KluwerLawOnline.com - Intertax

Litrature Review: Taxation, Citizenship and Democracy in the 21st Century Edited by Y. Lind and R. Avi-Yonah (Edward Elgar. 2024). [pre-publication]

Mon, 23 Dec 2024 00:01:06 GMT

Volume 53 Online ISSN 0165-2826

Article: International Tax Cooperation in a Multipolar World [pre-publication]

Mon, 23 Dec 2024 00:01:06 GMT

The recent adoption by the UN General Assembly of the resolution of 22 December 2023 calling for the development of a framework convention (A/ RES/78/230 2023) to strengthen international tax cooperation aligns with the liberal promise of legitimate, fair, and stable international tax governance institutions. In this article, the authors argue that there is reason to doubt that promise. They consider the more sober neorealist view of international relations according to which the world is characterized by zero-sum competition between the major powers whose most important aim is to secure their own survival. This perspective has remained underexplored in the international tax literature and suggests that adopting the UN General Assembly Resolution is unlikely to promote the stability and fairness of international tax cooperation. It rather serves as a warning that geopolitical tensions have infiltrated international tax matters and threaten the stability of the international tax regime as it is currently known.

Volume 53 Online ISSN 0165-2826

Article: From Africa to the World: Pathways to Inclusivity and Political Justice at the UN [pre-publication]

Mon, 23 Dec 2024 00:01:06 GMT

The international tax landscape has long been skewed against developing countries, with policies often crafted without considering their specific needs. Recent movements at the United Nations (UN) signal a potential shift towards more equitable tax governance. This paper contends that while the recent tax developments at the UN are a step forward, expecting the UN to radically transform the international tax regime may be overly optimistic. Instead, a more practical approach would involve the UN serving as a global coordinator of regional international tax fora. Starting with how such an international tax forum may be created in Africa and how it may interface with a possible UN tax body, this paper argues that it is time for regions to be more proactive in creating the change they want to see. This proposal not only brings about political justice and inclusivity in international tax governance, but also empowers regions to tailor solutions that meet their unique challenges and opportunities. More importantly, the formation of regional fora may be effective in bringing about change to the international tax regime even if no international tax body is ultimately formed at the UN.

Volume 53 Online ISSN 0165-2826

Article: Rebalancing Power: A UN Tax Council as A Political Counterbalance in the Global Tax Debate [pre-publication]

Mon, 23 Dec 2024 00:01:06 GMT

The 22 December 2023 UN General Assembly’s vote to establish terms of reference (ToR) for a framework convention on international tax cooperation has been hailed as a landmark success. This article cautions it could also undermine the last decade’s progress towards more inclusive tax cooperation. Discussions on global tax governance have persistently highlighted the power asymmetries between advanced and less advanced economies. Despite extensive analyses, few concrete solutions have been proposed addressing these imbalances. This article presents a model that illustrates that the divide between advanced and less advanced economies in the current UN process manifests itself along two main axes: the decision-making processes in a new UN body and the positioning of it relative to other tax cooperation entities. It is demonstrated that none of the model’s options meet the requirements for inclusive and effective cooperation as none reconcile the fundamental power asymmetry. Consequently, this article advocates for exploring the establishment of a UN Tax Council. Inspired by the UN Security Council, it would feature balanced regional representation with veto powers for all members. This positions it as a political counterbalance to the predominantly technocratic processes at the OECD, realigning power dynamics with current geopolitical and economic realities.

Volume 53 Online ISSN 0165-2826

Guest Editorial: The Coloured Light of Double Stars*: The Rise and Partnership Potential of Multilateral Tax Diplomacy [pre-publication]

Mon, 23 Dec 2024 00:01:06 GMT

This note argues that the current calls for more inclusive, effective and legitimate multilateral forums for determining international tax norms, principally from the developing world, and epitomized in UN General Assembly Resolution 78/230 on Promotion of inclusive and effective international tax cooperation at the United Nations (Resolution adopted on 22 December 2023, https://financing.desa.un.org/sites/default/ files/2024-01/A.RES_.78.230_English.pdf), represent a challenging but welcome development. This development, as well as multilateral developments at the OECD, will increasingly demand the blending of tax and diplomatic skills in the rooms where tax multilateralism will happen.

The need to consider taxation in its broader context of the need to achieve the sustainable development goals (SDGs) both enriches and complicates such multilateral efforts. An equal partnership of tax and diplomatic skills and understandings will give tax multilateralism the best chances of long-term success, including by understanding and drawing on relevant learnings from the experience of trade, investment, environmental and other linked but differently formed worlds.

The note examines specific features of successful diplomacy and their possible relevance to the multilateral tax endeavour. The countries that best and most creatively manage such efforts will most effectively meet their national needs within a system aspiring for a higher, more collective, and more permanent, improvement in international tax cooperation mechanisms and outcomes. A readjustment period that appears to some to presage uncertainty and instability may, if properly handled, yield just the opposite.

Volume 53 Online ISSN 0165-2826

Policy Note: Australian Tax Treaty Policy: The Dilemma of a Wealthy Capital-Importing Nation [pre-publication]

Mon, 23 Dec 2024 00:01:06 GMT

Australia’s unique combination of economic and political attributes has clearly had an impact on its tax treaty policy. The country has been an OECD member for over half a century and has consistently supported OECD-promoted policies. It is, at the same time, relatively sparsely populated when viewed in terms of its physical size and abundance of natural resources, leaving it reliant on foreign capital for a significant portion of its resource exploitation enterprises. It is simultaneously both a capital exporter in terms of passive portfolio investment and a very serious capital importer in terms of direct non-portfolio active investment. The country’s tax treaty policy reflects the dichotomous policy interests, with early adoption of the United Nations (UN) Model policies on taxing rights over gains from the disposal of indirect interests in immovable property. At the same time, it veers towards OECD norms in terms of passive investment income. Particularly striking is its treatment of direct non-portfolio active investment where it has used a combination of more generous features from the OECD and UN Model treaties on top of generous domestic law exemptions to create a very favourable regime for remittances of profits from active subsidiaries in Australia.

Volume 53 Online ISSN 0165-2826

Article: The Old UN Ghosts Speak: Quo Vadis, International Tax Regime: From Coordination to Cooperation? [pre-publication]

Mon, 23 Dec 2024 00:01:06 GMT

This article discusses the phenomenon of the United Nations (UN) Framework Convention for International Tax Cooperation in view of the historical experiences of international organizations in developing and shaping the international tax system. As developing countries press for a new beginning that offers hope for tax justice and a chance to remake the international tax regime, the first two experiments in global tax policymaking through the League of Nations and the UN offer insights for a deeper appreciation of why current developments in international tax relations present a rare, hard-won opportunity that is long overdue. By examining the stimulus, processes, networks, and actors that have shaped and are shaping the direction and parameters of global tax negotiations, this article teases out stark differences in the contrast between past and present to illuminate the seismic shifts that have taken place, the developments that are cause for optimism, and the hurdles that remain in the ongoing struggle to establish a truly inclusive and fair global system.

Volume 53 Online ISSN 0165-2826

Article: DEBRA: When Unstoppable Aspirations for Debt-Equity Parity Meet Immovable Tax Systems [pre-publication]

Mon, 23 Dec 2024 00:01:06 GMT

Achieving debt-equity parity in corporate taxation has long been a sought-after holy grail in the quest for capital structure neutrality; however, the latter does not always align with the former. The United States devoted significant thought on how to reach both, especially in the 1990s, but eventually did not achieve either with its tax reforms at the dawn of the twenty-first century.

Now, it is Europe’s turn to try. This is what the European Commission aims to accomplish with its Directive Proposal for a Debt Equity Bias Reduction Allowance (DEBRA). It would introduce a notional interest deduction on increases in a firm’s equity and a dual-limiting rule that would cap deductible interest at 85% of exceeding borrowing costs (interest paid minus interest received) in addition to interest deductibility already being restricted to 30% of a firm’s earnings before interest, taxes, depreciation, and amortization (EBITDA).

This article shows that DEBRA fails to achieve capital structure neutrality and does not ensure debt-equity parity. It skews the tax treatment of debt without promoting greater diversification in the portfolio choice of financing sources for corporate Europe as European companies remain heavily reliant on bank lending compared to their American counterparts.

Last, the article suggests that the risk of debt-financing outsourcing as a potential consequence of DEBRA could inadvertently impact direct investments between Europe and some of its main trading partners, including the United States and the United Kingdom. This process is already underway in America with more anti-abuse provisions emerging in its tax treaties and federal tax regulations for the cross-border payment of interest and dividends.

Volume 53 Online ISSN 0165-2826