Why Do Non-OECD, Non-G20 Countries Pursue International Tax Cooperation? Shu-Yi Oei Investigates in an Empirical Study of Membership in the BEPS Inclusive Framework

by Diane Ring

A dominant theme of international taxation over the past 15 years has been that of cooperation and consensus—from the BEPS Project to the new Multilateral Instrument to the new BEPS Inclusive Framework. Regardless of one’s assessment of nations’ true commitments to such cooperation and consensus, it is clear that notable changes in the framework of international tax engagement are afoot.

Yet, countries themselves remain very different in terms of the wealth, GDP, natural resources, tax revenues, commercial base, infrastructure, technological capacity, and financial systems. It is not obvious that cooperation and consensus are uniformly in countries’ interests, particularly in light of who is drafting the agenda. Most pointedly, it is reasonable to ask why non-OECD, non-G20 countries would be willing to commit to global tax cooperation.

In a new empirical paper, “World Tax Policy in the World Tax Polity? An Event History Analysis of OECD/G20 BEPS Inclusive Framework Membership,” Shu-Yi Oei tackles this question by studying the OECD/BEPS Inclusive Framework, which currently has a total of 140 member states, of which 96 are non-OECD, non-G20 countries. Using event history regression methods, Oei seeks to answer the question of how these states came to join the Inclusive Framework. She posits a series of hypotheses regarding membership drivers and tests them against a new database that she has constructed. In a paper that is accessible to both international tax policy makers and empiricists, Oei provides a compelling answer to the question. Not surprisingly, the actions and initiatives of international organizations and blocs play a the significant role in the story. In fact, many of the findings prove consistent with earlier work that Oei and I have written (both separately and together) including analyses of international relations dynamics in international tax, the scope of actors shaping international tax policy, the potential for disjuncture between international agreement and domestic action, the potential influence of nonstate actors, and the ability of powerful states to draw other nations into specific tax policy choices. Oei’s new empirical paper propels this research agenda forward by allowing greater insight into the world of international tax.

International Symposium: “The Professionals: Dealing with the Enablers of Economic Crime”

By Diane Ring

Just as summer is in full swing, the VIRTEU Project is back with a close look at a less than sunny side of economic life — the role that professionals (read lawyers, accountants and auditors) can play in enabling economic crime. This coming Wednesday July 21, 2021 (starting at 10:15am ET) join us in a three-panel zoom symposium that investigates how and why professionals may play this enabling role, and what responses and solutions we might consider. We will look carefully at real life case studies and talk with experts from various sectors as we explore this ongoing issue.

Register here to join us for this zoom symposium.

Call for Papers for the 2021 Indiana/Leeds Summer Tax Workshop Series

By: Leandra Lederman

This summer, the Indiana University Maurer School of Law and the University of  Leeds School of Law will run the Indiana/Leeds Summer Tax Workshop Series again. Like last summer, Dr. Leopoldo Parada and I will host it. It will meet online via Zoom on Fridays from 11:30am-1pm Eastern time (4:30-6pm British Summer Time), starting May 28, 2021. We expect to invite a couple of speakers and select the remainder from a call for papers.

The Call for Papers opens today and will close on May 14, 2021 at midnight British Summer Time (7pm Eastern Daylight Time). If you are interested in presenting in the Workshop, please send the following before then to both llederma@indiana.edu and L.Parada@leeds.ac.uk, with “Indiana/Leeds Workshop submission” in the subject line of your email:

  1. Your name, title, and affiliation.
  2. The paper title and an abstract of no more than 1,000 words.
  3. Whether or not you already have a draft of the paper. (We plan to circulate a draft of each paper—a minimum of 10 pages—a week in advance of each talk.)
  4. Whether or not the paper has been accepted for publication, and, if so, when it is expected to be published.
  5. A list of any Fridays between May 28 and July 16 that you would not be available to present, or a statement that any Friday in that date range would work for you.

In selecting papers, preference will be given to tax topics of broad, general interest. These can involve international or domestic tax issues, but a preference will be given to topics that would be of interest to scholars in more than one country. Like last summer, we expect an international group of attendees. Note also that speakers will be strongly encouraged to limit their scripted remarks to 20 minutes, to allow ample time for questions and discussion.

Videos of all but one of last summer’s talks are online at http://www.tinyurl.com/indianaleeds. These recordings include only the introductory remarks and the scripted portion of the speaker’s presentation. We plan to take the same approach this summer for those speakers who grant permission.

If you have questions, feel free to email us at L.Parada@leeds.ac.uk and llederma@indiana.edu.

Institutional Corruption and Avoidance of Taxation: Final VIRTEU Roundtable

By Diane Ring

The most recent Roundtable session in the series of four VIRTEU [Vat fraud Interdisciplinary Research on Tax crimes in the European Union] sessions this spring focused on the limited success we have seen with the formal regimes of gatekeepers tasked with ensuring that taxpayers accurately meet their reporting and taxpaying obligations. The session then explored the role that whistleblowers play in remedying the resulting enforcement gaps. (A recording of this 3rd Roundtable is available here). Building on that discussion, the 4th and final Roundtable session, to be held Friday March 12, 2021 at 12:30pm EST (5:30pm GMT), will turn to the related topic, Institutional corruption and tax avoidance.

This March 12th discussion will examine corruption broadly understood to encompass not only the most direct forms of corruption (e.g. bribes) but more indirect forms (including implicit deals with officials), on to questions of undue influence, conflict of interest and the power of lobbying. Attention will be given to not only government actors, but also structural and institutional features that impact corruption and avoidance of taxation, including the role of large corporations, wealth, and power bases. For more information on the Roundtable, see below. To join us for the discussion, please register here.

VIRTEU Roundtable #3: Whistleblowing, Reporting, and Auditing in the area of taxation

by Diane Ring

We do not yet live in a world in which taxpayer compliance can simply be assumed. Instead, we must rely on the interplay of reporting requirements, internal and external auditing, and ultimately whistleblowing, to help ensure compliance with the tax system. How do they fit together? What can we expect from reporting and auditing? When do they breakdown, and why? How does whistleblowing–both the actual cases and the “threat” of whistleblowing–shape law, taxpayer behavior, and society’s understanding of compliance. And when does this tax noncompliance intersect with government corruption and fraud? What recommendations and options might we consider for the future?

Next week, the VIRTEU Roundtable Series tackles these questions in its 3rd Roundtable: “Whistleblowing, Reporting and Auditing in the area of taxation.” (VIRTEU [Vat fraud: Interdisciplinary Research on Tax crimes in the European Union]). This session builds on the first two Roundtables which gathered experts from around the world to discuss tax crime, corruption, CRS, and business ethics, and which can be viewed online: (1) Roundtable #1: Exploring the Interconnections between tax crimes and corruption; and (2) Rountable #2: CSR, Business Ethics, and Human Rights in the area of taxation.

The 3rd Roundtable, on “Whistleblowing, Reporting and Auditing in the area of taxation,” will be held Friday February 26, 2021 at 5:30-7:00pm GMT (12:30-2:00pm EST). For more information on the panel, see below. To join us, visit the registration link here.

CSR, Business Ethics & Human Rights through a Tax Lens: VIRTEU Roundtable Series Continues

by Diane Ring

Last month, the VIRTEU Roundtable Series launched with a discussion I had the opportunity to moderate on the basic connections between tax crime and corruption.  (VIRTEU [Vat fraud: Interdisciplinary Research on Tax crimes in the European Union]). Clearly, we were only just getting started — the discussion ended because time was up but the questions continued. This week’s roundtable takes a closer look at the role that CSR (corporate social responsibility), business ethics and human rights can, should, or do play in business conduct, in tax enforcement strategies, and in the design of tax law itself.

These three frames for regulating (business) behavior are regularly examined and debated in the corporate and regulatory literature, but their application to the tax system remains under explored. If you are interested in thinking more about the tax side, join us this Friday February 12, 2021 at 5:30-7pm GMT (12:30-2:00pm EST). For more information on the panel, see below. To join, visit the registration link here.

Break Into Tax

By: Leandra Lederman & Allison Christians

We’ve started a new YouTube series we wanted to share with our readers! It’s called “Break Into Tax” (BiT) and can be found at tinyurl.com/BreakIntoTax.

The idea behind BiT is that we’ll discuss and break down tax-related concepts, broadly defined. This includes issues that may be of interest to law students and others newer to tax or to particular issues. The topics we plan to cover include substantive tax law concepts, tax policy concerns, the study of taxation, and the pursuit of tax as a career. We also welcome suggestions for topics in the comments on our videos!

We come at the issues from the perspective of tax law professors in the U.S. and Canada with cross-border interests. The BiT series is not at all designed to be of interest only to people from these two countries. We expect to focus on concepts that are foundational enough or general enough to be of broad interest.

Our introduction video, located here, is a good place to start. It shares more about us and the BiT channel. Our first playlist covers Tax Policy Colloquia: what are they, how to ask a good question in a tax workshop, and tips for students writing reaction papers.

Please join us as we break into tax!

Tax Crime and Corruption: VIRTEU Roundtable Series and Research

by Diane Ring

It is no surprise to those working in the tax field, whether in government, private practice, academia or the nonprofit sector, that not all taxpayer mistakes are innocent. Some taxpayers affirmatively engage in fraud, and sometimes that fraud is wrapped up with corruption. The high profile spate of tax leaks beginning in 2008 helped put a more public face on many aspects of an old problem.

As part of an effort to better respond to tax crimes and corruption, the EU has funded an interdisciplinary and comparative research legal research project — VIRTEU [Vat fraud: Interdisciplinary Research on Tax crimes in the European Union]. This project is aimed at exploring connections between tax fraud and corruption. Focused in part on VAT fraud, the relevant issues and the kinds of questions that must be asked are universal across the tax system.

VIRTEU, for which I am a special advisor, is hosting a Roundtable Discussion Series this spring that brings together experts from academic institutions, nongovernmental organizations, and the private sector to engage in topical discussions around the general problem of tax fraud and corruption. Along with the the VIRTEU project’s Principal Investigator Dr. Costantino Grasso and Co-Investigator Dr. Lorenzo Pasculli, I will be organizing and hosting the series, which is also sponsored by Boston College Law School, Coventry University Research Centre on Financial and Corporate Integrity, and OLAF (the European Anti-Fraud Office).

The first session, “Exploring the interconnections between tax crimes and corruptions“, will be held via Zoom on Friday January 29, 2021 (at 11:00am EST/ 4:00pm GMT). Here is the registration link. See below for more details – and join us for what promises to be an invigorating discussion of the connections between the legal and policy frameworks for corruption and for tax crimes.

Wrap-Up of the 2020 Indiana/Leeds Summer Tax Workshop Series

Zoom Composite 2.0

By: Leandra Lederman

The 2020 Indiana/Leeds Summer Tax Workshop Series ended on Thursday, after 13 weeks of talks. It was terrific getting to spend the summer with so many tax enthusiasts–professors, practitioners, and students–from all over the world! Dr. Leopoldo Parada and I really enjoyed co-hosting this series, and we expect to continue it next summer!

We received speaker permission to share videos of most of the talks. The speaker’s scripted remarks and our introductions are included. Those videos can be found at this link.

The complete speaker list and papers presented were as follows:

May 21 Ruth Mason, University of Virginia The Transformation of International Tax
May 28 Stephen Daly, King’s College London Trust, Tax Administration and State Aid
June 4 Susan Morse, University of Texas Modern Custom in Tax
June 11 James Repetti, Boston College The Appropriate Roles for Equity and Efficiency in a Progressive Income Tax
June 18 Diane Ring & Shuyi Oei, Boston College Regulating in Pandemic: Evaluating Economic and Financial Policy Responses to the Coronavirus Crisis
June 25 Umut Turksen, Coventry University The Role of Human Factors in Tax Compliance and Countering Tax Crimes
July 2 Allison Christians, McGill University Accurately Counting Value in the International Tax System
July 9 Joshua Blank, University of California, Irvine Automated Legal Guidance
July 16 Michael Devereux, University of Oxford The OECD GloBE Proposal
July 23 Ana Paula Dourado, University of Lisbon The Concept of Digital Economy for Tax Purposes: a Reassessment
July 30 Ricardo García Antón, Tilburg University Enhancing the Group Interest in Transfer Pricing Analysis
Aug. 6 Steven Dean, New York University A Constitutional Moment in Cross-Border Taxation
Aug. 13 Monica Victor, University of Florida The Taxman’s Guide to the Galaxy: Allocating Taxing Rights in the Space-based Economy

Thank you again to all those who joined us, and we hope to see you next year! #IndianaLeedsSummerTax

More on Altera v. Commissioner

By: Leandra Lederman

Susan Morse and Stephen Shay have blogged on Procedurally Taxing on both May 22 and June 11 on Altera’s efforts to have the U.S. Supreme Court grant certiorari in Altera v. Commissioner. Altera is a closely followed case involving an administrative law challenge to the validity of a Treasury regulation, so I wanted to flag those blog posts for Surly Subgroup readers.

Recall that in Altera, the Court of Appeals for the Ninth Circuit upheld a cost-sharing regulation under IRC § 482, reversing the Tax Court’s unanimous decision invalidating the regulation as arbitrary and capricious. The Ninth Circuit ruled 2-1 for the government in both its original opinion, which was withdrawn due to the death of one of the judges on the panel, and again in a revised opinion. The Ninth Circuit also denied rehearing en banc, a victory for the IRS’s rulemaking process. (Full disclosure: in addition to joining in two earlier amicus briefs in favor of the Commissioner, which Susie and Steve spearheaded, I co-authored with them and Clint Wallace a 2019 amicus Brief in Opposition to the Petition for Rehearing En Banc.)

In February, Altera petitioned for certiorari, stating the following questions presented: Continue reading “More on Altera v. Commissioner”

Announcing the 2020 Indiana/Leeds Summer Tax Workshop Series!

Indiana Leeds PR image to useBy: Leandra Lederman

As I posted previously, this summer, Dr. Leopoldo Parada from the University of  Leeds School of Law and I (with the support of the Indiana University Maurer School of Law) will co-host the new Indiana/Leeds Summer Tax Workshop Series. It will meet online via Zoom on Thursdays from 10:30am-noon Eastern time (3:30-5pm British Summer Time). If you are interested in cutting-edge tax issues, we hope you will consider attending!

We received many terrific submissions in response to the Call for Papers. As stated there, we prioritized tax topics that would be of interest to scholars in multiple countries. We are very fortunate to have Professor Ruth Mason from the University of Virginia kicking off what promises to be an outstanding series! The following is the full list of speakers and the papers they’ll be presenting: Continue reading “Announcing the 2020 Indiana/Leeds Summer Tax Workshop Series!”

Virtual Tax Policy Colloquia

Orly Mazur--edited
Prof. Mazur

By: Leandra Lederman

The Tax Policy Colloquium at Indiana University Maurer School of Law, which I’ve been blogging about, ran in person in Bloomington until our Spring Break. The fourth talk of the semester was given by Prof. Orly Mazur of SMU Dedman School of Law on March 5, 2020. She presented her interesting law-and-technology paper titled “Can Blockchain Revolutionize Tax Compliance?” (In general, she argued that it can’t: blockchain is unlikely to dramatically change tax enforcement by, for example, replacing third-party information reporting.)

The subsequent IU Tax Policy Colloquium talk, by Prof. Rita de la Feria of the University of Leeds School of Law, was on March 27. She presented a paper, coauthored with Michael Walpole of UNSW, titled “The Impact of Public Perceptions on VAT Rates Policy,” which is part of a larger project proposing a progressive VAT. The paper argues that, although having a single consumption tax rate that is broadly applied is most equitable, there typically are numerous exemptions and/or lower rates, for political economy reasons.

Rita de la Feria
Prof. de la Feria

With the move to online classes due to the pandemic, this talk occurred via Zoom. It was unfortunate that, due to the pandemic, we were not able to host Rita in Bloomington. However, the silver lining was that I was able to invite tax experts and other faculty from all over the world to attend. Rita and I also both publicized the talk on social media. As a result, several academics and other tax experts either asked to attend, or, if they saw the notice too late, asked if there is a video they could watch, which there is. In addition to me, Rita, and the students in the class, there were 22 attendees, which produced a terrific discussion. The students later told me how wonderful it was to have so many international tax experts asking questions and making comments. Continue reading “Virtual Tax Policy Colloquia”

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””

Workforce and Workplace Trends: The Empirical Challenges and Policy Significance

By Diane Ring

On Thursday, my co-author (Shu-Yi Oei) and I had the opportunity to present on “Tax Related Challenges for Platform Workers” at the United States Government Accountability Office in downtown Boston. We enjoyed discussing our past and current research regarding taxation, platform workers, labor and emerging workforce trends with GAO researchers.

Our talk at GAO was particularly timely because we’re in the process of writing a book chapter for a new empirical volume, tentatively entitled “The Law and Policy of the Gig Economy: Qualitative Analysis,” which is forthcoming at Cambridge University Press (ed. Deepa Das Acevedo). This volume will address the promise of qualitative empirical approaches to studying the gig economy. Our contribution will build on our previous work in which we looked at the public online conversations among Uber and Lyft drivers regarding challenges they face in tax compliance.

Even without considering the impacts of the 2017 Tax Reform on both the gig economy and the broader workforce (which we have examined here, here and here), significant empirical questions remain regarding the tax and economic pressures faced by gig and contingent workers. Some, but not all, of those questions can be addressed by examining tax return and survey data. Add in tax reform to the mix (think the new section 199A deduction, the suspension of employee business deductions and the offshoring international provisions (section 250 and 956A)) and it’s clear we have a lot of work to do to better understand the interplay between tax and labor policies across many fields and how this will impact the future of the workplace. Our view is that it will take a combination of empirical approaches to get a well-textured picture of how tax impacts work.

U.S. Business Community Calls for Ratification of Tax Treaties in U.S. — Again

By Diane Ring

I have been wondering for the past few years why the business community has not put more pressure on the Senate to resolve the tax treaty roadblock created by Senator Rand Paul (R-KY). In 2011, newly-elected Senator Paul announced objections to the ratification of tax treaties and protocols and sought to block Senate consideration of those tax agreements in the pipeline. Senator Paul contended that the exchange of information provisions in the treaties violated taxpayers’ 4th amendment rights to privacy in their banking and financial data and that U.S. disclosure of such data to treaty partners would violate the due process rights of taxpayers. He succeeded in blocking the agreements (none have been ratified since 2010) and the result is a backlog of negotiated but unratified U.S. tax treaties and protocols.

A single senator can delay vote on a treaty and keep debate open. Negotiation with Senator Paul has not proven fruitful because he fundamentally objects to the information exchange provisions. However, other senators do have procedural recourse to end debate on a treaty and bring it to a vote. Under a process known as “cloture” (see Senate Rule XXII), a vote of 60 senators can force the end of debate. But this procedural path also requires an additional 30 hours of debate and the Senate can conduct no other business during this time. Thus, the cloture option puts a significant price tag on efforts to end the ratification impasse.

In a 2016 article (When International Tax Agreements Fail at Home: A U.S. Example), I mapped the historical and Senate procedural factors leading to the standstill on tax treaty ratification in the U.S. and the business community’s failed efforts to lobby  ratification of tax treaties. For example, in 2013 several major U.S. business trade groups (including the Technology Industry Council, the National Association of Manufacturers, the National Foreign Trade Council, the U.S. Chamber of Commerce, and the United States Council for International Business) sent a letter to Senator Bob Corker stressing the importance of approving pending tax treaties and protocols. Senator Paul remained unmoved by business community pleas and apparently, the problem had not been considered serious enough to warrant commencement of cloture.

But it now appears that the business community has been reviving its public efforts to pressure the Senate to act: Continue reading “U.S. Business Community Calls for Ratification of Tax Treaties in U.S. — Again”