TAX, SOCIETY & CULTURE

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Burgers & Mosquera on Corporate Tax, BEPS, and Developing Countries

Published Sep 06, 2017 - Follow author Allison Christians: - Permalink

Irene Burgers (University of Groningen - Faculty of Economics and Business) and  Irma Mosquera Valderrama (IBFD) recently posted Corporate Taxation and BEPS: A Fair Slice for Developing Countries?, which explores the link between perceptions of fairness in the allocation of international tax revenues and buy-in to the BEPS framework by developing countries. Here is the abstract:
The aim of this article is to examine the differences in perception of ‘fairness’ between developing and developed countries, which influence developing countries’ willingness to embrace the Base Erosion and Profit Shifting (BEPS) proposals and to recommend as to how to overcome these differences. The article provides an introduction to the background of the OECD’s BEPS initiatives (Action Plan, Low Income Countries Report, Multilateral Framework, Inclusive Framework) and the concerns of developing countries about their ability to implement BEPS (Section 1); a non-exhaustive overview of the shortcomings of the BEPS Project and its Action Plan in respect of developing countries (Section 2); arguments on why developing countries might perceive fairness in relation to corporate income taxes differently from developed countries (Section 3); and recommendations for international organisations, governments and academic researchers on where fairness in respect of developing countries should be more properly addressed (Section 4). 
This is an important analysis because it is clear that the meaningful participation of non-OECD countries in the development of international tax norms going forward is both difficult and imperative in terms of both legitimacy and effectiveness of the evolving international tax order.

Tagged as: BEPS development fairness scholarship tax competition tax policy

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Cockfield: Big Data and Tax Haven Secrecy

Published Oct 14, 2015 - Follow author Allison Christians: - Permalink

Art Cockfield has posted a new paper on SSRN, Big Data and Tax Haven Secrecy, forthcoming Florida Tax Review. The article sets out research he did with the International Consortium of Investigative Journalists (ICIJ) and is of interest. Here is the abstract:

While there is now a significant literature in law, politics, economics, and other disciplines that examines tax havens, there is little information on what tax haven intermediaries — so-called offshore service providers — actually do to facilitate offshore evasion, international money laundering and the financing of global terrorism. To provide insight into this secret world of tax havens, this Article relies on the author’s study of big data derived from the financial data leak obtained by the International Consortium for Investigative Journalists (ICIJ). A hypothetical involving Breaking Bad’s Walter White is used to explain how offshore service providers facilitate global financial crimes. The Article deploys a transaction cost perspective to assist in understanding the information and incentive problems revealed by the ICIJ data leak, including how tax haven secrecy enables elites in non-democratic countries to transfer their monies for ultimate investment in stable democratic countries. The approach also emphasizes how, even in a world of perfect information, political incentives persist that thwart cooperative efforts to inhibit global financial crimes.

Tagged as: evasion information scholarship tax policy

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Spiegel Sohmer Tax Policy Colloquium at McGill Law

Published Sep 28, 2015 - Follow author Allison Christians: - Permalink

McGill Law's annual Speigel Sohmer Tax Policy Colloquium kicks off today with a presentation by Roseanne Altshuler on the viability of a switch from worldwide to territorial corporate taxation in the United States. This year's colloquium will focus on the fundamentals of corporate tax policy by critically examining issues in national and international tax policy. Today's talk will take place from 14:30-17:30pm in Room 202 of New Chancellor Day Hall, 3644 Peel Ave, Montreal. Students, faculty and the McGill community in Montreal are welcome to attend.

Here is the colloquium line-up for the fall:

Monday, September 28: Rosanne Altshuler

Rosanne Altshuler is Dean of Social and Behavioral Science and a Professor of Economics at Rutgers University. She was the Chair of the Department of Economics at Rutgers from 2011 to 2015. She has written widely on federal tax policy, including her most recent article “Lessons the United States Can Learn from Other Countries’ Territorial Systems for Taxing Income of Multinational Corporations.”

Monday, October 5: Steven Dean

Steven Dean is a Professor at Brooklyn Law School and a specialist in tax law. His research addresses a range of tax and budgetary issues, including unconventional solutions to problems such as tax havens, regulatory complexity and tax shelters. His recent article, “Tax Deregulation,” considered the surprising implications of enhancing taxpayer autonomy.

Monday, November 2: Richard Murphy

Richard Murphy is a chartered accountant and economist. He is the founder of the Tax Justice Network and the director of Tax Research LLP, which undertakes work on tax policy, advocacy and research. Mr. Murphy is the co-author of several publications on tax policy, including his most recent book, “Over Here and Undertaxed: Multinationals, Tax Avoidance and You.”

Tuesday, November 10: Daniel N. Shaviro

Daniel Shaviro is a Professor of Taxation at the New York University School of Law. Professor Shaviro has written several books examining tax policy, budget policy and entitlements issues. His most recent book, “Fixing US International Taxation,” offers an analytical framework for international tax policy that sidesteps the standard worldwide taxation vs. territorial taxation framework.

Monday, November 23: Kim Brooks

Kim Brooks is Dean and Weldon Professor of Law at the Schulich School of Law, Dalhousie University. Dean Brooks’ research focuses on corporate and international tax law and policy. She focuses on using a discrete area of tax law to understand a larger tax concept, and using the tax system to promote international economic justice. Dean Brooks has written widely on tax treaties and international taxation, including her recent chapter, “The Troubling Role of Tax Treaties” in the volume 51 of “Tax Design Issues Worldwide: A Series on International Taxation.”

Monday, November 30: Albert Baker

Albert Baker is the Global Leader in Tax Policy at Deloitte & Touche LLP, where he specializes in international tax, including mergers and acquisitions, corporate financing and corporate reorganizations. His recent research focuses on base erosion & profit shifting, a project to address concerns that current international tax frameworks result in double non-taxation, or stateless income, or reducing the tax base in high tax countries.

The Spiegel Sohmer Tax Policy Colloquium has been made possible by a generous grant from the law firm Spiegel Sohmer, Inc., Montreal, for the purpose of fostering an academic community in which learning and scholarship may flourish. I am delighted to welcome these distinguished guests and look forward to today's discussion.

Tagged as: colloquium corporate tax McGill scholarship tax policy

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Today at McGill Law: Joseph Heath on Taxation as Collective Consumption

Published Oct 20, 2014 - Follow author Allison Christians: - Permalink

Professor Joseph Heath, Professor of Philosophy, University of Toronto, joins us today as the second speaker in the McGill University Speigel Sohmer Tax Policy Colloquium. Professor Heath is drawing from his book, Filthy Lucre: Economics for People Who Hate Capitalism, (released in the US as "Economics without Illusions: Debunking the Myths of Modern Capitalism"), where he writes about viewing taxation as a "club good":

Individuals express a surprisingly pervasive error that I refer to as the “government as consumer” fallacy. The picture underlying this fallacy is relatively straightforward. Government services, such as health care, education, national defense, and so on, “cost” us as a society. We are able to pay for them only because of all the wealth that we generate in the private sector, which we transfer to the government in the form of taxes. A government that taxes the economy too heavily stands accused of “killing the goose that lays the golden eggs” by disrupting the mechanism that generates the wealth that it itself relies upon in order to provides its services. Thus the government gets treated as a consumer of wealth, while the private sector is regarded as a producer. This is totally confused. The state in fact produces exactly the same amount of wealth as the market, which is to say, it produces none at all. People produce wealth, and people consume wealth. Institutions, such as the state or the market, neither produce nor consume anything. They simply constitute mechanisms through which people coordinate their production and consumption of wealth.
Heath has also pointed us to Todd Sandler's work on "Buchanan clubs."

 The presentation will take place in the Seminar Room of the Institute for Health and Social Policy, Charles Meredith House, 1130 Pine Ave., Montreal, beginning at 2:35 pm.

As always, the colloquium is open to all: students, faculty and the general public are welcome.

Tagged as: McGill philosophy scholarship tax policy

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Monday at McGill: Diane Ring on Sovereign Harmony, Domestic Discord

Published Nov 24, 2013 - Follow author Allison Christians: - Permalink

The 4th Annual Tax Policy Colloquium at McGill Law concludes Monday with a presentation by Professor Diane Ring of Boston College on her paper, Sovereign Harmony, Domestic Discord: Democracy and the Gap Between International Tax Cooperation and Domestic Politics (draft not yet available). Professor Ring explores how to understand the interplay between domestic tax politics and the need for nations to speak with one voice on the international stage. She argues that the more fractured internal politics, the less hope there seems to be for the kind of international cooperation that would make the tax system more coherent both nationally and internationally. Here is the Abstract:

The challenges of the international tax system have become ubiquitous. Newspapers recount the tax exploits of multinational corporations that are household names and announce the jail sentences of the latest Swiss bankers and U.S. taxpayers to fall in the ongoing attack on tax evasion. The twin pressures on effective income taxation captured by these stories are those of tax evasion (typically engaged in by individual taxpayers) and tax avoidance (typically characterized by the planning and structuring undertaken by multinational corporations). In both cases cooperation between and among states plays a pivotal policy and enforcement role. That is not to say that cooperation (in its various iterations) is a universal or achieved objective. Rather, the question of whether states can identify a shared goal and move cooperatively toward that goal is an important focus of international tax policy discussions. With respect to the problem of tax evasion there have been some notable steps of cooperation through information sharing measures (including Tax Information Exchange Agreements) as well as domestic changes designed to increase transparency. Less agreement and coordination has been evident for the problem of tax avoidance. The current context in which these questions are being explored communally is the Organization for Economic Cooperation and Development (OECD) project on “Base Erosion and Profit Shifting” (the “BEPS” project). 
But regardless of the degree of current cooperation, agreement, and coordination achieved on these international tax issues, the focus on the status of state-to-state relations can obscure another critical factor in the international tax system: domestic politics. Even if and when states reach a shared understanding of a dimension of the evasion or avoidance problems, a resulting agreement by states is not the end game. Although states must act and negotiate as monoliths in their state-to-state interactions, there remains the ever-present constraint of democracy at home and the possibility that a deal struck on the global stage is undone in the domestic sphere. This dynamic between international relations and domestic “politics” is neither new nor limited to taxation. But the serious attention to and heightened expectations from cooperation among nations regarding major issues of international tax policy requires that comparable attention be directed at the domestic side of cooperation. 
The task of this paper is to explore how domestic politics can impact the heart of the international tax system – agreements among states on important issues of tax policy design and practice. Through a better understanding of the intersection of domestic politics with international debates and agreements, we can consider how and under what circumstances states might diminish the likelihood that domestic discord will ultimately undermine sovereign harmony (i.e. international agreement). Part I outlines three recent examples of international agreement or cooperation that risked rejection or at least significant undermining on the domestic front. Part II reviews the literature regarding international cooperation to develop a framework for approaching the case studies on domestic politics in international tax. Part III draws upon the theoretical work reviewed in Part II to develop a framework for understanding the intersection of international tax and domestic politics. In light of the increasing role that global cooperation and coordination plays in the development of successful international tax policy and practice, the Conclusion considers further research that could illuminate the domestic side of international agreements.
The McGill Tax Policy Colloquium features distinguished visiting academics and offers a forum for students, professors, and local practitioners to discuss issues of tax policy and theory, along with related issues of economics and social justice. Professor Ring's talk will commence at 2:30 pm tomorrow; members of the public are warmly welcomed.

Location: McGill Faculty of Law, 3644 Peel Street, New Chancellor Day Hall, Room 203.

Date and Time: Monday, 25 November, 14:30–16:30.

Tagged as: McGill scholarship tax policy

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Tomorrow at McGill: Tillotson on the historical use of morality in tax policy

Published Nov 10, 2013 - Follow author Allison Christians: - Permalink

The 4th Annual Tax Policy Colloquium at McGill Law continues Monday with a presentation by Professor Shirley Tillotson of Dalhousie University on her paper, The moral worlds of fair taxation: a perspective from 20th century Canadian history (draft not yet available). Professor Tillotson examines the use of political rhetoric to advance tax reform. Marco Garofalo posted some thoughts on the topic earlier today.

The McGill Tax Policy Colloquium features distinguished visiting academics and offers a forum for students, professors, and local practitioners to discuss issues of tax policy and theory, along with related issues of economics and social justice.

Professor Tillotson's talk is scheduled to commence at 2:30 pm tomorrow; members of the public are warmly welcomed.

 Location: McGill Faculty of Law, 3644 Peel Street, New Chancellor Day Hall, Room 203.
 Date and Time: Monday, 11 November, 14:30–16:30.

Tagged as: McGill scholarship tax policy

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Tomorrow at McGill Law: Sagit Leviner presents on the Three Goals of Taxation

Published Oct 27, 2013 - Follow author Allison Christians: - Permalink

The 4th Annual Tax Policy Colloquium at McGill Law continues Monday with a presentation by Professor Sagit Leviner of Ono Academic College, Israel, on her paper, co-authored with Tali Nir, Contemplating on the Meaning & Attainment of the Three Goals of Taxation, forthcoming in Honoring Arie Lapidot (Hebrew University Press, 2014). Here is the abstract:

Why do we need a tax system? Do we want the tax system to only finance public goods and services or do we also intend it to redistribute wealth and regulate human behavior?  What are the different means available to advance each goal and the likely (as well as unlikely) tension that might built up when utilizing these means and pursuing  the different goals? This chapter seeks to address these questions in order to present the building-blocks for a clear and accessible analysis of the goals of taxation. Specifically, the chapter addresses these goals in the context of the Israeli tax system while placing the analysis in a broader theoretical and empirical setting.
In connection with the above, Professor Leviner will discuss her 2003 Tannenwald prize-winning paper, From Deontology to Practical Application: the Vision of a Good Society and the Tax System, 24 Va. Tax Rev. 406 (2006) [draft here]. That paper laid out Leviner's vision for thinking abut tax policy from the perspective of a community-rather than individual-oriented view of society, "drawn from an analysis of the role that individual and collective rights and responsibilities ought to play in contemporary tax policy-making." This innovative work laid the groundwork for her current research and should make for a lively discussion.

The McGill Tax Policy Colloquium features distinguished visiting academics and offers a forum for students, professors, and local practitioners to discuss issues of tax policy and theory, along with related issues of economics and social justice.

Professor Leviner's talk is scheduled to commence at 2:30 pm tomorrow; members of the public are warmly welcomed.

 Location: McGill Faculty of Law, 3644 Peel Street, New Chancellor Day Hall, Room 203.
 Date and Time: Monday, 28 October, 14:30–16:30.

Tagged as: McGill scholarship tax policy

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Measuring Corporate Tax Incidence: Update from the Joint Committee on Tax

Published Oct 17, 2013 - Follow author Allison Christians: - Permalink

The JCT released a report yesterday laying out its new method for measuring corporate tax incidence, Modeling The Distribution Of Taxes On Business Income (JCX-14-13).  The paper begins with a nice summary of the literature to date, and lays out the JCT's decision to assume that in the short run the incidence of corporate tax is fully on capital owners but in the long run (assumed to be reached by the end of a ten year analysis period), owners can shift 25% of the tax to domestic labor. Current Treasury practice assumes an 82/18 split. JCT explains its methodology and provides "illustrative examples", so the report is worth reading in full, but here are a few excerpts of note:

The Joint Committee staff has refrained from estimating the distribution of changes to the taxation of corporate income.... Past decisions not to estimate the distribution of taxes on corporations and passthrough entities were the result both of uncertainties among economists regarding the appropriate incidence of business taxes and to data limitations which made it impractical to distribute such taxes in the timeframe necessary to fit the legislative schedule. However, the economic literature has continued to advance. The Joint Committee staff believes that public finance economists now have a better understanding of, and can more appropriately measure, the incidence of taxes on business income. ... In addition, more detailed data and faster computing speeds help make timely completion of such distributional effects more feasible. 
...The debate over the incidence of corporate income taxes is ongoing, with a range of estimates on the precise breakdown depending on the assumptions of underlying models. Nevertheless, the existing research has arrived on two clear points of consensus. One is that the burden of the corporate income tax falls largely on domestic individuals, and therefore the corporate income tax does impact the well-being of these individuals. The second is that the burden of corporate income taxes is not borne entirely by capital owners, and is instead shared between capital owners and labor with the share borne by each being the subject of ongoing debate. 
...In the very short run, the incidence of business tax changes should fall entirely on the holders of the existing capital stock and bond holders. ... [I]n the long run owners of domestic capital are more easily able to escape some of the burden of the tax so business taxes are at least partially passed on to labor. ... 
The new methods ... reflect the current understanding in the economics profession that domestic individuals ultimately bear the majority of the burden of these taxes. Given the general economic consensus that these taxes should be distributed to individuals, the Joint Committee staff believes that estimating the distribution is appropriate. In the short run the new method distributes 100 percent of both types of taxes to owners of capital. In the long run it distributes 75 percent of corporate income taxes and 95 percent of the taxes attributable to passthrough business income to owners of capital. 
A portion of capital’s share of the corporate tax burden is borne by international capital owners, so in both the short run and the long run the distribution of tax burdens borne by domestic owners of capital is less than the burden borne by all capital owners. The portion of the corporate income tax burden borne by foreign capital owners is not distributed to domestic individuals on tax distribution tables. The remainder of the tax burden that is not distributed to foreign and domestic capital owners is distributed to labor, reflecting the compensation adjustment that results from corporate income taxes reducing the after-tax revenue that each worker generates for his firm. 
Given no definitive economic literature on the duration of the short run, the Joint Committee staff generally assumes that the long run is reached by the end of the 10-year budget window. These distributions between capital and labor reflect the middle of the range of estimates for distributing business taxes in the economic literature. The Joint Committee staff will use the updated distribution methods in this report to estimate tax distributions for all future estimates of the distribution of Federal income taxes. The Joint Committee staff will continue to evaluate and refine this approach to be consistent with new research findings as they arise. 

Tagged as: corporate tax economics tax policy u.s.

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The Shutdown and a Tea Party Tax Paradigm Shift: Guest Post by Marco Garofalo

Published Oct 14, 2013 - Follow author Allison Christians: - Permalink

One of the many benefits of hosting a tax policy colloquium is that the students become deeply engaged in grappling with tax policy principles through contemporary scholarship, and they apply these ideas to the world in which they find themselves. After our recent presentations by Reuven Avi-Yonah on the shifting pressures of globalization on the tax base, by Clifton Fleming on the politics of tax expenditure analysis, and by Lyne LaTulippe on the topic of tax competition, in which she introduced us to work by the political scientist Mark Blyth, one of my students came back with the following analysis of tax politics in the US, and he agreed to share it here.

Government Shutdown and a Tea Party-Induced Tax Policy Paradigm Shift in the United States

A paradigm shift in tax policy may be unfolding in the United States, as the Tea Party positions itself differently than either the Democrats or the Republicans when it comes to important aspects of tax policy processes and practices.  In a recent article, "Paradigms and Paradox: The Politics of Economic Ideas in Two Moments of Crisis," Mark Blyth investigated why we did not see a paradigm shift in economic policy after the financial crisis of 2008. He argues that paradigm shifts are usually:

  1. triggered by failures in the current paradigm; 
  2. accompanied by a new paradigm that is waiting in the wings to replace the current one; and 
  3. driven by a change in who can speak authoritatively on the subject.
He concluded that “it is politics, not economics, and it is authority, not facts, that matter for both paradigm maintenance and change.” Consequently, he argues that we did not see a paradigm shift after the financial crisis for a few reasons. First, even though there was a failure of the current paradigm, there was no challenger waiting to replace it. To illustrate his point, Blyth suggests that it was inconceivable that the Washington Consensus would be replaced by the Beijing Consensus, “so complete was its initial victory.” Second, the sudden policy failure did not result in a change of who speaks authoritatively on the subject, as protagonists did not change (individuals in the US Treasury, the ECB, and the IMF all retained their authority) and thus their solutions did not either. Blyth calls this ‘disciplinary incentive’; in other words, “too many careers and institutions are at stake!” Thus the financial crisis did not spur a paradigm shift.

But consider the Tea Party and its crusade. Since 2009, the Tea Party has been an unavoidable presence in US politics. While the Tea Party story has many permutations, causes, and manifestations, only the current government shutdown is important for the purposes of the current discussion. The current shutdown is not about Republicans versus Democrats; it is about the Tea Party versus Republicans. The Patient Protection and Affordable Care Act passed in Congress, was upheld by the Supreme Court of the United States, and its funding was not seriously contested by the Republican Party. This is an artificial crisis, a main architect of which appears to be Jim DeMint, former US Senator and current President of the Heritage Foundation.  If non-Tea Party GOP members do not want to play along, the implicit threat, according to Joshua Green of Bloomberg Businessweek, is that the Tea Party will turn on them, such as by launching “attack ads calling [Republican Senator Mitch] McConnell a ‘turncoat’ who ‘surrendered to Barack Obama’ in the healthcare fight."  So far, the Tea Party is pulling off this political coup: the government is shut down and positions are becoming entrenched.

Now consider this political impasse as a paradigm shift. First, we have a failure in the current paradigm (even though it is artificial). Joshua Green argues that “What’s causing the malfunction is a battle within the GOP.”  Second, we have a paradigm waiting in the wings to replace the current one. In fact, the Tea Party is not so much waiting to replace the Republicans as forcing that to happen. Third, the loci of authority in the Republican Party are shifting, either to Tea Party members or to the remaining GOP members who agree to change their tune. Hence we may see a paradigm shift, in which the Tea Party becomes the dominant faction in the Republican Party, resulting in a recalibration of the Democrat-Republican relationship.

Such a paradigm shift would have serious implications for tax policy. At least two would arise immediately, in the areas of tax expenditure analysis and tax consultations. First, tax expenditure analysis may begin to play a greater role. While the Republicans and Democrats function largely by dressing government spending as tax credits and deductions, the Tea Party is having none of that. The prime example would be the current crisis. The current government shutdown is itself a tax issue: the Patient Protection and Affordable Care Act, SCOTUS cogently reminds us, is a piece of tax policy. If the Tea Party does become the dominant Republican faction, then tax expenditure analysis may take center stage as a tool to sniff out government spending in all of its forms.

Second, the structure and content of tax consultations could change. Professor LaTulippe argues that international tax policy is beholden to a discourse of competitiveness (draft forthcoming). While part of the competitiveness discourse is about low rates, which the Tea Party presumably likes, part of the discourse is about tax expenditures, which the Tea Party would not like. Currently, tax consultations perpetuate this discourse by giving short time frames for the private sector to contribute to proposed tax reforms, with the result that a certain class of participants (accountants and lawyers) is greatly advantaged in giving feedback and achieving client-favored tax policy results. With the Tea Party paradigm, that policy loop could be disrupted, as this recent article suggests.

A paradigm shift in US politics is not certain. Any number of things could happen, including the Republican Party standing up to and beating the Tea Party. If that were to happen, then tax policy commentators should be concerned about the issues described above. Maybe once the dust settles we will meet the new boss, same as the old boss. But the current government shutdown (and impending sovereign debt default deadline) exhibits signs of a paradigm shift.  Something fundamental does seem to be changing on the small government side of political discourse. As such, we should stay tuned to the implications for tax policy.

Tagged as: political malfunction politics scholarship tax policy u.s.

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Tomorrow at McGill Law: Lyne LaTulippe presents on Tax Competition

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

The 4th Annual Tax Policy Colloquium at McGill Law continues Monday with a presentation by Professor Lyne LaTulippe of the Université de Sherbrooke, on a paper entitled "Public consultations framed within a competitiveness discourse." The paper examines the rhetorical and political power of the competitiveness motif in domestic tax policy-making processes, using two specific tax reform episodes in Canada and Australia as case studies of the institutional and political landscape. The author finds that competitiveness in taxation has become a dominant meme, crowding out alternative policy goals and narrowing democratic participation in the process.

The McGill Tax Policy Colloquium features distinguished visiting academics and offers a forum for students, professors, and local practitioners to discuss issues of tax policy and theory, along with related issues of economics and social justice.

Professor LaTulippe's talk is scheduled to commence at 2:30 pm tomorrow; members of the public are warmly welcomed.

 Location: McGill Faculty of Law, 3644 Peel Street, New Chancellor Day Hall, Room 203.
 Time: Monday, 7 October, 14:30–16:30.

Tagged as: McGill scholarship tax policy

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