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.

Advance Payments of the Child Tax Credit

By: Sam Brunson

Yesterday my neighbor texted me to mention that three pieces of my mail had been left in his mailbox; he dropped them off in front of my door. Two were just standard junk mail but one is potentially important: a letter from the Department of the Treasury.

Perhaps you also got this letter: it has some important information about the way the the child tax credit now works. In short, the American Rescue Plan, a law signed in March, makes a number of significant changes to the child tax credit.

Two of those changes are particularly notable. First, it increases the amount of the credit to $3,000 for most children and $3,600 for children five and younger.

Second, it makes allows the IRS to make advance payments of the child tax credit. Essentially, unless parents choose otherwise, starting in July the will receive monthly payments of $250 or $300 per child (depending on the child’s age).

Third, the credit is fully refundable. Even if a parent doesn’t have enough income to owe taxes, they will receive the full amount of the child tax credit.

Finally, the age limit for the child tax credit has been increased from 16 to 17. (Note that currently these changes are all temporary–they only apply to 2021, though the may be extended as some point.)

Continue reading “Advance Payments of the Child Tax Credit”

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!

Why Tax Losses Matter (for Pres. Trump’s Taxes and Everyone Else’s)

By: Leandra Lederman

Tax losses pose a special problem for the federal fisc. I’ll get to that in a minute, but first some set-up as to how tax noncompliance differs on the income side versus the deduction and credit side. The overall purposes of this post are to address some questions I’ve gotten and pull together some tax enforcement themes that are implicated by the recent NY Times reporting on Pres. Trump’s returns.

The Importance of Third-Party Reporting

A lot of tax noncompliance occurs with respect to income. Not for folks with mainly wage and salary income who maybe earn a little bit of interest from a bank account. All of that is reported by third parties (the payors) to the IRS, on information returns like Form W-2 or Form 1099. The taxpayer/payee receives a copy the information return and that both simplifies reporting and communicates what information the IRS has about the transaction. As Joe Dugan and I argue in a forthcoming article, third-party reporting is very effective. With the IRS able to do simple return matching to catch any incorrect reporting (intentional or otherwise), IRS figures like this bar graph show that there’s not a lot of noncompliance where there’s substantial third-party information reporting.

Where much tax noncompliance occurs is with respect to income earned by the self-employed and small businesses, where there’s much less third-party reporting and also more use of untraceable cash. (I added the red circle to the IRS image below.)

Continue reading “Why Tax Losses Matter (for Pres. Trump’s Taxes and Everyone Else’s)”

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

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!”

Taking Control of the State Tax Base During the Pandemic

COVID-19 has impacted society in nearly every dimension, and state and local governments have been hit especially hard. Those governments are simply not equipped to deal with major revenue shocks like those that accompany a global pandemic. In that vein, a group of scholars has joined forces to create Project SAFE (State Actions in Fiscal Emergencies), which is focused on providing research-backed policy recommendations for states. Among the project’s areas of focus is how states can help themselves by modifying their own taxing and spending programs and priorities.

One of the features of state taxation that I have been looking at quite a bit in recent years is states’ conformity practices—states using the federal tax code for purposes of defining their own tax bases. Continue reading “Taking Control of the State Tax Base During the Pandemic”

Updated Working Paper on Pandemic Regulation Includes Analysis of the CARES Act, H.R. 748

My co-authors and I (Hiba Hafiz, Shu-Yi Oei, and Natalya Shnitser) have just posted an updated version of our Working Paper, Regulating in Pandemic: Evaluating Economic and Financial Policy Responses to the Coronavirus Crisis. The Working Paper is revised and updated to incorporate the provisions of H.R. 748 (the “Coronavirus Aid, Relief, and Economic Security Act” or the “CARES” Act) enacted into law on March 27, 2020. In addition, the revised draft considers recent action by the Federal Reserve, the Department of Labor, and other agencies all through the analytical framework we offer for evaluating these initiatives.

Regulating in Pandemic: Evaluating Economic and Financial Policy Responses to the Coronavirus Crisis

By Diane Ring

As is apparent to the entire nation, the United States is currently trying to manage a fast-moving public health crisis due to the coronavirus outbreak (COVID-19). The economic and financial ramifications of the outbreak are serious. Yet the policy responses being developed have limited time for assessment and evaluation—despite their likely dramatic impacts. Three of my colleagues (Hiba Hafiz, Shu-Yi Oei, and Natalya Shnister) and I are currently working on a project that analyzes and tracks these emerging responses. Having spent the past several years working together as part of Boston College Law School’s Regulation and Markets Workshop, it made sense to combine our efforts and expertise to try and contribute to effective policy guidance at this critical time.

Our new Working Paper (“Regulating in Pandemic: Evaluating Economic and Financial Policy Responses to the Coronavirus Crisis”) discusses the ramifications of proposed and legislated policy and other actions and identifies three interrelated but potentially conflicting policy priorities at stake in managing the economic and financial fallout of the COVID-19 crisis: (1) providing social insurance to individuals and families in need; (2) managing systemic economic and financial risk; and (3) encouraging critical spatial behaviors to help contain COVID-19 transmission. The confluence of these three policy considerations and the potential conflicts among them make the outbreak a significant and unique regulatory challenge for policymakers, and one for which the consequences of getting it wrong are dire.

This Working Paper—which will be continually updated to reflect current developments—will analyze the major legislative and other policy initiatives that are being proposed and enacted to manage the economic and financial aspects of the COVID-19 crisis by examining these initiatives through the lens of these three policy priorities. It starts by analyzing the provisions of H.R. 6201 (the “Families First Coronavirus Responses Act”) passed by the house on March 14, 2020. By doing so, this Working Paper provides an analytical framework for evaluating these initiatives.

 

IU Tax Policy Colloquium: Liscow, “Equality, Taxation, and Law and Economics In the 21st Century”

IMG_0948By: Leandra Lederman

On February 20, 2020, the Indiana University Maurer School of Law welcomed our third Tax Policy Colloquium guest of the year: Prof. Zachary Liscow from Yale Law School. Zach presented his draft article titled “Equality, Taxation, and Law and Economics In the 21st Century.”

As its title suggests, the article takes on income inequality. The article argues that the standard approach of redistributing only through the tax system and hinging non-tax policies on efficiency is misguided. It makes the case that (1) people want more equality than we currently have; (2) people do not think of tax and transfers together and fungibly trade off between types of redistribution but instead have (conceptually) “separate public accounts” for taxation and other government activities; (3) in part, that is because people have an idea of “desert” that is linked to cash income, resulting in resistance to heavily redistributionist taxation; and thus (4) rather than striving for “optimal” taxation and efficient legal rules, the government should tilt non-tax policies (such as transportation policy) to increase their redistributive aspects. As the abstract states, this argument “turns standard economics prescriptions on their heads.”

The article is fascinating and a compelling read. The idea that people think separately about taxes and transfers seems very plausible. I had not thought before about the idea of desert applying to pre-tax income but it is quite persuasive. It adds a further layer to the argument I made in a 2004 article titled “The Entrepreneurship Effect.” That article argued that the Internal Revenue Code systematically favors business deductions over investment deductions; the difference between them is that the former require labor and the latter do not; and this reflects societal favoritism for entrepreneurship. The idea that “desert” particularly inheres in labor income adds a layer in that it helps source the societal value put on labor income and entrepreneurship. Continue reading “IU Tax Policy Colloquium: Liscow, “Equality, Taxation, and Law and Economics In the 21st Century””

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””

The IU Maurer Law School’s 2020 Tax Policy Colloquium

By Leandra LedermanCaptureTaxColloqFullPOsterJPG

Indiana University Maurer School of Law’s Tax Policy Colloquium will reconvene this Thursday, January 23, 2020. Michelle Layser from the University of Illinois College of Law will start us off, presenting her new paper titled “When, Where, and How to Design Community Oriented Place-Based Tax Incentives.” It’s a really interesting study of tax-expenditure design in the context of geography-based tax incentives. Prof. Layser’s paper includes original “heat maps” of Chicago showing areas with high poverty levels, areas with high numbers of low-wage jobs, areas that are eligible for the New Markets Tax Credit, and areas designated as Opportunity Zones. The talk promises to be really interesting!

The full schedule of talks is listed below, after the jump, and is also shown in the poster pictured above. Overall, this year’s line-up of speakers is more international than usual, following my wonderful Fulbright research stay at the University of Luxembourg in Spring 2019.

As I did the last time I ran the Colloquium, I’m planning to blog each workshop afterwards, with permission of the speakers. If you will be in Bloomington and are interested in attending one or more workshops, just let me know and I can add you to the email list or send you a particular paper once I receive it. (Most of the paper drafts will not be publicly available.) Continue reading “The IU Maurer Law School’s 2020 Tax Policy Colloquium”