With the return of Canada's Parliament to business this week, debate theoretically should take place on Bill C-82, An Act to implement a multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting, a.k.a. the "Multilateral Instrument in Respect of Tax Conventions Act" (the official short title). But we can call it the BEPS bill since its job is to implement a set of consensus positions the OECD developed to eliminate "Base Erosion and Profit Shifting" by multinational taxpayers.
This BEPS Bill implements the OECD's MLI to Prevent BEPS, which is a multilateral treaty that amends existing bilateral tax treaties. The rationale is that countries were engaging in or at least facilitating BEPS, and they were often doing so through tax treaties, so a blanket change to a few thousand of these treaties was needed to prevent ongoing tax avoidance.
Given that the BEPS bill adopts one treaty to rule them all, Parliament might be expected to undertake careful scrutiny of its terms, but these expectations are not likely to be met. A study I completed with help from a very adept graduate student in 2016, entitled “While Parliament Sleeps: Tax Treaty Practice in Canada,” (published in the Journal of Parliamentary and Political Law / Revue de droit parlementaire et politique 10 (1) : 15-38, March / mars 2016 and available in draft form here), found that over a fifteen year period, Parliament has adopted legislation implementing 32 international tax agreements without a single standing vote occurring in the House of Commons at any point in the legislative process.
These 32 agreements collectively form over 750 pages of binding law in Canada, none of which was considered for more than two sittings at any stage of consideration in either the Senate or House of Commons.
In Canada, tax-treaty implementing legislation is generally introduced in the Senate, studied very little there, and then sent to the House of Commons where it receives even less attention. Although tax scholars focus, rightfully, on scrutinizing the substance of tax treaties, we should not be lulled into ignoring the process by which Parliament discharges its role in legislating tax treaty implementation. To that end, some of the debate in Parliament is downright disappointing.
For example, consider the most recent exercise (written after my study), when the Senate was seized with Bill S-4, whose official summary reads:
This enactment implements a convention between the Government of Canada and the Government of the State of Israel for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and an arrangement between the Canadian Trade Office in Taipei and the Taipei Economic and Cultural Office in Canada for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income. It also amends the Canada–Hong Kong Tax Agreement Act, 2013 to add to it, for greater certainty, an interpretation provision.In a speech of only a few minutes on the bill, the Legislative Deputy of the Government Representative in the Senate stated:
It is urgent that we move forward with the study of this bill because if we want the agreements on double taxation to go into effect in 2017, the bill must receive Royal Assent by the end of 2016. Therefore, I invite all honourable Senators who wish to speak to this bill to do so as quickly as possible so that the bill may be referred to a committee as soon as possible.In total, the entire House Finance Committee's study took less than 15 minutes. The third reading debate in the Senate lasted less than 10 minutes and, after calling the bill a "no-brainer," a "marvellous bill," and "a continuity-of-government bill" that "does wonderful things for Canadian industry and consumers alike," the Senators continued with this exchange:
Senator Day: Should I tell anybody what this bill is about?Then followed a dubiously notable comment by Senator Plett that "I'd like to add my voice and simply say that this, again, is clear evidence that occasionally a good biscuit can be found in a garbage can."
Some Hon. Senators: No.
The idea that Parliament should rush to meet the government’s preferred timetable in what the Senate characterizes as a "garbage can" of a bill (or of a government--I am not sure which) is highly problematic. If it takes longer to scrutinize a bill, so be it. The government – for its part – didn’t leave Parliament much time in this case, having only introduced S-4 in the Senate on November 1st, 2016. By the time the Legislative Deputy of the Government Representative in the Senate got to make her speech on November 24th, the clock was ticking quickly toward the MPs' and Senators' winter break.
I single out this debate not only for the unprincipled concession to expedited timing, but particularly for the exchange that followed. A Senator asked the Legislative Deputy of the Government Representative in the Senate “In your opinion, does the bill before us pertain to our participation in the WTO?” The response: “I do not know much about this bill. However, I do know that it is important, that it is urgent that we move it along, and that it has significant consequences.”
Putting aside the carefree decision to speak to a bill one “does not know much about” and the apparent confusion about how the bill relates to the WTO (did the Senator mistake a tax treaty for a trade agreement?), it would be hard to characterize the limited early Senate Chamber debate as well-informed or thoughtful in any way. On the House side, the bill was fast-tracked – a motion passed by unanimous consent stipulated that “when the House begins debate on the third reading motion of the Bill, a Member from each recognized party, as well as a Member from the Bloc Québécois, may speak for not more than five minutes, with no question and comment period, after which the Bill shall be deemed read a third time and passed."
As such, in its last debate, the bill received less than 20 minutes of attention in the House with no questions –that is, each party spoke but there was no dialogue in substance. The bill received Royal Assent on December 15th, 2016.
This brings me back to the BEPS Bill, which actually bucks the trend by being introduced in the House of Commons instead of the Senate. This is important because even though Senate debates on tax treaty implementing legislation are limited (as evidenced above), the Senate is still the body that generally studies these matters and has nominally built up expertise. Because the general trend in Parliament is that the Chamber that receives a tax bill second is the one that studies it less, one is left to hope without confidence that the House will undertake its due diligence.
There is cause for concern with C-82. Unlike the other tax treaty implementing bills I studied, this was preceded by a ways and means motion that provided the text of the bill in advance. In other words, the Minister of Finance tabled a notice on May 28th that contained essentially what would become C-82. But, rather than debate the Notice, the House on June 19th deemed that motion agreed to and further deemed the BEPS bill formally introduced.
Without venturing too far into the procedural weeds, it is perhaps sufficient to observe that there could have been a debate on that ways and means motion. Instead, the decision in June deemed this motion adopted ‘on division’ – that is, dissent is indicated for the record but we don’t know who disagreed or on what basis because there was no actual debate on the record.
This leads me to wonder whether we’ll see an actual debate occur on the merits of C-82 if even its introduction was fast-tracked through deeming. I doubt it. After all, MPs (and Senators alike) often find tax matters confusing and technical. Maybe in this case especially, the whole things seems like a foregone conclusion since we are talking about an OECD initiative in which Canada has been involved over many years. Moreover, Canada's undertakings in the MLI are modest to say the least. Even so, that doesn’t mean these bills don’t deserve careful study since it is agreed that certain tax arrangements erode Canada’s tax base (cf: the recently decided Alta Energy case). It is much harder (and more costly) to re-negotiate and re-legislate (if need be) a treaty than to get things right the first time (for a discussion, see See Charlie Feldman, “Parliamentary Practice and Treaties” (2015) 9 J. Parliamentary & Pol. L. 585). Adopt in haste, repent at leisure ought to be a mantra for tax treaties.
Unfortunately, Canada's Parliament has limited involvement in the treaty process and only so much influence over treaty-implementing legislation. An additional concern is that there is only so much time left in the legislative calendar with an election a year away. The government has important pieces of legislation moving – including implementing the TPP, adopting the first-ever national legislation on accessibility, and an election law overhaul that the government has already tried to fast-track. Moreover, of the 366 commitments the Trudeau government has made, the government’s own analysis indicates that just 96 have thus far been met. Many others also
Moreover, Parliament already has many bills to consider which have yet to complete the legislative process. Parliament's Legislation-at-a-glance page shows just how much each House has before it already, including criminal justice and family law reforms, firearms regulation, and military justice changes remaining in the House, and many big legislative matters before the Senate including bills on sustainable development, access to information, and fisheries reform. While the BEPS bill could be a step ahead of bills yet to come, it is easy to imagine easier-to-debate matters (such as labour reforms) getting much more debate in the House and, if and when it does get to the Senate, that body will be even more pressed for time given all the other items from the House being added to its plate.
Tagged as: BEPS Canada MLI scholarship
I'm very happy to announce the 2018 McGill Tax Policy Colloquium, which will take an interdisciplinary approach to tax policy analysis. The colloquium is made possible by a grant from Spiegel Sohmer. The land on which we gather is the traditional territory of the Kanien’keha:ka (Mohawk), a place which has long served as a site of meeting and exchange amongst nations. The distinguished speakers who will contribute to this year’s colloquium include:
- Oct 22: Sam Singer, Assistant Professor, Faculty of Law, Thompson Rivers University. Prof. Singer's research focuses on tax dispute resolution, the policy rationales underlying tax measures, and the regulation of charities and charitable giving.
- Nov 12: Lindsay Tedds, Scientific Director of Fiscal and Economic Policy and Associate Professor, Department of Economics, University of Calgary. Dr. Tedds’ research focuses on tax policy and she has done extensive work with the Government of Canada in the areas of public economics and policy implementation.
- Nov 19: Laurens van Apeldoorn, Assistant Professor of Philosophy, Leiden University. Prof. Van Apeldoorn’s research examines the nature and prospects of the sovereign state, with a special focus on the normative aspects of international taxation rules in relation to the global justice.
- Nov 26: Frances Woolley, Full Professor, Department of Economics, Carleton University and President, Canadian Economics Association. Prof. Wooley’s expertise and research focus on economics of the family, gender and intra-house inequality, taxation and benefits for and of families, and feminist economics.
- Dec 3: Ruth Mason, Full Professor, School of Law, University of Virginia. Prof. Mason’s research focuses on international, comparative, and state taxation. Her work on tax non-discrimination laws’ effect on cross-border commerce has been cited extensively, including by the U.S. Supreme Court.
Tagged as: colloquium McGill scholarship tax policy
A full house expected for today's event, but it's not too late to join us if you're in Montreal!
Tagged as: conference McGill tax technology
The latest edition of the Canadian Tax Journal [gated] has a nice article by Daria Crisan and Kenneth J McKenzie that documents Canada's relatively generous tax subsidies for R&D spending, yet relatively underwhelming investment by large corporations, over the period 1981-2016. The article briefly summarizes the chronology of federal R&D programs and gives an overview of provincial policies. It finds that while Canada's spending on R&D is high relative to peer countries, the amount of R&D being undertaken relative to GDP consistently underperforms these peers and continues to decline. The bulk of the article is a presentation of data showing these trends. The conclusion is intriguing, positing three possible explanations for the puzzle of high spending but low investment:
The first is the rather obvious point that it may well be that Canada’s r&d performance would have been even worse in the absence of the subsidies. Of course we don’t observe this counterfactual, but it is consistent with the above observations.
The second comment is more speculative ... Canada relies much more than
other countries on the type of “indirect” tax subsidies that we consider here, which
are generally available to all companies, as opposed to “direct” subsidies, such as
targeted grants. It could be that the nature of r&d subsidies in Canada—the reliance
on indirect tax incentives rather than direct grants—is the problem. ...
This leads to our third, and final, observation. To our knowledge, there is in factThe authors conclude that their own ongoing research involves an empirical investigation of the effectiveness of direct and indirect incentives in promoting business r&d investment in Canadian
very little rigorous empirical evidence regarding the efficacy of direct versus
indirect government subsidies for r&d. Moving in this direction may well be the
right thing to do, but this seems to us to be based more on faith, and perhaps some
frustration with the Canadian “r&d policy puzzle,” than on solid empirical evidence.
Our hope is that the data presented here provide, at least in part, the basis
for additional research in this regard in a Canadian context.
I don't know whether the type of spending matters in terms of investment incentives. I would think that it matters what the spending is related to. For example, does spending a lot of money on companies to patent things actually lead to "innovation," whatever that word means? What I have read to date suggests not. There seems to be a strong connection of innovation spending toward traditional legal rights in copyright and patent, but these rights seem decreasingly relevant to many contemporary innovative business models.
Despite a general lack of empirical evidence that taxpayer dollars are well spent on R&D subsidies, governments everywhere spend and spend and spend to spur innovation. As a result empirical studies that shed light on the efficacy of this spending will always be welcome. If the studies show that traditional modes of subsidizing R&D do not provide the intended results, the question is whether governments themselves will be willing and able to innovate in terms of how they support innovation. From the chronology presented herein and my own research on the topic, the prospects seem dim. I look forward to seeing more of this important research.
Tagged as: Canada innovation R&D scholarship subsidies
Today, Ajay Mehrotra, Northwestern University and the American Bar Foundation, will present "The VAT Laggard: A Comparative History of U.S. Resistance to the Value-Added Tax, as part of the annual Spiegel Sohmer Tax Policy Colloquium at McGill Law. This is a fascinating topic as the United States considers major tax reform without explicitly embracing VAT as much of the rest of the world has done. Prof. Mehrotra's new project will explore the U.S. position in light of how Canada, Japan, and other jurisdictions were able to overcome historical resistance to a national VAT by adopting a Goods and Services Tax (GST).
The tax policy colloquium at McGill is supported by a grant made by the law firm Spiegel Sohmer, Inc., for the purpose of fostering an academic community in which learning and scholarship may flourish. The land on which we gather is the traditional territory of the Kanien’keha:ka (Mohawk), a place which has long served as a site of meeting and exchange amongst nations.
Tagged as: colloquium history McGill tax policy
2017 marks the centennial of Canada's federal income tax, so it is appropriate that this year’s tax policy colloquium at McGill Law will focus on the theme of 100 Years of Tax Law in Canada. The colloquium is made possible by a grant from Spiegel Sohmer. The land on which we gather is the traditional territory of the Kanien’keha:ka (Mohawk), a place which has long served as a site of meeting and exchange amongst nations.
The distinguished speakers who will contribute to this year’s colloquium include:
- Kim Brooks, Professor of Law, Dalhousie University. Former Dean, Dalhousie Law, Prof. Brooks is an internationally recognized tax scholar. On October 2, she will present a keynote and take part in a half-day symposium on the history of tax law in Canada.
- Amir Pichhadze, Lecturer, Deakin University, Australia. Prof. Pichhadze is an emerging scholar who studied comparative tax law in the U.S. and U.K. and completed a Judicial Clerkship at the Tax Court of Canada. On October 23, he will present work in progress on the development of value added taxes in Canada, the U.K., and the U.S.
- Shirley Tillotson, Professor of History, Dalhousie University. Prof. Tillotson is a recognized expert in Canadian tax law history, and has written multiple articles and books on the subject. On November 6, Professor Tillotson will present on her new book entitled “Give and Take: The Citizen-Taxpayer and the Rise of Canadian Democracy,” and her upcoming research plans.
- Ajay Mehrotra, Executive Director and Research Professor, American Bar Foundation, and Professor of Law, Northwestern University. Professor Mehrotra is a leading voice on tax history in North America who has studied various aspects of interrelationships and influences in Canadian and U.S. tax law history. On November 20, he will present a work in progress on intersecting developments in Canadian and U.S. tax law history.
- Ashley Stacey, Associate, Olthuis, Kleer, Townshend. Ms. Stacey is a junior associate whose practice is focused on advising First Nations and First Nation-owned businesses on corporate and commercial transactions and who blogs at oktlaw.com on tax and governance issues relevant to First Nations communities. On December 4, Ms. Stacey will present her work in progress on historical and contemporary intersections of taxation, sovereignty, and autonomy of First Nations in Canada.
The colloquium is open to all.
Tagged as: colloquium McGill scholarship tax policy
Kluwer law has recently published Tax Sovereignty in the BEPS Era, a collection of contributions I co-edited with Sergio Rocha, in which we and a slate of authors from a range of countries explore the impact of the BEPS initiative on "tax sovereignty"--which I take to mean the autonomy that nations seek to exercise over tax policy. Here is the description:
Tax Sovereignty in the BEPS Era focuses on how national tax sovereignty has been impacted by recent developments in international taxation, notably following the OECD/G-20 Base Erosion and Profit Shifting (BEPS) Project. The power of a country to freely design its tax system is generally understood to be an integral feature of sovereignty. However, as an inevitable result of globalization and income mobility, one country’s exercise of tax sovereignty often overlaps, interferes with or even impedes that of another. In this collection of chapters, internationally respected practitioners and academics reveal how the OECD’s BEPS initiative, although a major step in the right direction, is insufficient in resolving the tax sovereignty paradox. Each contribution deals with different facets of a single topic: How tax sovereignty is shaped in a post-BEPS world.And here is the table of contents:
Part I The Essential Paradox of Tax SovereigntyAnd finally, here is a brief description:
- CH 1: BEPS and the Power to Tax, Allison Christians
- CH 2: Tax Sovereignty and Digital Economy in Post-BEPS Times, Ramon Tomazela Santos & Sergio André Rocha
- CH 3: Justification and Implementation of the International Allocation of Taxing Rights: Can We Take One Thing at a Time?, Luís Eduardo Schoueri & Ricardo André Galendi Júnior
- CH 4: An Essay on BEPS, Sovereignty, and Taxation, Yariv Brauner
Part II Challenge to the Foundational Principles of Source and Residence
- CH 5: Evaluating BEPS, Reuven S. Avi-Yonah & Haiyan Xu
- CH 6: Jurisdictional Excesses in BEPS’ Times: National Appropriation of an Enhanced Global Tax Basis, Guillermo O. Teijeiro
- CH 7: Taxing the Consumption of Digital Goods, Aleksandra Bal
Part III Acceptance and Implementation of Consensus by Differently-Situated States
- CH 8: The Birth of a New International Tax Framework and the Role of Developing Countries, Natalia Quiñones
- CH 9: The Other Side of BEPS: “Imperial Taxation” and “International Tax Imperialism”, Sergio André Rocha
- CH 10: Country-by-Country Over-Reporting? National Sovereignty, International Tax Transparency, and the Inclusive Framework on BEPS, Romero J.S. Tavares
- CH 11; How Are We Doing with BEPS Recommendations in the EU?, Tomas Balco & Xeniya Yeroshenko
- CH 12: U.S. Tax Sovereignty and the BEPS Project, Tracy A. Kaye
The book unfolds in three parts. The first, The Essential Paradox of Tax Sovereignty, features four chapters.
- In chapter 1, Christians introduces the topic by demonstrating how BEPS arose from the paradox of tax sovereignty and analyzing why multilateral cooperation and soft law consensus became the preferred solutions to a loss of autonomy over national tax policy. The chapter concludes that without meaningful multilateralism in the development of global tax norms, the paradox of tax sovereignty will necessarily continue and worsen, preventing resolution of identified problems for the foreseeable future.
- Tomazela &; Rocha pick up this thread in chapter 2, where they demonstrate that BEPS addresses the symptoms, but not the problems, of the sovereignty paradox. In their view, the central defining problem of this paradox is an ill-defined jurisdiction concept. The chapter demonstrates why tax policymakers need to change the conventional wisdom on sovereignty in order to incorporate new nexus connections due to the changing nature of trade and commerce.
- In chapter 3, Schoueri & Galendi further the inquiry by providing a detailed analysis of the interaction of contemporary cooperation efforts with the sovereignty of states in light of historical claims in economic allegiance, economic neutrality and now cooperation against abusive behaviour.
- Brauner rounds out this first part in chapter 4, which establishes the evolution of the concept of tax sovereignty. The chapter proposes an instrumental role for sovereignty in the process of improving cooperation and coordination of tax policies among productive (non-tax haven) countries, to balance claims and serve as a safeguard against political (in this case international) chaos. Brauner concludes that such a change to the business of international tax law would ensure at least an opportunity for all participants to succeed on their own terms.
Part Two of the book, Challenge to the Foundational Principles of Source and Residence, takes an in depth look at why residence and source continue to be the two essential building blocks of tax sovereignty and the backbone of the international tax system, surviving BEPS but still subject to multiple challenges in theory and practice.
- In chapter 5, Avi-Yonah & Xu argue that BEPS simply cannot succeed in solving the sovereignty paradox because BEPS follows the flawed theory of the benefits principle in assigning the jurisdiction to tax. Avi-Yonah and Xu therefore make a compelling argument that for the international tax regime to flourish in the face of sovereign and autonomous states, countries must commit to full residence-based taxation of active income with a foreign tax credit granted for source-based taxation.
- In chapter 6, Tejeiro continues the analysis of the fundamental jurisdictional building blocks, demonstrating that by resorting to legal fictions within BEPS and beyond it, states are attempting to enlarge the scope of their personal or economic nexus, or to grasp taxable events and bases beyond their proper reach under well-settled international law rules and principles.
- Bal furthers the discussion in chapter 7, with an analysis of how digital commerce has upended traditional notions of source and residence. Bal advocates the consumer's usual residence as a good approximation of the place of actual consumption and therefore the best-justified place of taxation.
Part Three of the book, Acceptance and Implementation by Differently-Situated States, considers tax sovereignty after BEPS from a range of perspectives. Chapters 8 through 10 focus on perspectives from lower income or developing countries, while chapters 11 and 12 review the landscape from the perspective of Europe and the United States, respectively.
- In chapter 8, Quinones explores how developing countries might take advantage of the new international tax architecture, developed for purposes of coordinating the BEPS action plans, to ensure that their voices are truly shaping the standards. She argues that the knowledge gap between developing and developed is getting narrower instead of wider, with major negative impacts expected for the international tax order.
- Rocha continues this discussion in chapter 9, with a proposal: instead of simply accepting the BEPS Project’s recommendations and their reliance on historical decisions about what constitutes a country’s “fair share of tax”, developing countries should join in the formation of a Developing Countries’ International Tax Regime to focus discourse on the rightful limits of states’ taxing powers.
- Furthering the theme of autonomous priority-setting, in chapter 10 Tavares focuses in on a key part of the BEPS consensus, exploring whether implementing the CBCR standard, without a deeper transfer pricing reform, should be viewed as a priority in every country. He further questions whether this particular initiative, even if important, is worthy of mobilization of the scarce resources of developing countries. Tavares concludes with an incisive review of the role of the inclusive framework in prioritizing some needs over others.
- Balco & Yeroshenko then consider BEPS implementation from the very different perspective of the EU in chapter 11. The chapter demonstrates that even within the EU, BEPS implementation is not straightforward, as the interests of member states sometimes conflict and the basic notion of tax sovereignty remains fundamental even while tax coordination and harmonization across the EU expands. However, the authors note that the progress made in the last several years on key cooperation norms, which was largely inspired by BEPS, has been unprecedented.
- Finally, Kaye provides a capstone to the book in chapter 12, where she makes the convincing case that although some in the United States saw the BEPS Project as a threat to US tax sovereignty, this project was in fact necessary in order for the United States to effectively wield its tax sovereignty. Kaye’s chapter thus ends the book with a clear picture of the ongoing paradox of tax sovereignty in the world after BEPS.
Tagged as: BEPS scholarship sovereignty tax competition tax policy
This Article examines international law limitations on the ascription of citizenship in the context of U.S. taxation of non-resident citizens. U.S. citizenship practice is exceptionally generous, extending citizenship to almost all persons in its territory at the moment of birth. At the same time that it is generous at the front end, U.S. citizenship is sticky at the back. Termination of citizenship on the individual’s part involves substantial fees and tax compliance. It is difficult to shed a citizenship one may never have wanted in the first place.
This stickiness would be inconsequential if few costs were associated with the status. But the United States taxes its citizens on a worldwide basis. The 2010 enactment of the Foreign Account Tax Compliance Act has ramped up historically lax enforcement and imposes substantial administrative burdens on even middle-earner citizens abroad.
In this frame, U.S. birthright citizenship and expatriation regimes may violate international norms, especially with respect to those "accidental Americans" who departed the United States as children. Even in the context of extremely relaxed historical constraints on state nationality practice, there were acknowledged nineteenth century limitations on the extension of citizenship to individuals with insufficient connection to a state -- citizenship over-claiming, as it were. The article also describes the historical requirement that naturalization be volitional, a norm now appropriately applied in some cases in the context of birthright citizenship.
To the extent the ascription of U.S. citizenship compromises individual rights, there are tax fixes and there are citizenship fixes. Citizenship fixes include opt-in and opt-out mechanisms for birthright citizenship. The better solution may lie in frictionless exit for those with nominal ties to the national community. Though reform is more likely to be accomplished through the tax regime, the moment highlights the over-inclusiveness of U.S. citizenship and the growing salience of international law to citizenship practices.I'm less confident than Peter that reform will ever be delivered through the tax regime, but I am very glad to see this important contribution to the growing literature focusing on the citizenship/taxation link.
Taxpayers who hide assets abroad to evade taxes present a serious enforcement challenge for the United States. In response, the U.S. has developed a family of initiatives that punish and rehabilitate non-compliant taxpayers, raise revenues, and require widespread reporting of offshore financial information. Yet, while these initiatives help catch willful tax cheats, they have also adversely affected immigrants, Americans living abroad, and “accidental Americans.”
This Article critiques the United States’ offshore tax enforcement initiatives, arguing that the U.S. has prioritized two problematic policy commitments in designing enforcement at the expense of competing considerations: First, the U.S. has attempted to equalize enforcement against taxpayers with solely domestic holdings and those with harder-to-detect offshore holdings by imposing harsher reporting requirements and penalties on the latter. But in doing so, it has failed to appropriately distinguish among differently situated taxpayers with offshore holdings. Second, the U.S. has focused on revenue and enforcement, ignoring the significant compliance costs and social harms that its initiatives create.
The confluence of these two policy commitments risks creating high costs for the wrong taxpayers. While offshore tax enforcement may have been designed to catch high¬-net-worth tax cheats, it may instead impose disproportionate burdens on those immigrants and expatriates who have less ability to complain, comply, or “substitute out” of the law’s grasp. This Article argues that the U.S. should redesign its enforcement approach to minimize these risks and suggests reforms to this end.The paper provides a thorough review of the panoply of offshore enforcement programs and mechanisms and documents the harms of their dragnet approach, especially on the most vulnerable and least likely targets. A significant contribution to the literature.
I've posted on SSRN a new work in progress and two recently published works on the topic of taxation and human rights:
Human Rights at the Borders of Tax Sovereignty
Tax scholarship typically presumes the state’s power to tax and therefore rarely concerns itself with analyzing which relationships between a government and a potential taxpayer normatively justify taxation, and which do not. This paper presents the case for undertaking such an analysis as a matter of the state’s obligation to observe and protect fundamental human rights. It begins by examining existing frameworks for understanding how a taxpayer population is and ought to be defined. It then analyzes potential harms created by an improperly expansive taxpayer category, and those created by excluding from consideration those beyond the polity even if directly impacted by the tax regime. It concludes that a modified membership principle is a more acceptable framework for normative analysis of the jurisdiction to tax, even while acknowledging the overwhelming weight of existing perceptions about the bounds of the polity and the state-citizen relationship as significant barriers to acceptance.Taxpayer Rights in Canada
Canada is one of many countries where taxpayer rights are becoming an increasingly common topic of discourse among policymakers, practitioners, and the public. Especially in light of recent developments regarding the global expansion of taxpayer information exchange, the role of taxpayer privacy and confidentiality rights have emerged as significant legal issues. This chapter surveys the contemporary theoretical, legal, and political landscape of taxpayer rights in Canada. Part I outlines the theoretical and legal sources from which taxpayers may be said to have rights. Part II examines Canada’s Taxpayer Bill of Rights and considers some of the historical, legal, and political issues that give rise to their core principles. Part III focuses in on the taxpayer’s right to privacy and confidentiality in the context of evolving global trends surrounding the use and exchange of taxpayer information. The Chapter concludes with some observations about where taxpayer rights may be headed in Canada.Taxpayer Rights in the United States
Despite abundant sources of legal and quasi-legal protection against abuses of individual rights and freedoms, there are areas of contention regarding respect for taxpayer rights in the United States. This chapter lays out the framework of taxpayer rights and considers their meaning by considering a contemporary case, namely, the recent expansion of citizenship-based taxation through globally enforced financial asset reporting and information exchange. Part I outlines the theoretical and legal sources from which taxpayers may be said to have rights. Part II examines the US Taxpayer Bill of Rights and considers some of the historical, legal, and political issues that give rise to their core principles. Part III focuses in on the taxpayer’s right to be informed in the context of citizenship-based taxation in a globalized world. The Chapter concludes with some observations about where taxpayer rights may be headed in the United States.