Recently published as part of the Brooklyn Law School symposium Reconsidering the Tax Treaty, this article looks at the introduction of new clauses to switch off treaty benefits where the treaty partner adopts certain kinds of tax rate or base reductions. I think these clauses are interesting because they create a way for one country to control the future tax policy decisions of another. Whether other countries will agree to a treaty with such a provision is another story.
Here is the abstract:
The new US model income tax treaty contains an unusual addition: mechanisms for the parties to unilaterally override the negotiated treaty rates in specified circumstances. Previewed last year in proposed form — a first for Treasury — these new mechanisms work as kill-switches, partially terminating the treaty as to one or both treaty partners. The idea is to forestall a more problematic outcome, such as an enduring breach of one of the parties’ expectations, or the opposite, a complete termination of all the treaty terms in the face of such a breach. Yet embedding a kill-switch in a treaty creates distinct legal, procedural, and political pressures in the tax-treaty relationship that implicate treaty negotiation, ratification, interpretation, and dispute resolution. Kill-switches also communicate a defensive tenor in the tax treaty relationships among many countries. This Article analyzes the new kill-switch provisions and concludes that their introduction in the U.S. Model reflects the steady deterioration of tax treaties from essentially diplomatic documents premised on the good faith of the parties to detailed contracts drafted in anticipation of the opposite.
Tagged as: scholarship Tax law treaties US
The OECD released the multilateral instrument (MLI) on tax, so (assuming that at least five countries ratify it), we have to revise the old rules for doing tax research. The MLI means that any given tax situation will be impacted by relevant statutes, relevant tax treaties, and the portions of the MLI that are in effect as to those treaties. So here they are, the revised rules for tax research:
Tagged as: international law MLI OECD research treaties
The OECD recently released what it calls a "public discussion draft" in connection with its work on the multilateral instrument (MLI), and seeks public input until June 30. As I explained in a post a few months ago, the MLI is be used to 'modify' all existing tax treaties in force among signatory countries to conform to BEPS standards and recommendations. However, the released document is not actually a discussion draft of the MLI--there are no terms to be reviewed. The drafting committee, which currently includes 96 members (OECD members and "BEPS Associates"), only met for the first time two weeks ago so this is decidedly not a draft of substantive provisions to be debated in the public discourse. No, that would be chaos and contrary to the plan:
"the draft text of the multilateral instrument is the subject of intergovernmental discussions in a confidential setting."Instead it is in effect a crowdsourced, and very carefully framed, issue-spotting exercise. The document consists of three pages: page one is the BEPS narrative (why the OECD undertook this project and what has happened so far). Page two describes what BEPS changes will be covered in the MLI once drafted. Page three lays out three "technical issues" the OECD faces in drafting the MLI, and finally gives the call for input. The discussion is very brief and in OECD-passive-speak so it's almost comical to summarize but here are the three issues, as I understand them:
- the MLI must be able to modify existing treaties, and this will be done with "compatibility clauses."
- the MLI will be broadly worded so will require commentary and maybe explanatory notes for consistent interpretation
- the MLI will be in French and English but will interpret thousands of treaties written in different languages.
Point 1 raises the issue that seems to me most difficult in terms of the transition to complete OECD domination of global tax policy: I am still not sure how the MLI is supposed to work on top of a network of individualized and distinct bilateral agreements among sovereign nations. The OECD says "If undertaken on a treaty-by-treaty basis, the sheer number of treaties in effect would make such a process very lengthy." Indeed it would but as a matter of law in many countries, revising an existing international agreement requires another international agreement that is ratified in the same manner as the original, which appears to require the signatories to come to a meeting of the minds as to the terms that govern their unique relationship. The OECD says that distinguished experts have carefully considered the public international law questions at hand. But I haven't seen any study and I don't quite understand how you get a coherent international tax law regime in anything like a "quick" process. The OECD's implied answer in point 1 only raises another question for me: what is a compatibility clause? Is this a well-understood mechanism in play in other areas of international law? Can I get a precedent somewhere to anticipate where we are going with this?
Further, is the MLI going to be a matchmaking exercise in practice? If country A agrees to revisions 1 through 6 as to countries B and C, but only revision 5 as to country D, and country B agrees to revisions 1-3 for countries A and D but only 5 and 6 for C, and countries C and D agree in principle but never ratify anything, then what, exactly, are the agreements between and among these countries?
I am also not sure what the agreement matrix looks like when there are multiple standards for several of the BEPS items. Notably the "prevent treaty shopping" minimum standard provides multiple choices for defending treaties against "abuse": a principal purpose test, a limitation on benefits provision, an anti-conduit provision, or some combination. May each of countries A, B, C, and D choose a different combination vis a vis each of the others? It is difficult to see convergence. At the panel I attended in Montreal a couple of weeks ago this was a topic of vigorous discussion. The more I think about this, the increasingly uncertain I become regarding how this is going to work out in practice.
Comments and input should be submitted by 30 June 2016 at the latest, and should be sent by email to email@example.com in Word format (in order to facilitate their distribution to government officials). Please note that all comments received will be made publicly available. ... Persons and organisations who submit comments on this document are invited to indicate whether they wish to speak in support of their comments at a public consultation meeting that is scheduled to be held in Paris at the OECD Conference Centre on 7 July 2016 beginning at 10.00 am.
Tagged as: BEPS international law OECD tax policy treaties
I posted previously on the new US Model, which was released in February of this year; I've now posted my article, co-written with McGill PhD student Alex Ezenagu, on the "kill switch" provisions in the new model. These provisions are found in the new articles and definitions involving special tax regimes and subsequent law changes, which would allow countries to switch on and off specified treaty benefits if their treaty partners get too aggressive in the ongoing race to the bottom on tax.
Here is the abstract:
The new US model income tax treaty contains an unusual addition: mechanisms for the parties to unilaterally override the negotiated treaty rates in specified circumstances. Previewed last year in proposed form—a first for Treasury—these new mechanisms work as kill-switches, partially terminating the treaty as to one or both treaty partners. The idea is to forestall a more problematic outcome, such as an enduring breach of one of the parties’ expectations, or the opposite, a complete termination of all the treaty terms in the face of such a breach. Yet embedding a kill-switch in a treaty creates distinct legal, procedural, and political pressures in the tax-treaty relationship that implicate treaty negotiation, ratification, interpretation, and dispute resolution. Kill-switches also communicate a defensive tenor in the tax treaty relationships among many countries. This Article analyzes the new kill-switch provisions and concludes that their introduction in the U.S. Model reflects the steady deterioration of tax treaties from essentially diplomatic documents premised on the good faith of the parties to detailed contracts drafted in anticipation of the opposite.It has long been assumed that tax treaties are uncontroversially technical agreements that no one outside of tax circles cares about or pays attention to--including, it seems, all too many lawmakers tasked with adopting these agreements into law. But with the US Treasury and the EU competition commissioner trading barbs over the fence about what seems right or fair when it comes to global tax competition and coordination, this assumption might be changing. The consensus built up over decades by OECD nations is under stress as the pressure for coherence in the international tax realm increases. Treasury released these provisions in draft from last fall, expressly in order to influence the OECD's work on BEPS. Now that the provisions are in the model, it remains to be seen how they will play out as BEPS, currently at a mid-cycle of norm making, moves from the articulation of principles to the implementation phase. This article doesn't provide answers or predictions about the future but it examines one aspect of the ongoing contestation and tries to situate it in historical and contemporary terms.
Tagged as: institutions international law offshore scholarship tax policy treaties US
I am occasionally asked for a list of the things I've written or presented about FATCA and citizenship-based taxation, and decided I may as well post it here. I have a newer article on the adoption of the IGA in Canada, will post that soon and add to this list.
- Uncle Sam Wants...Who? A Global Perspective on Citizenship Taxation (explaining the expansive US tax jurisdiction and its consequences on citizens abroad)
- Understanding the Accidental American—Tina’s Story (describing the “gotcha” of CBT and FATCA)
- Paperwork and Punishment: It’s Time to Fix FBAR (explaining FBAR, its mission creep, and its effects on USPersons living abroad)
- Taxpayer Rights, On and Off-shore (exploring tax complexity and compliance for nonresident US Persons)
- Regulating Tax Preparers: A Global Problem for the IRS (exploring the problem of regulating the tax compliance industry outside the US territory)
- Could a Same Country Exception Help Fix FATCA and FBAR? (calling for exemption of local accounts held by nonresident US Persons from FATCA reporting; third item in a compilation; scroll to p. 7 of the document).
- Two expert reports in connection with the Hillis v. Attorney General of Canada litigation.
- Submission to Finance Department on Implementation of FATCA in Canada (discussing legal issues with proposed adoption of IGA)
- What You Give And What You Get: Reciprocity under a Model 1 IGA (explaining asymmetrical account disclosure and sharing requirements)
- Tax Cooperation: Past, Present and Future (explaining why FATCA is a tax treaty override & the IGAs do not “cure” it)
- The Dubious Legal Nature of IGAs and Why it Matters (arguing that the IGAs violate the US constitution regarding the treaty power, and thereby implicate public international law as to the treaties they ostensibly interpret)
- Interpretation or Override: Introducing the Hybrid Tax Agreement (further analysis on the public international law problems created by the IGAs)
- Putting the Reign Back in Sovereign: Advice to the Second Obama Administration (analyzing FATCA’s unilateral nature and its implications for international tax policy)
- Interview with Tax Analysts (November 2015)
- Podcast with the McGill Law Journal (February 2014)
- Testimony to Finance Committee (March 2014)
- Interview with CBC News (January 2014)
- Interview with CBC Radio "All in a Day" (July 2014)
- Explaining the basic structure and issues surrounding FATCA (2012-prior to the IGA era)
Tagged as: citizenship FATCA scholarship tax policy
Céline Azémar and Dhammika Dharmapala recently posted "Tax Sparing, FDI, and Foreign Aid: Evidence from Territorial Tax Reforms," of interest. Tax sparing refers to the intentional exemption of income from tax by two countries working cooperatively. The idea of tax sparing is to ensure that tax incentives granted to investors by source countries are not “cancelled out” by income taxation in the residence country. This is typically accomplished by ensuring that the residence country gives credit for the amount of tax that would have normally been paid to the source country, instead of a reduced (or eliminated) amount that was actually paid according to an incentive scheme. In other words, tax sparing is treaty-based double nontaxation.
Here is an example of tax sparing from Article 21 of the 1993 tax treaty between Indonesia and the United Kingdom,:
For the purposes of paragraph (1) of this Article, the term “Indonesian tax payable” shall be deemed to include any amount which would have been payable as Indonesian tax for any year but for an exemption or reduction of tax granted for the year….”In this type of provision, an amount of tax would be credited by the taxpayer’s home country (presumably the UK) in accordance with the standard double tax relief provisions of the treaty even though not ultimately paid to the source country (presumably Indonesia).
If the residence country does not tax foreign income (i.e., is an exemption or territorial system as the UK is now), tax sparing would be pointless since the incentive in the source country accomplishes the desired result of nontaxation unilaterally. Yet this paper finds a surprising result: tax sparing increases FDI even after a treaty partner switches to a territorial system.
Here is the abstract:
The governments of many developing countries seek to attract inbound foreign direct investment (FDI) through the use of tax incentives for multinational corporations (MNCs). The effectiveness of these tax incentives depends crucially on MNCs' residence country tax regime, especially where the residence country imposes worldwide taxation on foreign income. Tax sparing provisions are included in many bilateral tax treaties to prevent host country tax incentives being nullified by residence country taxation.
We analyse the impact of tax sparing provisions using panel data on bilateral FDI stocks from 23 OECD countries in 113 developing and transition economies over the period 2002-2012, coding tax sparing provisions in all bilateral tax treaties among these countries. We find that tax sparing agreements are associated with 30 percent to 123 percent higher FDI. The estimated effect is concentrated in the year that tax sparing comes into force and the subsequent years, with no effects in prior years, and is thus consistent with a causal interpretation.
Four countries - Norway in 2004, and the U.K., Japan, and New Zealand in 2009 - enacted tax reforms that moved them from worldwide to territorial taxation, potentially changing the value of their preexisting tax sparing agreements. However, there is no detectable effect of these reforms on bilateral FDI in tax sparing countries, relative to nonsparing countries.
These results are consistent with tax sparing being an important determinant of FDI in developing countries for MNCs from both worldwide and territorial home countries. We also find that these territorial reforms are associated with increases in certain forms of bilateral foreign aid from residence countries to sparing countries, relative to nonsparing countries. This suggests that tax sparing and foreign aid may function as substitutes.The link to foreign aid is intriguing: it looks like compensation for the loss of a benefit. The OECD's Action Plans to counter BEPS are specifically designed to eliminate benefits like those created by tax sparing provisions. Is BEPS the end of tax sparing? If so, will BEPS also result in increased foreign aid?
Tagged as: BEPS scholarship tax policy treaties
As observers of global tax policy know, international tax issues are dealt with in bilateral treaties that more or less adhere to a 'model' tax treaty developed and periodically updated by the OECD (provisions in a rival UN Model are occasionally invoked, and the US has its own model with its own distinctions and idiosyncrasies). There are those who have long lamented the problem of having thousands of bilateral agreements that can't be easily or quickly updated when the OECD revises the model (thus curbing the impact of OECD soft law).
As part of the base erosion and profit shifting (BEPS) initiative, the OECD is currently developing a
"Multilateral instrument on tax treaty measures to tackle BEPS" which would be used to 'modify' all existing tax treaties in force among signatory countries. The OECD says this mechanism (which it calls an 'innovative approach') 'would preserve the bilateral nature of tax treaties' even as it modified all existing bilateral treaties 'in a synchronized way'. The OECD says there are "limited precedents" for modifying bilateral treaties with a multilateral instrument.
But are there really any precedents at all? I couldn't think of any off-hand. A quick check with a few international law colleagues yielded few comparators. Tim Meyer suggested the EU harmonizing efforts on Bilateral Investment Treaties (BITs) as a candidate, albeit noting that this does not contemplate directly overriding existing BITs but requires EU members to change their bilateral arrangements to conform with EU investment policy.
Tim also made the interesting observation that"treaties that reference customary international law standards, such as BITs’ reference to the minimum standard of treatment" could be overridden in a somewhat similar fashion. He explained that "[i]f custom changed, such as through the promulgation of soft law documents or multilateral treaties, it would change the BITs that incorporate the customary standard. That isn’t exactly the same thing [as the new OECD multilateral instrument], but similar."
The OECD's work in developing "global consensus" has in the past led some to describe OECD standards as "soft law" and others to suggest that the OECD may be understood to articulate customary international tax law; moreover the OECD has itself now taken to describing its model as soft law (including in its 2014 report on the multilateral instrument). I have urged caution in defining OECD proclamations as soft law or customary law given the OECD's exclusive membership of mainly rich countries, which excludes all of the BRICs and most of the rest of the world, as I think the nomenclature lends an imprimatur of legitimacy to OECD proclamations that may not be deserved. But it seems clear that the BEPS action items, and the new global forum to "monitor compliance" with them, are intended to overcome the exclusivity problem while endowing OECD norms with ever-greater law-like effect (without offending the unicorn that is "tax sovereignty").
It seems likely to me that a multilateral agreement that modifies existing tax treaties is actually intended to ultimately replace those treaties, making small and incremental modifications until the underlying bilateral treaties become superfluous or extinct. Accordingly I view the OECD's multilateral 'modification' function to be an exercise in creeping harmonization as well as "ossification" (or maybe transformation) of soft law into hard law.
Adding together the other elements of BEPS, including the new global forum to compel national compliance with 'minimum standards' as they develop, I recently suggested that the OECD's tax folks are giving birth to a new global tax order complete with rules, audits, and reform processes. This is perhaps not the order envisioned by those who have in the past called for global tax coordination in a supranational body for the sake of pursuing global tax justice. If the OECD-based regime is not fully supranational yet, it is close, and it looks increasingly inevitable once it sets a multilateral agreement in place.
There are many fascinating threads of soft law and public international law are at work in these developments. I recently came across an article by Jung-Hong Kim on the topic, entitled A New Age of Multilateralism in International Taxation?, abstract:
With the OECD/G20 BEPS project, the current international tax landscape is facing challenges and changes unprecedented for the past several decades. This paper looks at the development of bilateralism and multilateralism in the current international tax regime, takes stock of the BEPS works and analyzes the proposed Multilateral Instrument. Then, the paper discusses the emerging multilateral tax order in international taxation.
Historically, bilateralism has been the constant trend of tax treaties, and later multilateral tax treaties have emerged in some regional areas. There being some deficiencies with bilateral treaties such as dilapidation, delay in entry into force and vulnerability to treaty shopping, the experience of multilateral tax treaties can help build a foundation for future development of a multilateral tax treaty to complement the bilateral tax treaty network.
With a caveat that BEPS output is fluid at this stage, drawing on the various examples of existing non-tax multilateral treaties, the Multilateral Instrument will be a desirable and feasible tool to reflect the necessary changes resulting from BEPS project. For Korea whose tax treaties need a systematic upgrade after a noticeable growth in quantity, the negotiation on the Multilateral Instrument of the BEPS project will be a great opportunity to revisit the existing bilateral tax treaties and to make appropriate amendments with bilateral treaty partners in multilateral format.
Beyond BEPS, supposing that the work on the Multilateral Instrument results in a multilateral convention, the inevitable question is the emergence of a multilateral tax order. In terms of feasibility of such a multilateral tax order, there are both positive and negative sides. The positive side is that the relative success of Global Forum on Tax Transparency can be a guidance on the post-BEPS multilateral tax order. On the other hand, the phenomenon of diminishing multilateral trade regime and bilateral investment treaty regime seem to be a negative evidence. Another point to consider is the appropriate forum to manage the multilateral tax order. For this, there are two competing organizations, i.e., the OECD CFA and UN tax committee, each of which having some limit to be developed into an intergovernmental forum.
After all, the essential question will be how those major players such as the U.S., EU, China, India etc. could build a consensus by compromising on the institutional and substantive aspects of the multilateral tax order. For now, for the emerging multilateral tax order to proceed on a sound basis, the work of the BEPS project should bear substantive and meaningful fruits.
This paper introduces a new dataset that codes the content of 519 tax treaties signed by low- and lower-middle-income countries in Africa and Asia. Often called Double Taxation Agreements, bilateral tax treaties divide up the right to tax cross-border economic activity between their two signatories. When one of the signatories is a developing country that is predominantly a recipient of foreign investment, the effect of the tax treaty is to impose constraints on its ability to tax inward investors, ostensibly to encourage more investment.
The merits of tax treaties for developing countries have been challenged in critical legal literature for decades, and studies of whether or not they attract new investment into developing countries give contradictory and inconclusive results. These studies have rarely disaggregated the elements of tax treaties to determine which may be most pertinent to any investment-promoting effect. Meanwhile, as developing countries continue to negotiate, renegotiate, review and terminate tax treaties, comparative data on negotiating histories and outcomes is not easily obtained.
The new dataset fills both these gaps. Using it, this paper demonstrates how tax treaties are changing over time. The restrictions they impose on the rate of withholding tax developing countries can levy on cross-border payments have intensified since 1970. In contrast, the permanent establishment threshold, which specifies when a foreign company’s profits become taxable in a developing country, has been falling, giving developing countries more opportunity to tax foreign investors. The picture with respect to capital gains tax and other provisions is mixed. As a group, OECD countries appear to be moving towards treaties with developing countries that impose more restrictions on the latter’s taxing rights, while non- OECD countries appear to be allowing developing countries to retain more taxing rights than in the past. These overall trends, however, mask some surprising differences between the positions of individual industrialised and emerging economies. These findings pose more questions than they answer, and it is hoped that this paper and the dataset it accompanies will stimulate new research on tax treaties.Nadia Harrison and Lovisa Moller produced a report based on the dataset, entitled Mistreated: The tax treaties that are depriving the world’s poorest countries of vital revenue. Here is the abstract:
Women and girls in the world’s poorest countries need good schools and hospitals. To pay for this, these countries urgently need more tax revenue. A little-known mechanism by which countries lose corporate tax revenue is a global network of binding tax treaties between countries. This report marks the release of the ActionAid tax treaties dataset – original research that makes these tax deals made with some of the world’s poorest countries easily comparable and open to public scrutiny.
ActionAid also produced an interactive map showing overall treaty effects by country.
Tagged as: scholarship Tax law tax policy treaties
WASHINGTON - Today, the Treasury Department issued a newly revised U.S. Model Income Tax Convention (the “2016 Model”), which is the baseline text the Treasury Department uses when it negotiates tax treaties. The U.S. Model Income Tax Convention was last updated in 2006.
“The 2016 Model is the result of a concerted effort by the Treasury Department to further our policy commitment to provide relief from double taxation and ensure certainty and stability in the tax treatment of treaty residents,” said Deputy Assistant Secretary for International Tax Affairs Robert B. Stack. “The 2016 Model includes a number of provisions intended to eliminate double taxation without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance,” he added.
Many of the 2016 Model updates reflect technical improvements developed in the context of bilateral tax treaty negotiations and do not represent substantive changes to the prior model. The 2016 Model also includes a number of new provisions intended to more effectively implement the Treasury Department’s longstanding policy that tax treaties should eliminate double taxation without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance. For example, the 2016 Model does not reduce withholding taxes on payments of highly mobile income—income that taxpayers can easily shift around the globe through deductible payments such as royalties and interest—that are made to related persons that enjoy low or no taxation with respect to that income under a preferential tax regime. In addition, a new article obligates the treaty partners to consult with a view to amending the treaty as necessary when changes in the domestic law of a treaty partner draw into question the treaty’s original balance of negotiated benefits and the need for the treaty to reduce double taxation. The 2016 Model also includes measures to reduce the tax benefits of corporate inversions. Specifically, it denies reduced withholding taxes on U.S. source payments made by companies that engage in inversions to related foreign persons.
The Treasury Department has been a strong proponent of facilitating the resolution of disputes between tax authorities regarding the application of tax treaties. Accordingly, the 2016 Model contains rules requiring that such disputes be resolved through mandatory binding arbitration. The “last best offer” approach to arbitration in the 2016 Model is substantively the same as the arbitration provision in four U.S. tax treaties in force and three U.S. tax treaties that are awaiting the advice and consent of the Senate.
The 2016 Model reflects comments that the Treasury Department received in response to the proposed model treaty provisions it released on May 20, 2015. The Treasury Department carefully considered all the comments it received and made a number of modifications to the proposed model treaty provisions in response to those comments.Highlights mine. There is much to be discussed in this of course and I will make no attempt to be comprehensive here, but I made a quick comparison doc that might be useful; download here. Just at first glance: can you spot the BEPS? Action 6 is plainly at work, and probably others.
The Treasury Department is preparing a detailed technical explanation of the 2016 Model, which it plans to release this spring. The preamble to the 2016 Model invites comments regarding certain situations that should be addressed in the technical explanation for the so-called “active trade or business” test of Article 22 (Limitation on Benefits). See the preamble page 5. The deadline for public comments on this subject is April 18, 2016.
My current interest is in what I am calling the new "kill-switch" provisions, the special tax regime (art 3, 11, 12, 21, 22) and subsequent law changes (art 28) provisions alluded to in the bold highlighted text above. I'm working on a paper on this subject and will have more analysis soon.
Tagged as: international law soft law tax policy treaties US
Leopoldo Parada has recently posted on SSRN an article published last summer in the World Tax Journal, entitled Intergovernmental Agreements and the Implementation of FATCA in Europe, of interest. Here is the abstract:
FATCA is a US domestic tax policy that requires Foreign Financial Institutions around the world to provide the IRS information regarding their US clients. Recognizing this extraterritorial characteristic and the troubles associated with it, the US Treasury Department developed the Intergovernmental Agreements (IGAs), which have served the double purpose of coordinating FATCA at an international level and influencing the new international standards on automatic exchange of information. Nevertheless, the IGAs are instruments that still need to be improved, at least in order to guarantee their successful implementation in Europe. The first part of this article explores the legal nature and the characteristic of the IGAs, concluding that they possess an asymmetriclegal nature that can lead to conflicts of interpretation. Likewise, it concludes that their contribution toward international transparency is incompatible with the existence of other instruments in Europe that seek the opposite goal of protecting bank secrecy, although it recognizes the importance of the most recent achievements at the European level in order to ensure a coherent and consistent system of automatic exchange of information. The second part of this article analyses three grey areas in the IGAs implementation process in Europe (i.e., “quoted Eurobonds” in the United Kingdom; group requests under the Switzerland-United States IGA, and the “coordination timing” provision of the IGA Model 1A), concluding that there is still work to be done in order for the IGAs to grant an acceptable level of reciprocity in practice.I was not aware of this article when I wrote on a column last fall on this very same topic, in which I called the IGAs "Hybrid Tax Agreements" and pointed out the mess created by their unprecedented legal form as treaties to the rest of the world but administrative guidance in the United States. Parada's article goes further in the analysis and lays out a number of enduring difficulties. It seems to me that governments are simply ignoring these difficult issues as inconvenient barriers to desired outcomes and courts will face the same temptation. But I don't think these issues go away with time and gradual acceptance of FATCA as an institution. Instead, I think the issue will cause systemic problems going forward, both in terms of raising endless conflicts of law, and in terms of the precedent set for international tax relations by the failure of states to challenge US exceptionalism even as it tramples on law and legal process throughout the world.