IU Tax Policy Colloquium: Haslehner, “International Tax Competition—The Good, the Bad, and the Ugly”

By: Leandra LedermanIMG_0665a

On February 6, 2020, the Indiana University Maurer School of Law welcomed our second Tax Policy Colloquium guest of the year: Prof. Werner Haslehner from the University of Luxembourg’s Department of Law, who is currently a Global Research Fellow and adjunct professor at NYU Law School. Werner presented his draft essay titled “International Tax Competition—the Good, the Bad, and the Ugly.”

States of course compete for tax base. Werner’s essay explains that “States’ general freedom to act (which we may call sovereignty) and taxpayer’s freedom to choose (which we may call liberty) – although neither is without limits – inescapably lead to competitive pressures and reactions.” (p.4) And some of this competition has been labelled as “harmful” by the OECD, the European Commission, and others. Yet, the essay points out, there is no accepted definition of the phrase “harmful tax competition.” The essay briefly reviews the literature and points out differences in approach to defining this concept. This part of the essay draws in part on Lily Faulhaber’s compelling article, The Trouble with Tax Competition: From Practice to Theory, 71 Tax L. Rev. 311 (2018), which pointed out the lack of definitional consensus and offered a typology of tax competition.

Werner’s essay further argues that, as commonly understood, there is no economic standard that supports a distinction between “harmful” and other types of tax competition. The essay thus proposes to replace the phrase “harmful tax competition” with “unfair tax competition.” (p.13) The essay specifically proposes “to refer as a basis for such a constraint to one of the most salient principles of moral philosophy: Immanuel Kant’s categorical imperative. According to this norm’s first formulation, one is to ‘act only in accordance with that maxim through which one can at the same time will that it become a universal law’.” (p.16). The essay provides two examples of behaviors that would be considered “unfair” under this standard: (1) ring-fencing (the provision of a tax benefit only to foreigners, not domestic taxpayers) and (2) secrecy (which, in response to a question I posed, Werner clarified refers to “secrecy as a service”—assisting foreign taxpayers in tax evasion). Continue reading “IU Tax Policy Colloquium: Haslehner, “International Tax Competition—The Good, the Bad, and the Ugly””

IU Tax Policy Colloquium: Layser, “When, Where, And How To Design Community-Oriented Place-Based Tax Incentives”

By: Leandra LedermanIMG_0435 (002)c

On January 23, the Indiana University Maurer School of Law welcomed our first Tax Policy Colloquium guest of the year: Prof. Michelle Layser from the University of Illinois College of Law. She presented her draft paper on the design of place-based tax incentives, then called “When, Where, And How To Design Community-Oriented Place-Based Tax Incentives,” and since retitled “How Place-Based Tax Incentives Can Reduce Geographic Inequality.” An updated draft is available on SSRN.

Shelly explained that this draft is the second paper in a multi-part project she is conducting on place-based tax incentives. Last year, she published the first piece in the series, “A Typology of Place-Based Investment Tax Incentives,” 25 Wash. & Lee J. Civ. Rights & Soc. Just. 403 (2019). Place-based tax incentives are geography-based incentives that generally are intended to help low-income areas by fostering investment in those areas. The 2019 article distinguished among place-based tax incentives on two dimensions: direct and indirect tax subsidies and spatially-oriented versus community-oriented incentives. “Direct tax subsidies provide tax breaks directly to businesses that invest in low-income communities.” (p. 415) Indirect tax subsidies are instead provided to investors in such business (pp. 417-18). She cites as examples the New Markets Tax Credit (NMTC) of IRC § 45D and the Opportunity Zones (OZ) provisions in IRC § 1400Z-1 et seq. (The OZ provisions are the most oddly numbered Internal Revenue Code sections I’ve ever seen!). Spatially-oriented tax incentives focus on specific geographically-defined Continue reading “IU Tax Policy Colloquium: Layser, “When, Where, And How To Design Community-Oriented Place-Based Tax Incentives””