FIDH—reveal strong national patterns in INGO practices, including advocacy, fund-raising, and professionalization. These differences are quite pronounced among INGOs in the humanitarian relief sector, and are observable, though less marked, among human rights INGOs. 
Stroup finds that national origin helps account for variation in the "transnational advocacy networks" that have received so much attention in international relations. For practitioners, national origin offers an alternative explanation for the frequently lamented failures of INGOs in the field: INGOs are not inherently dysfunctional, but instead remain disconnected because of their strong roots in very different national environments.
She also contributed a chapter entitled "National Origin and Transnational Activism" to Power and Transnational Activism, which compares US, French, and Japanese NGOs and concludes that their home state policies and practices shape their ability to be influential on a global scale; she also has a paper up on SSRN from a couple of years ago that I managed to miss, and that I am reading right now, called There’s No Place Like Home: National Origin, Networking, and Advocacy at International NGOs, with a short and sweet abstract:
"It is amazing to witness the number and scope of organizations today that claim to be “without borders.” Doctors, reporters, architects, lawyers, librarians, mothers, chemists, clowns, acupuncturists, and even bees now have organizations that claim be with “without borders” or “sans frontières.” This enthusiasm for expressing global sympathies and taking global action has also taken hold in the academic community. The vast and growing literature on international non-governmental organizations (INGOs) reveals that these organizations can change state policy and shape social practice in many places around the globe."
 Fascinating body of work she's developing.






Tagged as: institutions international law scholarship soft law

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The Lobbyists are Winning: Corporate Tax Transparency edition

Published Apr 12, 2012 - Follow author Allison Christians: - Permalink

The activist-led movement to increase multinational tax disclosure is proving to be a full-employment program for natural resource industry lobbyists.  The money and energy available for fighting against transparency seems limitless.  We have seen the effects of this in the US, where Dodd-Frank's section on extractive industry transparency has been completely undermined and consistently sidelined as a result of lobbyists.  We have seen the effects in Canada, where the industry managed to kill transparency legislation all together by means of a tidal wave of lobbying by the energy industry there.  Today the FT tells a similar tale unfolding in the EU.

There is a perhaps not obvious but very pernicious undercurrent in this transparency contest.  It is that in each country, lobbyists are using the success of the lobbyists in the other countries to bolster the cause for their own success.  No matter we may like to think about the nature of tax policy as somehow a sacred and protected space for purely national politics, that hallowed chamber of sovereign entitlement, it's clear that lobbying is fully globalized and therefore tax policy is, too.

Today's FT story provides a case in point.  First, the FT notes that the EU's work on transparency was prompted by the inclusion of new corporate tax information disclosure standards for resource extractors (think oil, gas, etc):

The European Commission last year proposed a scheme that allowed for payments for specific projects to be tracked, with reporting requirements that broadly matched the US approach enacted in the Dodd-Frank Act.
Just by putting the possibility of corporate tax transparency into legislation, even though it could not and still cannot be implemented without further action through federal regulations, Dodd-Frank put extractive industries transparency on the map of legislative possibilities, and therefore cleared some space for the policy to spread to other nations (I analyze this more thoroughly in my forthcoming book chapter on global tax activism).

The FT reports that industry in the EU responded by protesting the new rules as unnecessary, onerous, etc.--in other words, a set of self-serving arguments with which those of us who have been following this issue in the US and Canada have become all too familiar and most of which do not hold up under scrutiny.  But lobbying works very well, and so the EU is considering a much less transformative version of the proposal, one that would not require very much disclosure if any at all.

The FT closes the circle by concluding that:

If the compromise passes in Brussels, it will bolster industry arguments that the US rules being drawn up to implement Dodd-Frank should be watered down to match the EU approach and ensure a level playing field.
The idea that tax policy is in any sense a purely national project could not be more clearly debunked.  The EU's imminent adoption of a more lax standard arms lobbyists in the US with a fresh round of anti-transparency ammunition.  Their ability to use this to further the anti-transparency cause in the US will in turn re-invigorate lobbying in Europe and elsewhere.  This will continue until transparency is uniformly killed, unless the pro-transparency lobby gains a similarly viral foothold from which to reinvigorate the campaign for transparency.  It is an international game with fascinating network aspects and effects.  Too bad then that in the meantime, a policy that really ought to be implemented, not least because it is in fact written into the rule of law here in the US at least, will be stalled indefinitely.

On a related note, it is worth recognizing that a new euphemism is emerging in international tax policy that is steadily gaining ground through casual and unexamined use.  That is the idea that this or that tax policy is necessary to "ensure a level playing field." Both sides of the transparency issue have used the term to support completely opposing goals in the past, so it would seem that the term means very little.  That means a translation is in order when people use the term to score political points.

Let us be clear then that when used by opponents of transparency, "ensuring a level playing field" is what people say when they mean that the lobbyists are winning.  That is because a level playing field would quite obviously exist when the market has full information--that is, when all multinational companies engage in full disclosure of their tax payments in all countries, and all stakeholders--shareholders, taxpayers, governments, and watchdog groups--have the same information about how generous tax policies support industry all over the world (this is how the pro-transparency crown use the term).  When what is sought is a market with little or preferably no publicity of this kind of information, "the level playing field" means something very close to the current status quo--the product of all that successful lobbying to date.

Tagged as: Canada CBCR civil society corporate tax disclosure EITI EU lobbying transparency u.s.

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The Right to Justification

Published Apr 10, 2012 - Follow author Allison Christians: - Permalink

Larry Solum recommends Rainer Forst, The Right to Justification: Elements of a Constructivist Theory of Justice (New Directions in Critical Theory):
    Contemporary philosophical pluralism recognizes the inevitability and legitimacy of multiple ethical perspectives and values, making it difficult to isolate the higher-order principles on which to base a theory of justice. Rising up to meet this challenge, Rainer Forst, a leading member of the Frankfurt School's newest generation of philosophers, conceives of an "autonomous" construction of justice founded on what he calls the basic moral right to justification.

    Forst begins by identifying this right from the perspective of moral philosophy. Then, through an innovative, detailed critical analysis, he ties together the central components of social and political justice—freedom, democracy, equality, and toleration—and joins them to the right to justification. The resulting theory treats "justificatory power" as the central question of justice, and by adopting this approach, Forst argues, we can discursively work out, or "construct," principles of justice, especially with respect to transnational justice and human rights issues.

    As he builds his theory, Forst engages with the work of Anglo-American philosophers such as John Rawls, Ronald Dworkin, and Amartya Sen, and critical theorists such as Jürgen Habermas, Nancy Fraser, and Axel Honneth. Straddling multiple subjects, from politics and law to social protest and philosophical conceptions of practical reason, Forst brilliantly gathers contesting claims around a single, elastic theory of justice.
    ... Forst's master idea is that people have a right and duty of reciprocal justification in the domain of shared institutions and that testing for the justice of such arrangements means testing for how far they are indeed justifiable. 
This is useful in thinking about the rise of global tax activism, where it is not necessarily clear that what people seek is rule or regime change, but rather an accounting of what the rules and regimes have wrought, and a justification for the status quo and its systemic continuation through the construction of international institutions and epistemic communities.









Tagged as: fairness institutions philosophy rule of law

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Tax Activism

Published Mar 28, 2012 - Follow author Allison Christians: - Permalink

Activists around the world are taking on tax dodging as a threat to economic development in poor countries and to society in general in all countries.  I write about the movement and its prospects for involving NGOs and other non-business civil society groups into the rarefied world of international tax policymaking in my latest paper, Tax Activists and the Global Movement for Development Through Transparency.  In the paper I explore how the rise of concern about tax avoidance, especially by multinational companies, came about, and how the elite tax policy community is reacting to it (not particularly well).  Tax avoidance has been a staple of entity-level planning ever since we have had an income tax, and tax havens have existed for decades with tacit acceptance by governments.  It is only in the last decade or so that you could say a "movement" to bring multinational taxation to the public discourse as a matter of social justice began.  What happened to get the ball rolling and what turned it into a sustained force capable of disrupting the status quo?  The paper traces the movement and how it is faring as a means of contesting the established policymaking order.  If you're interested in the extractive industries transparency movement, country-by-country reporting, how tax connects to economic development, or how the OECD manages international tax discourse, you'll find the paper of interest.  It is forthcoming as a chapter in a book on tax law and development, edited by Miranda Stewart and Yariv Brauner.

Tagged as: CBCR corporate tax development globalization institutions lobbying OECD scholarship tax policy transparency

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