Recent Papers on Taxation and Development

Development...

Reuven Avi-Yonah and Yoram Margalioth, Taxation in Developing Countries: Some Recent Support and Challenges to the Conventional View (unpublished paper, 2006).

Abstract: The general advice of international institutions such as the IMF and the World Bank given to developing countries over the past few decades has been to replace trade taxes with domestic consumption taxes, particularly value-added tax (VAT) and to maintain relatively high corporate income tax rates. This paper reviews recent literature that supports and challenges this conventional view.

Richard M. Bird and Eric M. Zolt, "Tax Policy in an Era of Rising Inequality: Redistribution via Taxation: The Limited Role of the Personal Income Tax in Developing Countries," 52 UCLA Law Review 1627-1695 (2005). (large: 4.5 meg).

Abstract: Inequality has increased in recent years in both developed and developing countries. Tax experts, like others, have focused on how taxes may reduce this growing inequality of income and wealth. This Article examines whether it makes sense for developing countries to rely on personal income taxes to redistribute income. We think not. This Article begins with some initial reflections on the redistributive role of the tax system. It then considers the relative success of developed and developing countries in using tax systems to redistribute income. Finally, the Article examines some alternatives in reforming the personal income tax, as well as options available to developing countries in designing and implementing more progressive fiscal systems.

Abdel Hamid Bouab, "Financing for Development, the Monterrey Consensus: Achievements and Prospects," 26 Michigan Journal of International Law 359-369 (2004). 

Abstract: The International Conference on Financing for Development, held in Monterrey, Mexico, in March 2002, marked the beginning of a new international approach to dealing with issues of development finance. Under the umbrella of the United Nations, all parties involved in the financing for development process contributed to creating a policy framework, the Monterrey Consensus of the International Conference on Financing for Development, to guide their respective future efforts to deal with issues of financing development at the national, regional, international, and systemic levels. This paper presents a summary of the major recommendations of the Monterrey Conference.

Neil Brooks & Thaddeus Hwong, The Social Benefits and Economic Costs of Taxation: A Comparison of Highand Low-Tax Countries (2006). 

Abstract: Tax cuts are disastrous for the well-being of a nation's citizens. Findings from this study show that high-tax countries have been more successful in achieving their social objectives than low-tax countries. Interestingly, they have done so with no economic penalty.

 

Christian Aid, The Shirts off their Backs: How tax policies fleece the poor (2005). 

Abstract:The debate about how poor countries fund their escape from poverty has hitherto focused mainly on calls for debt cancellation and increases in aid. This briefing focuses on the importance of taxation in poor countries as another and vital piece in the puzzle. New research from a global network of economists --- the Tax Justice Network --- points firmly towards the importance of taxation as a means of raising money to fund poverty eradication. But it also throws into sharp relief capitalism's 'Mr Hyde' persona, which undermines both the global economy and the taxing capability of poorer countries by dragging billions of untaxed money offshore.

 

Lory Nguyen, "Vietnam's 2005 Accession Bid to the WTO: The Harmful Effects Facing Less Developed Countries," 6 Journal of Law & Social Challenges 131-150 (2004). 

Abstract: Vietnam is adopting economic, political, and legal reforms to ensure the WTO approves its bid for membership. Vietnam and other less developed countries jump over numerous hoops to gain access to the WTO's current membership of 144 states. The tempting lure of an increased gross domestic production through membership in the WTO prevents Vietnam from recognizing other inherent harms membership will bring to its struggling economy. Trade with developed nations will potentially destroy Vietnam's diversity of agriculture as it shifts to a cash-crop export country. Vietnam and other countries that are far behind in technology and intellectual property areas are often greatly disadvantaged during negotiations setting international standards for IP protection.

Jinyan Li, "Development and Tax Policy: Case Study of China" (unpublished paper, 2006). 

Abstract: This paper examines the role of tax policy in China’s economic, social and legal development. It concludes that tax policy has played an important, but somewhat mixed, role in China’s economic development. Tax policy has not been effective in enhancing social development in terms of redistributing social income or encouraging socially-desirably activities. The relationship between legal development and tax policy is perhaps not as obvious. In China’s case, however, a case can be made that tax policy has had a positive impact on the development of a system of rule-by-law.

Kenneth L. Sokoloff & Eric M. Zolt, Inequality and Taxation: Evidence from the Americas of How Inequality May Influence Tax Institutions, 59 Tax L. Rev. 167 (2006).

Abstract: In this Article we have begun to explore how the extreme inequality that came to characterize nearly all Latin American countries during their colonial periods may influence how their tax institutions evolved. We seek to understand why the tax structures of Latin American countries are so distinctive today, even relative to other developing countries with roughly similar per capita incomes, and why their national governments historically have been so dominant and their local governments stunted.

 

Tax Treaties ...

Allison D. Christians, " Tax Treaties for Investment and Aid to Sub-Saharan Africa: A Case Study," 71 Brooklyn Law Review 639-700 (2005).

Abstract: The investment and aid goals of tax treaties are undermined by competing tax regimes, including domestic U.S. rules that provide relief of current U.S. tax burdens on foreign income earned by multinational companies. To the extent multinationals can escape U.S. taxation simply by investing abroad, the U.S. fosters tax competition throughout the world as foreign countries compete to attract the U.S. capital fleeing taxation at home. As a result of this international tax competition and a corresponding divergence in tax mix between developed and less developed countries, much of the tax ostensibly relieved under tax treaties no longer exists to a significant extent with respect to investment in many LDCs. As a result, traditional tax treaties with these countries may offer few commercial benefits to investors.

Allison Christians, "Taxing the Global Worker: Three Spheres of International Social Security Coordination," 26 Virginia Tax Review 81-123 (2006). 

Abstract: Income security programs form a part of the social and legal fabric of a majority of countries around the world, including all of the countries with which the United States has strong economic and commercial ties. Most workers can obtain some relief from multiple layers of income taxation, as well as a fair amount of certainty regarding their income tax treatment, either through statutory measures provided on a unilateral basis by individual countries or through an income tax treaty. This article examines how these two procedurally and substantively distinct methods of social security program coordination create a framework that is logical in some respects but that necessarily introduces overlaps, gaps, and administrative complexities, and suggests some ways to achieve a more cohesive approach to coordinating the taxes imposed on global workers.

Antonio Hugo Figueroa, "International Double Taxation: General Reflections on Jurisdictional Principles, Model Tax Conventions and Argentina's Experience," 59 Bulletin for International Fiscal Documentation 379-386 (August/September 2005)

Abstract: The source principle ought to prevail over the worldwide income principle because it reduces the risk of undertaxation. In any event, tax treaties should not follow the OECD Model, which was drafted when international double taxation was common and not properly dealt with by domestic legislation. It unfairly causes resources to be shifted from poor countries to rich countries and facilitates international tax avoidance and evasion.

Deborah L. Swenson, "Why Do Developing Countries Sign BITs?," 12 U.C. Davis Journal International Law & Policy 131-155 (2005). 

Abstract: A remarkable expansion in the number of signings of bilateral investment treaties (BITs) marked the 1990s. This expansion in the number of treaty obligations presents a puzzle, since a number of studies have come to question whether the receipt of new foreign investment flows rewarded signatory countries. I find two factors that are likely to influence the observed benefits of country decisions to enter into BITs. First, countries that had already received larger stocks of foreign investment were more likely to sign BITs than were countries that had been less successful in attracting foreign investment. Second, when controlled for timing, data from the late 1990s suggests that BIT signing did help developing countries attract a larger volume of foreign investment.

Capital Flight ...

Harry Grubert, "Tax Credits, Source Rules, Trade, and Electronic Commerce: Behavioral Margins and the Design of International Tax Systems," 58 Tax Law Review 149-190 (2005). 

Abstract: This Article describes the array of behavioral margins that international tax rules have to address, including the choice of where to invest tangible and intangible capital, the choice between production at home or abroad, the choice between arm's length transactions or transactions with related parties, and so on. The analysis indicates that the current U.S. rules lack a consistent conceptual basis, either in terms of efficiency or fairness.

Bruce Zagaris, "Revisiting Novel Approaches to Combating the Financing of Crime: A Brave New World Revisited," 50 Villanova Law Review 509-582 (2005). 

Abstract: This paper discusses recent approaches by the United States and international organizations in combating the financing of crime. In particular, it looks at efforts to construct an international financial enforcement regime. The international community and countries such as the United States have enacted a substantial amount of new legislation and have developed initiatives to combat new transnational crimes, such as cybercrime, intellectual property crimes, international tax crimes, terrorism and organized crime. Globalization, free trade and information technology have facilitated borderless transnational criminal operations.

Code of Conduct...

Larry Cata Backer, "The United Nations' Norms on the Responsibilities of Transnational Corporations as a Harbinger of Corporate Social Responsibility in International Law," 37 Columbia Human Rights Law Review 287-389 (2006). 

Abstract: This Article considers the ramifications of current efforts to internationalize the regulation of corporate social responsibility. The primary focus will be on the United Nations' efforts to regulate "transnational corporations" through the development of its Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights. The Norms point to potential far reaching changes in global consensus with significant ramifications for American domestic corporate law. The Article ends with a consideration of the possible collision between the methodology of the Norms and the principle of democratic governance that forms the basis of a public policy of corporate and state organization, and the convergence of governance norms for states and non-state entities.

Isabella D. Bunn, "Global Advocacy for Corporate Accountability: Transatlantic Perspectives from the NGO Community," 19 American University International Law Review 1265-1306 (2004). 

Abstract: This article reviews ten key areas of policy related to corporate social responsibility, highlighting some of the questions in the debate and assessing the prospects for a global legal framework. The quest for greater legal accountability of corporations may be understood as part of the international community's commitment to the international rule of law. The law, of course, is not without its limits; but it is one means of advancing the realization of international justice. Many NGOs would argue that global companies, as powerful economic, social, and political actors, must increasingly be brought within the law's domain.

Sean D. Murphy, "Taking Multinational Corporate Codes of Conduct to the Next Level," 43 Columbia Journal of Transnational Law 389-433 (2005). 

Abstract: Over the course of the past thirty years, numerous non-state actor codes of conduct have emerged that seek to promote socially responsible conduct of multinational corporations (MNCs), especially in the developing world. The objective of such codes is to prevent harm or mistreatment of persons or things caused by MNC operations (e.g., the existence of unhealthy worker conditions in an MNC factory). Many criticisms have been leveled against codes of conduct. This Article suggests a new approach to thinking about these codes, one that might enhance their legitimacy, effectiveness, and credibility. Greater thought should be given by all stakeholders to an increased role for governments in the development and implementation of such codes.

Insop Pak, "International Finance and State Sovereignty: Global Governance in the International Tax Regime," 10 Annual Survey, International & Comparative Law 165-206 (2004). 

Abstract: This paper begins with a description of globalization and analyzes its nature and effects on the financial environment. Implications of globalization for state sovereignty are also addressed. In particular, global challenges to national fiscal sovereignty are discussed. In this context, this writing clarifies the concept of tax jurisdiction and reviews problems with the national tax systems such as double taxation, and taxpayers' cross-border arbitrage which results from the increased mobility of capital associated with financial globalization. This article searches for the measures to enhance global governance in the international tax regime.

Territorial Regimes...

Edward D. Kleinbard, "Throw Territorial Taxation From the Train," Tax Notes, February 5, 2007, pp. 547-564.

Abstract: This report reviews the case for replacing the Internal Revenue Code's complex rules for taxing foreign direct investment with a territorial tax system. The report argues that a territorial tax system would vastly exacerbate crossborder transfer pricing problems by rewarding successful transfer pricing gamers as "instant winners" of the tax lottery. In light of the overwhelming evidence of pervasive transfer pricing problems today, Kleinbard argues that this alone is sufficient reason not to move to a territorial tax system. Kleinbard believes a "full-inclusion" tax system would eliminate the tax frictions on repatriating foreign earnings, and would genuinely be simpler than current law or than a territorial tax system and would significantly reduce transfer-pricing issues.

James R. Repetti, "Will U.S. Investment Go Abroad in a Territorial Tax: A Critique of the President's Advisory Panel on Tax Reform," 8 Florida Tax Review — (2006) (forthcoming), Available at SSRN: http://ssrn.com/abstract=958860 (January 23, 2007).  

Abstract: This article critiques the Report of the President's Advisory Panel on Federal Tax Reform. The Report recommends the U.S. adopt a territorial tax system that would exclude income earned by U.S. taxpayers actively conducting foreign businesses. The Report incorrectly uses the absence of evidence of an adverse effect to assert that there will be no adverse effect. The Report justifies its recommendation for a territorial tax by asserting that the tax will eliminate the tax impediment to repatriating earnings and will make U.S. multinationals more competitive. This article explains that the Report does not consider potential costs of a territorial tax that make it impossible to determine the net welfare impact of a territorial tax. As a result, this article concludes that the Report fails to make a persuasive case for such a tax.

Corporate Tax ...

Reuven S. Avi-Yonah, "Corporations, Society, and the State: a Defense of the Corporate Tax," 90 Virginia Tax Review 1193-1255 (2004).

Abstract: This Article examines the relationship among corporations, society, and the state through the lens of the corporate income tax. The corporate income tax offers a unique opportunity to examine this broader issue because, first, it is one way in which the state intervenes directly in the affairs of corporations; and second, because various theories of why the corporate income tax exists illustrate the dichotomy between the real and aggregate views of the corporation. The corporate tax today is seen primarily as an indirect way of taxing shareholders.

Kim Brooks, "Learning to Live with an Imperfect Tax: A Defence of the Corporate Tax," 36 University of British Columbia Law Review 621-672 (2003). 

Abstract: A separate corporate tax might seem anomalous to corporate law lawyers. Modern financial theory and recent theoretical advancements in corporate law have been premised on the assumption that all forms of legal enterprise are simply a nexus of contracts among individuals such as shareholders, creditors, suppliers and employees. This paper argues that it is not necessary to subscribe to a belief that the corporation is an entity separate from these contracting individuals to recognize that the separate corporate tax plays a number of important, necessary, and irreplaceable roles in a modern tax system. It is suggested that the cumulative force of the arguments in favour of maintaining the separate corporate tax is often understated; the costs and disadvantages of the tax are often exaggerated.

Administration...

Wei Cui, "China's New Personal Income Tax Return Filing Regime," 45 Tax Notes International 977-985 (March 12, 2007). 

Abstract: This article will attempt to assess China's new return filing regime from three different perspectives. First, it reviews the main changes in applicable law brought by the new return filing procedures. Second, it ventures some predictions regarding the impact that the new compliance regime, along with other recent and imminent changes in Chinese tax law, could have on the incidence of the PIT. Third, it discusses what the new return filing requirement implies for the overall PIT compliance and the administrative structure for the PIT.

Other...

Reuven S. Avi-Yonah, "All of a Piece Throughout: the Four Ages of U.S. International Taxation," 25 Virginia Tax Review 313-338 (2005).

Abstract: This paper divides up the history of U.S. international taxation into four periods, on the basis of what was the basic theoretical principle underlying the major legislative enactments made in each period. The last period began with the decision to cooperate with the OECD's harmful tax competition project in 1998, and is marked by a continuous attempt to coordinate residence and source taxation to prevent both double taxation and double nontaxation.

Bibliography...

Hugh Ault, "Tax Competition: What (If Anything) To Do About It?," in 26 International and Comparative Taxation: Essays in Honour of Klaus Vogel 1 (Paul Kirchhof et al. eds., 2002).

Reuven Avi-Yonah, "Globalization, Tax Competition, and the Fiscal Crisis of the Welfare State," 113 Harvard Law Review 1573 (2000).

Geoffrey Brennan & James M. Buchanan, The Power to Tax: Analytical Foundations of a Fiscal Constitution (1980)

Frances M Horner, "Do We Need an International Tax Organization?," 24 Tax Notes Int'l 179 (2001).

Javier Salinas, "The OECD Tax Competition Initiative: A Critique of its Merits in the Global Marketplace," 25 Houston Journal of Inernationa'l Law 531 (2003).

Miranda Stewart, "Global Trajectories of Tax Reform: The Discourse of Tax Reform in Developing and Transition Countries," 44 Harvard International Law Journal 139 (2002).