Lavigne & VanRybroek on Language, Communication and Access to Justice

This recently posted article by Michele Lavigne and Gregory VanRybroek, entitled 'He Got in My Face so I Shot Him': How Defendants' Language Impairments Impair Attorney-Client Relationships, while not directly tax-related, presents a very interesting take on what it means to have meaningful access to justice, which is a major aspect of thinking about what it means to say we are governed by the rule of law. I am still more optimistic than PJ about this concept, but I have grave fears for the future of law in the face of the many severe procedural impairments we have been seeing of late. This paper outlines in a deep and rich way some of the fundamental components necessary to a just legal system, but it also just a very well written and fascinating account of the role of language and communication in expressing and implementing law. Abstract:

Language impairments -- deficits in language and the ability to use it -- occur at starkly elevated rates among adolescents and adults charged with and convicted of crimes. These impairments have serious ramifications for the quality of justice. In this article, we focus specifically on the effects of a client's language impairment on the attorney-client relationship, the constitutional realm that suffers most when a client lacks essential communication skills. The effects of language impairment can be seen in a client's ability to work with a lawyer in the first place, tell a story, comprehend legal information, and make a rational and informed decision. This article shows how these effects play themselves out within the attorney-client relationship, and the impact on the lawyer's ability to meet her constitutional and ethical obligations. We also propose concrete steps for improving the quality of communication within the attorney-client relationship. While attorneys will obviously shoulder much of the responsibility, judges and prosecutors are not exempt. A client's poor communication skills are not simply be "the lawyer's problem," but a matter of great concern for all stakeholders in the justice system.

Collected Scholarly Work by Ivor Richardson being posted to SSRN

The Victoria University of Wellington SSRN Legal Research Papers has begun to publish the collected scholarly work of the Right Honourable Sir Ivor Richardson, one of the leading tax judges of the late twentieth century. He already has 96 papers posted, and over the rest of 2013, fifty papers are planned, in about ten issues, with more to come in future years. This is a tremendous resource for anyone looking at historical or comparative trends in international and national tax policy development: the most recent issue of the working paper series includes some older articles which are as timely now as they were when first published, for example:

"Attitudes to Income Tax Avoidance"  Inaugural Address, Victoria University of Wellington, 1967 This paper discusses the growing importance of income tax law, the corresponding increase in tax avoidance, and the different perspectives on tax avoidance. A brief history of income tax is given, and an analysis of the competing objectives of an income tax system, its inherent problems, and the possible solutions to these. There follows an explanation of what is meant by tax avoidance, the features of the New Zealand income tax system which create opportunities for tax avoidance, and the arguments against permitting this on a large scale. The paper then outlines the attitudes towards tax avoidance of the legislature, judiciary, revenue, and taxpayers, before concluding with an observation as to the increased interest which income tax law holds for both lawyers and teachers and students of law.  "Appellate Court Responsibilities and Tax Avoidance"  2 Australian Tax Forum 3, 1985 Victoria University of Wellington Legal Research Paper Series Richardson Paper No. 3 IVOR RICHARDSON, Victoria University of Wellington - Faculty of Law Email: richardsons@xtra.co.nz The subject raises two questions for consideration: the interpretation of tax legislation, and the characterisation of transactions for tax purposes. This paper briefly outlines the problems of drafting tax legislation, before describing the different judicial approaches to interpretation of tax legislation, including the scheme and purpose approach of New Zealand courts. In considering when the scheme and purpose of the legislation will necessitate re-characterisation of transactions for income tax purposes, there is a discussion of the business purpose requirement, and an analysis of the tax effect of the assignment of personal exertion income to a third party. Concerning the manner in which the character of a transaction is to be determined at law, the paper provides a discussion on form and substance, analysing the English ‘fiscal nullity’ approach and its reception in other jurisdictions, and concluding that such an approach must be firmly grounded in the scheme and purpose of the legislation. Much more at Ivor Richardson's SSRN page, linked above. Thanks to Prof. John Prebble for alerting me to this info.

New series of papers on why government can and should bring financial services into the tax base

The Victoria University of Wellington (Australia) has a new SSRN issue of interest, featuring a series of papers by Sybrand van Schalkwyk and the ever-prolific John Prebble, all on the topic of consumption tax and financial services. The first of these is the big picture:

"Value Added Tax and Financial Services"  Asia-Pacific Tax Bulletin, Vol. 10, pp. 363-370, 2004 Victoria University of Wellington Legal Research Paper No. 29/2013 Value added tax (VAT) is a relatively modern development. Designers of VAT recognized from the outset that the way in which financial institutions are remunerated creates significant difficulty when the tax is applied to their services. Administrative difficulties relate to imposing invoice-based VAT on service fees charged as part of the margin between buy and sell rates. Theoretical reasons relate to arguments that financial services should not be taxed under a consumption tax because, it is argued, financial services are not consumed in the way in which goods and services are consumed. Because of these difficulties, most jurisdictions have opted to exempt financial services from VAT. However, the commonly accepted reasons to exempt financial services from VAT are not compelling, since financial services are no different in relevant respects from other services. Moreover, there are methods by which financial services could be brought within the VAT base. Furthermore, although exemption is the simplest way for a VAT to treat financial services, it causes significant distortions in the economy.  This paper is of special interest to me because it confirms my own view that societies are increasingly accepting tax systems that intentionally tax the "easy-to-tax" most vigorously, the "hard-to-tax" much less vigorously and more randomly, and the "impossible-to-tax" not at all, and that these categories have been intentionally constructed from regulatory decision-making that renders various activities to a given category in systematic and purposeful ways. There are fundamental justice issues at stake in these regulatory outcomes. If Prebble and van Schalkwyk are correct that exempting financial services from VAT is a policy choice that has been made on the basis of an unexamined theory that these flows are hard or impossible to tax which in turn has been decided because of a failure to institute measures that would make them easy (or at minimum easier) to tax, then the failure to include financial services within existing VAT systems is a grave source of injustice within that tax policy choice (that is, in addition to and apart from the question about whether consumption taxation is itself a violation of justice in the exercise of taxation by states). The papers that follow focus on various ways to increase the coherency of the taxation of financial flows--what I would suggest is an effort to show us that financial flows could in fact be easier to tax, if not "easy-to-tax," given various regulatory reforms: "Defining Interest-Bearing Instruments for the Purposes of Value Added Taxation"   Asia-Pacific Tax Bulletin, Vol. 10, pp. 418-426, 2004Victoria University of Wellington Legal Research Paper No. 30/2013  This is the second of a series of four articles on the taxation of financial services under a value added tax. The first article considered whether, from a theoretical viewpoint, financial services should be included under a value added tax. It concluded that the arguments in favour of treating financial services in the same manner as any other service outweighed the arguments against doing so. This second article considers the definition of interest bearing financial instruments in some detail. It also considers the kinds of activities that qualify as financial services in relation to the instruments. The definition of financial services is important where a different type of treatment is applied to financial services. If financial services were taxed like any other service, then no definition would be needed. However, where, as in New Zealand, supplies of financial services can be exempted, the definition of financial services becomes very important. Alternatively, if some financial services are to be zero rated or taxed but not others, then it is necessary to have a global definition of financial services followed by individual definitions of the particular kinds of service that are to be brought within the tax base one way or the other. This article begins by considering interest-bearing instruments.  "Imposing Value Added Tax on Interest-Bearing Instruments and Life Insurance"  Asia-Pacific Tax Bulletin, Vol. 10, pp. 471-468, 2004 Victoria University of Wellington Legal Research Paper No. 31/2013  Exemption of financial services from Value Added Tax (VAT) is commonly accepted as being an anomaly in the New Zealand goods and services tax legislation. While exempting financial services from VAT is attractive to the legislature because it is a simple way of addressing the difficulties of applying VAT to financial services, it causes significant distortions, for instance tax cascading, which in turn causes price distortions. The application of VAT to interest-bearing financial instruments and life insurance is complicated by the way in which financial intermediaries charge for these services. The first part of this article investigates how interest-bearing instruments can be taxed under VAT, and the second part how life insurance can be taxed under VAT. There are several options for the treatment of interest-bearing instruments. They can be exempted, zero-rated, or included in the tax base. In this last category, there are three possible methods of including interest-bearing instruments: the invoice, cash flow, and truncated tax flow systems. The last is recommended because policy makers have come to realize that the cash flow system cannot be applied without significant modification.  "Imposing Value Added Tax on the Exchange of Currency"  Asia-Pacific Tax Bulletin, Vol. 10, pp. 469-483, 2004 Victoria University of Wellington Legal Research Paper No. 32/2013  Exemption of financial services from Value Added Tax (VAT) is commonly accepted as being an anomaly in the New Zealand goods and services tax legislation. While exempting financial services from VAT is attractive to the legislature because it is a simple way of addressing the difficulties of applying VAT to financial services, it causes significant distortions, such as tax cascading, which in turn causes price distortions. The application of VAT to services that bring about the exchange of currency is one instance where financial services could be included in the VAT base. Services bringing about the exchange of currency are a species of financial service, but are inherently different from other financial services since they are relatively simpler than other financial services. Reasons advanced for exempting financial services in general do not necessarily apply to services bringing about the exchange of currency. Bravo to the authors--this represents a lot of work and adds much to the discussion of how economically-integrated yet politically independent nations can approach the subject of taxation from the perspective that justice matters in policy decisions.

New Book: Looking through the Corporate Structure

Saurabh Jain has published Effectiveness of the Beneficial Ownership Test in Conduit Company Cases.  Abstract:

Since the introduction of the term “beneficial owner” to the OECD Model Tax Convention in 1977, courts and the OECD have struggled to interpret the term, and to use it as a test for deciding conduit company cases. 

If applied in a formal legalistic sense, the beneficial ownership test has no effect on conduit companies because companies are legal persons that, in law, own both their assets and their income beneficially. By contrast, in a substantive sense, a company can never own anything because economically a company is no more than a matrix of arrangements that represents individuals who act through it.

Faced with these opposing considerations, courts and the OECD have adopted surrogate tests for the beneficial ownership test. These tests, however, were originally meant to counter different kinds of tax planning strategies. They did not indicate the presence of beneficial ownership. Therefore, they are inappropriate for determining the correct tax treatment of passive income derived by conduit companies. 

This book examines the conflict between the general policy of double tax treaties embodied in the beneficial ownership requirement and the concept of corporations. The work highlights the shortcomings of surrogate tests with the help of analyses of reported conduit company cases. It offers an alternative approach for interpreting and applying the beneficial ownership test. It contains a critique of the work of the OECD Committee on Fiscal Affairs before the insertion of the term, and suggests appropriate amendments to relevant parts of the official Commentary on the OECD Model Tax Convention.

John Prebble alerted me to this book and he says:

The book is particularly timely because it addresses one of  the principal means by which multinational companies siphon profits to low-tax jurisdictions. One apparently obvious way to address the conduit company problem is for states to re-draft and to renegotiate their tax treaties. But that is easier said than done, and usually very time-consuming.

Until there can be wholesale re-drafting of treaties, the book argues persuasively that within current legal frameworks it is not only possible but legally correct for tax administrations and courts to interpret beneficial ownership provisions in tax treaties purposively. The result would be to thwart the use of stepping-stone strategies that shift profits from high-tax countries in Europe, Asia, and the Americas to low-tax jurisdictions.

The book adopts a comparative approach, analysing reported cases from a number of jurisdictions, comparing judgments that have interpreted treaties purposively with formalistic reasoning that creates loopholes that states never intended.

I agree, this is a particularly timely topic. It's technically and conceptually difficult, and it is difficult to solve as a matter of law as well.  The book is available at the link above, and at a 20% discount until May 31 using promotional code EBOT_2013.

Recent academic scholarship on FATCA

It seems to me that academic attention to FATCA is on the rise. Here is a roundup of recent lectures & publications by law professors (and one student):

Steven Dean delivered a lecture at the University of Antwerp entitled FATCA's Unanswered Questions, description:

Like an asteroid passing close to Earth, the threat of FATCA's implementation has caused great anxiety and much activity. Despite the existence of important questions about FATCA's implementation, it has caused even some of the most reluctant foreign governments to embrace information reporting obligations. Tracing FATCA's origins offers useful insights regarding its likely effects. Even if it ultimately "misses" as a commitment device, FATCA will have a lasting impact on global tax administration.

Susan Morse published a reply to my article on the dubious legal pedigree of FATCA agreements, entitled Why FATCA Intergovermental Agreements Bind the U.S. Government, abstract:

Bilateral intergovernmental agreements (IGAs) relating to the Foreign Account Tax Compliance Act (FATCA) and entered into by the U.S. government reduce the reach of FATCA's withholding tax regime, including the reach of that regime as applied to non-U.S. taxpayers. The validity of these IGAs has been questioned. Yet IGAs have a strong case for binding status as valid congressional-executive agreements or treaty-based agreements. In addition, regardless of IGAs’ status as international agreements, they should bind the U.S. government as valid administrative guidance.

Frederic Behrens (law student) published Using a Sledgehammer to Crack a Nut: Why FATCA Will Not Stand, abstract:

The Foreign Account Tax Compliance Act (FATCA) became law in 2010 and is an important development in combatting income tax evasion. Under FATCA, American individual and corporate taxpayers must provide comprehensive information to the Internal Revenue Service (IRS) regarding foreign bank accounts. In addition, a more controversial part of FATCA requires foreign banks to report directly to the IRS certain information about financial accounts held by American taxpayers. 

These drastic changes in American tax policy are alarming to the international financial community. International banks are forced to implement expensive compliance programs to satisfy the information reporting requirements. An increasing number of foreign financial institutions will no longer want any involvement with American citizens or investments. Furthermore, Americans living abroad might be forced to denounce their American citizenship in order to gain access to insurance and basic banking options.   

In response to the unilateral imposition of FATCA, foreign governments and banks may lobby for its repeal. This Comment examines factors in the global movement to repeal FATCA and suggests several workable solutions that would be agreeable to the United States and foreign nations. Specifically, this Comment suggests how investment income withholding and increased IRS enforcement actions are a better solution to prevent income tax evasion.

And Itai Grinburg delivered a new paper at NYU, entitled Emerging Countries and the Taxation of Offshore Accounts, abstract:

A new international regime in which financial institutions function as cross-border tax intermediaries is emerging. The contours of that regime will be established during a narrow window of opportunity over the span of the next few years. The resulting regime will have especially important consequences for emerging countries. A uniform, multilateral automatic information exchange system would improve both these jurisdictions’ ability to tax the offshore accounts of their residents and their capacity to tax certain domestic-source income from capital. 

Interestingly, multinational financial institutions’ and emerging countries’ concerns with the emerging international regime are largely aligned. As a result, they may find that they are improbable allies in the battle over taxing offshore accounts. With the G-20 as an agenda-setter and international financial law as the model, a governance structure for an automatic information exchange regime that could be useful to emerging countries’ tax administrations and lower multinational financial institutions’ compliance costs could materialize. The paper explores the necessary architecture, as well as steps emerging countries may take to help that architecture develop.

Many different perspectives emerging. Have I missed any recent scholarship? Please do bring it to my attention if so.

The Boundaries of Tax Justice

I posted a draft of this paper on SSRN some time ago but neglected to post it here, so here it is. I argue that because governments chase wage-earners and consumers doggedly while selectively overlooking or ignoring other taxpayers, the imposition of income taxation as it is practised by states today is fundamentally unjust. Abstract:

The story of our time may be the awakening of society to an epidemic of global tax dodging by the world’s elites. Citizens, watchdog groups, and even government officials are puzzled, frustrated, and sometimes outraged by the phenomenon, wondering where the nation-state lost its way in regulating its people and its resources, and why it is standing by, apparently helplessly, as its tax base erodes while austerity measures undermine the welfare state. This paper demonstrates that the sequence of tax base erosion-austerity-welfare state erosion is a story about a crisis of tax justice. It does so by revisiting how Canada's historic Royal Commission on Taxation, in its search for guiding principles for tax reform, turned to tax justice as the central component for any tax system. It shows why nations have consistently failed to meet these guiding principles, instead taxing the easy-to-tax more or less comprehensively, the hard-to-tax more or less randomly, and the impossible-to-tax not at all. It demonstrates that the result is that no state today imposes taxation justly: instead, taxation as exercised around the world today is overwhelmingly characterized by arbitrariness and injustice. The paper concludes that if governments cannot or will not pursue justice in taxation, they have at minimum a duty to explain to society why this goal is no longer worthy of pursuit.

This paper includes a discussion of who should be considered a "taxpayer" by a state. I argue that citizenship-based taxation is unjust from both a human and statist perspective, and I therefore make the case for residence-based taxation. As always, comments are welcome.

Add to summer reading list: Multinationals and Human Rights

John Ruggie has published Just Business: Multinational Corporations and Human Rights.  Abstract:

One of the most vexing human rights issues of our time has been how to protect the rights of individuals and communities worldwide in an age of globalization and multinational business. Indeed, from Indonesian sweatshops to oil-based violence in Nigeria, the challenges of regulating harmful corporate practices in some of the world's most difficult regions long seemed insurmountable. Human rights groups and businesses were locked in a stalemate, unable to find common ground. In 2005, the United Nations appointed John Gerard Ruggie to the modest task of clarifying the main issues. Six years later, he had accomplished much more than that. Ruggie had developed his now-famous "Guiding Principles on Business and Human Rights," which provided a road map for ensuring responsible global corporate practices. The principles were unanimously endorsed by the UN and embraced and implemented by other international bodies, businesses, governments, workers' organizations, and human rights groups, keying a revolution in corporate social responsibility. 

Just Business tells the powerful story of how these landmark "Ruggie Rules" came to exist. Ruggie demonstrates how, to solve a seemingly unsolvable problem, he had to abandon many widespread and long-held understandings about the relationships between businesses, governments, rights, and law, and develop fresh ways of viewing the issues. He also takes us through the journey of assembling the right type of team, of witnessing the severity of the problem firsthand, and of pressing through the many obstacles such a daunting endeavor faced.

Excellent timing, with all the world watching whether and how governments are going to increase transparency with respect to MNCs and their local and global dealings.

Kahng & Fellows: Undertaxed Business Owners and Overtaxed Workers

Lily Kahng & Mary Louise Fellows recently published Costly Mistakes: Undertaxed Business Owners and Overtaxed Workers, in which they take issue with traditional attempts to distinguish between outlays that constitute "investment", which may be used to reduce income (sooner or later) and those that constitute "consumption", which never get to be used to reduce income. Every tax professor must address this line-drawing issue in the first tax course and in my experience students are often frustrated by  number of clearly arbitrary designations. Typical example: why is it that a consultant's outlay for box seats to woo clients is an "investment" but my law school tuition is "consumption"?  Lily & Mary Louise's answer: because the powers that be have in general determined that businesses only make outlays for the pursuit of profit, while employees are equated with consumers, so their outlays must typically be considered personal. I am glad to see Lily & Mary Louise take on this line-drawing challenge, and I think they do a good job showing the normative failures that have been allowed to direct tax policy in this regard.

From the abstract:

This Article advocates fundamental changes in the federal income tax base by systematically challenging conventional understandings of consumption and investment. As signaled by its title, “Costly Mistakes,” this Article’s thesis has to do with the disparate treatment of expenditures incurred by business owners and workers. Where the current tax law treats a business owner’s expenditure as investment, the Article sometimes finds consumption and questions why the law should allow the expenditure to be deducted. Where the tax law treats a worker’s expenditure as consumption, the Article sometimes finds investment and questions why the law does not allow at least a partial deduction. 

...[T]he Article demonstrates that the deference the tax law traditionally has accorded business owners results in their undertaxation. Through an analysis of the tax law’s treatment of workers, it further shows how its structural and substantive rules treat workers primarily as consumers, rather than as producers, and why that results in their overtaxation. 

The Article then investigates the economic inefficiencies produced by the tax law’s generous treatment of business owners’ outlays and its unduly restrictive treatment of workers’ outlays. It goes on to suggest how to scrutinize and reform the tax treatment of workers and how to extend that approach to business owners with far-reaching implications. Finally, the Article relates the undertaxation of business owners and the overtaxation of workers to the broader social policy discussions concerning the high rate of unemployment in the private sector and the escalating deficits in the public sector. 

It concludes that the success of the U.S. economy in the twenty-first century requires the tax law to treat both business owners and workers as producers. It further concludes that the tax law’s continuing failure to acknowledge that business owners and workers are both consumers and producers undermines the goals of efficiency and fairness.

In addition to making the normative case against preserving the status quo on both efficiency and ability to pay grounds, the article walks through the major issue areas covered in an intro tax course, so this looks like a good candidate to add to any intro tax canon. 

Journal Issue: Mobile Money in Developing Countries

Recently the Washington Journal on Law Technology & the Arts issued a symposium issue entitled "Mobile Money Symposium 2013." Description:

This special issue of the Washington Journal of Law, Technology & Arts contains papers contributed to a conference held at the University of Washington School of Law on April 20, 2012. The conference, entitled Mobile Money in Developing Countries: Financial Inclusion and Financial Integrity, was organized by the University of Washington School of Law with the support of the Linden Rhoads Dean’s Innovation Fund, Deakin University School of Law, Australia, and the United Nations Commission on International Trade Law (UNCITRAL).

All of the papers are available for download. They are:

• The 2012 Revised FATF Recommendations: Assessing and Mitigating Mobile Money Integrity Risks within the New Standards Framework by Louis de Koker; 
• Governance of Global Mobile Money Networks: The Role of Technical Standards by Jane K. Winn; 
• Privacy and Security Concerns Associated with Mobile Money Applications in Africa by Andrew Harris, Seymour Goodman, and Patrick Traynor; 
• The Role of UNCITRAL Texts in Promoting a Harmonized Legal Framework for Cross-Border Mobile Payments by Luca G. Castellani; 
• Mobile Money as an Engine of Financial Inclusion and Lynchpin of Financial Integrity by Claire Alexandre and Lynn Chang Eisenhart; 
• The Role of Anti-Money Laundering Law in Mobile Money Systems in Developing Countries by Emery S. Kobor; 
• M-Payments in Brazil: Notes on How Country Background May Determine Timing and Design of Regulatory Model by Gilberto Martins de Almeida; 
• Safaricom and M-PESA in Kenya: Financial Inclusion and Financial Integrity by Mercy W. Buku and Michael W. Meredith; 
• Mobile Money, Financial Inclusion and Financial Integrity: The South African Case by Vivienne A. Lawack-Davids; 
• Reporting of Suspicious Activity by Mobile Money Service Providers in Accordance with International Standards: How Does it Impact on Financial Inclusion? by Miriam Goldby; and 
• Mobile Payments In The U.S.: How Disintermediation May Affect Delivery of Payment Functions, Financial Inclusion and Anti-Money Laundering Issues by Erin F. Fonté.

The one on Safaricom looks like a fascinating case study:

The recent and widespread availability of affordable mobile phone technology in developing countries has paved the way for the development of a number of mobile money and electronic remittance services. One of the most successful of these services is Safaricom’s M-PESA program, launched in the East African nation of Kenya in March 2007. Since then, the program has successfully enrolled 15.2 million users, transferred more than US$1.4 trillion in electronic funds, and contributed significantly to poverty alleviation and financial inclusion efforts in rural Kenya. This Article seeks to trace the development of M-PESA in Kenya, provide a snapshot of the Kenyan implementation of and experience with the program, and consider the role that services like M-PESA might play in national and international anti-money laundering and counter-terrorist financing efforts. 

Interesting throughout.

Tax, Law and Development

Yariv Brauner and Miranda Stewart have posted their introductory chapter to Tax, Law and Development, a book to which I am contributing with a chapter on global tax activism.  Here is the abstract:

This book is the first collection of independent legal scholarship exploring the relationship between tax, law and the quest for human development. While acknowledging fully the challenge of tax competition in a global economy, this book rejects calls to end taxation of mobile capital even if this may be perceived to be a theoretical economic inevitability due to the difficulty of collection in an uncooperative environment. New approaches to economic development suggest we must abandon – or significantly downplay – the dominant normative approaches to tax policy, replacing these with contextualized, diverse, partial and incremental tax law reform approaches that take seriously the legal, social and political context. The innovative scholars who contribute to this book examine the role of law in national and international tax regimes across a range of topical tax issues, from the perspective of countries including China, Brazil, South Africa, India and the United States. Chapters discuss the reform of tax laws that are central to economic globalization, including tax incentives for foreign direct investment, their relationship with tax treaties and other international tax law, the problem of how to address fundamental equity concerns, and institutions of budgeting, tax law making and administration in a global era.

They conclude:

The variety of chapters presented in this book forcefully demonstrate the deep need and the wealth of opportunities for progress in this avenue of study of tax, law and development. The primarily economic and ‘one size fits all’ focus of tax policy to date has not been sufficiently matched by detailed legal, historical and contextual policy analysis that can fortify and enrich it, supporting the implementation of tax reforms within real world social and legal structures. A range of alternative approaches to development arise out of the critique presented by the authors in this book and surveyed in this Introduction. The chapters call for a direct acknowledgement of the challenges and contradictions of tax law reform for development, and emphasize patience, diversity, a trial-and-error approach, transparency, legitimacy or ‘ownership’ and constant feedback and evaluation in tax reform approaches. Although less apparently streamlined and ‘correct’, these alternative approaches to tax, law and development do not imply a loss of focus, even if they are slow, difficult to implement, and lack the appeal of promised panacea. Moreover, they often require careful coordination within and between countries that does not exist in the current international tax regime. This new approach does, however, promise some actual success. The goal of this book is unashamedly idealistic, to serve as the foundation that would jump-start further scholarship, and support real change in the global and national tax laws for economic development.

I'm looking forward to seeing the book in print.

Shaffer on Transnational Legal Ordering

Gregory C. Shaffer has a new book of interest: Transnational Legal Ordering and State Change. Abstract:

Law can no longer be viewed through a purely national lens. Transnational legal ordering affects the boundary of the state and the market, the allocation of power among national institutions, the role of professions and their expertise, and associational patterns that provide new normative frames. This book breaks new ground for understanding the impacts of transnational legal ordering within nation-states in today's globalized world. The book addresses the different dimensions of state change at stake and the factors that determine these impacts. It brings together leading scholars from sociology and law who study the effects of transnational legal ordering within different countries. Their case studies illustrate how transnational legal ordering interacts with national law and institutions in different regulatory areas, and cover anti-money laundering, bankruptcy, competition, education, intellectual property, health, and municipal water law and policy in different countries. The book explains the extent and limits of transnational legal ordering in today's world.

Tax law is not specifically covered but international tax law folks will find much of interest here for thinking about how law emerges through networks and norms and evolves through transplantation into national spheres.

H/T Int'l Law Reporter

Up Goer Your Law Review Article

The Faculty Lounge throws down a challenge to legal academics: can we tell people what we are talking about in words that are easy to understand?

Cedar Riener (follow him @criener), an enterprising psychology professor, has begun a Tumblr, Up Goer Your PhD, collecting doctoral dissertation abstracts written in layman's terms, as described above. His project is a riff on this brilliant layman's diagram of Saturn 5, otherwise known — when one is limited to the most common 1,000 words — as "Up Goer 5." People using Up Goer to explain a variety of other complicated concepts can be found on Twitter at #UpGoerFive. Many Up Goer projects turn out to be hilarious, and they're fun to create, too.

But there's a serious point here as well. Jargon (including technobabble, neurobabble, and other babbles) can be efficient shorthand when conversing among other experts. But let's be frank: it can also conceal some serious B.S., not only from our readers, but also from ourselves.

That's right, and I spend a lot of time trying to stop my own tendency toward jargon in thinking, in teaching, and in writing. This is not easy when your world is dominated by code sections, acronyms, and hyperlexis. I suspect I fall short most of the time, in fact, I just did, five times in that last sentence alone. Sigh.  In my defense, "tax" is not even on the list of the "ten hundred most used words."

Paper: Putting the Reign Back in Sovereign

I've just posted a draft of my paper, "Putting the Reign Back in Sovereign: Advice for the Second Obama Administration," which I presented at Pepperdine last week. Abstract:

In its first term, the Obama administration enacted two pieces of legislation, each designed to protect an increasingly vulnerable income tax base, and each of which had the potential to set a new and unprecedented course for no less than the regulation of the global economy by the nation-state. The first, the Foreign Account Tax Compliance Act (FATCA), sought to end global tax evasion through tax havens.  The second, a little-noticed two-page addendum to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), sought to end the contribution of American multinationals to corruption in governance by codifying the transparency principles of the global Extractive Industries Transparency Initiative (EITI).  Both of these reforms reasserted a role for the nation state in regulating people and resources. But neither has yet to fulfil its potential. First, each has raised difficult questions about what the state can and cannot do to enforce disclosure and compliance on a global basis; failing to answer these questions is impeding implementation and aggravating an already-flagging taxpayer morale. Second, neither is broad enough: FATCA should be truly reciprocal and EITI should expand beyond the extractive industries. By acknowledging and responding in a principled way to the obstacles that limit their effectiveness, a second Obama administration could take significant steps to bring each piece of legislation to its potential, while ensuring that its scope focuses on its intended target in each case. This article outlines how these proposals could be accomplished and makes the case that they should be attempted.

I would be happy to have comments.  And in case it is of interest, here is a link to my powerpoint from the presentation as well (I don't know how to embed that here); you can actually watch the entire conference video here (my presentation was second to last).

Note on Enforcing the Long Arm of the Tax Law

I came across this paper when I was doing some treaty research. It may be of interest: “But the Americans Made Me Do It!”: How United States v. UBS Makes The Case For Executive Exhaustion. No abstract, but here are some excerpts:

In 2008, the U.S. government launched an investigation into UBS AG (“UBS”) following the indictment and conviction of one of UBS’s senior bankers on charges of assisting a wealthy American with tax evasion. ...The United States filed a summons in federal court seeking information from UBS concerning the identities of ... unknown taxpayers. Swiss bank secrecy laws, however, explicitly forbade such disclosure. 

UBS was caught in a classic conflict-of-laws dilemma. On the one hand, UBS and its employees would face potential criminal sanctions if they violated Swiss bank secrecy laws to comply with a U.S. court order. On the other hand, UBS could decline to comply with a potential U.S. court order and face contempt of court....

...U.S. courts thus have a dilemma when the United States, through its executive agencies, wants parties to disclose foreign accounts for tax or other investigatory purposes but bank secrecy laws stand in the way of these investigations. While many courts have used balancing tests to solve this problem, they have found that U.S. law-enforcement interests trump the interests of foreign nations. This places a defendant financial institution in the position of either providing client data in violation of its home state’s laws to meet the demands of the United States or disregarding U.S. discovery orders to meet its home state’s legal requirements.  

... One of the factors for a court to weigh in the balancing formula is “the availability of alternative means of securing the [requested] information.” 

This Comment uses the recent tax investigation into UBS and its account holders as a case study to argue that the alternative means factor from the Third Restatement should be a mandatory step for Executive Branch agencies to exhaust before they can petition a court to compel disclosure of foreign discovery that would require the defending party to violate foreign law. 

This mandatory step, which this Comment terms executive exhaustion, is derived from the concept of administrative exhaustion, in which courts decline to hear cases until the moving party has exhausted all available administrative remedies. The application of executive exhaustion will prevent courts from having to engage in the Third Restatement’s balancing test. By avoiding the Third Restatement’s balancing test, a court can avoid placing parties in a catch- 22—following one state’s laws at the expense of violating those of another state.

And from the conclusion:

[F]ederal courts are aware of the various international interests at stake in certain high-profile litigation. .... Even after the United States, the Swiss government, and UBS came to an agreement regarding the transfer of data, the independent Swiss judiciary held that the UBS client data could not be transferred pursuant to the Treaty Request Agreement because the agreement was not actually a treaty—and thus not officially Swiss law.  If the Swiss government was unable to transfer data pursuant to an agreement it drafted and signed, how did the IRS and the DOJ realistically believe that UBS would be able to comply with a possible order compelling disclosure? An order compelling disclosure would have resulted in a full-blown diplomatic disaster, with the Swiss seizing UBS client data and the IRS and DOJ moving to have contempt-of-court sanctions imposed against UBS.   

In light of the powerful international interests at stake when it comes to an order compelling disclosure of information in violation of foreign law, it is imperative that Executive Branch agencies seek all alternative means before petitioning a court for disclosure. Federal courts should be the last resort for compelling disclosure when an Executive Branch agency seeks information from abroad that would require the violation of foreign law.

 You can read the full paper at the link.

Treaty Termination and the Separation of Powers

Here is a new paper that is not directly on a tax topic, but does touch on the treaty power, which occasionally comes up in tax policy discussion and therefore may be of interest.  Kristen Eichensehr, Treaty Termination and the Separation of Powers:

The President, Congress, and the courts have long disagreed about who has the power to terminate treaties. Presidents have claimed the power to terminate treaties unilaterally, while Congress and particularly the Senate have argued that because the political branches share the power to make treaties, they should also share the power to terminate them. Unilateral presidential treaty terminations have prompted lawsuits by congressmen and private parties, Senate hearings and reports, and a divided academic literature. Meanwhile, the courts have deemed treaty termination to be a nonjusticiable political question.
This article reframes the debate over treaty termination by looking to treaty formation and analogizing to the Supreme Court's precedents on the Appointments Clause and removal power. The Appointments Clause uses the same "by and with the advice and consent of the Senate" language as the Treaty Clause and is found in the same sentence of the Constitution. Proponents of presidential power have relied on the Supreme Court's Appointments Clause jurisprudence to argue that Congress cannot limit the President's termination power. This article agrees that the oft-proposed requirement of Senate consent prior to treaty termination would be unconstitutional by analogy to the Appointments Clause. However, the Appointments Clause analogy points toward a new solution to the termination debate — namely, that the Senate could impose a "for-cause" restriction on the President's termination power. In particular, this article proposes a "for-cause" limitation implemented via a reservation, understanding, or declaration at the time of a treaty's ratification.
Recognizing the constitutionality of a "for-cause" termination reservation alters the terms of the ongoing debate about the interchangeability of congressional-executive agreements and Article II treaties. Both proponents and opponents of interchangeability have noted that the President's ability to terminate Article II treaties unilaterally makes treaties unreliable as compared to congressional-executive agreements, which cannot be terminated absent action by both Congress and the President. A "for-cause" termination reservation would increase the reliability of Article II treaties and so would shift the comparative utility of congressional-executive agreements and Article II treaties.

Motomura on Birthright Citizenship & Legalization

Here is an interesting paper on citizenship as legal status, by Hiroshi Motomura: Making Legal: The Dream Act, Birthright Citizenship, and Broad-Scale Legalization.  Abstract:

Some of the most controversial topics in immigration and citizenship law involve granting lawful immigration status—or citizenship itself—to persons who might otherwise be in the United States unlawfully. In this Article, I examine arguments for and against three ways to confer lawful status: (1) the DREAM Act, which would grant status to many unauthorized migrants who were brought to the United States as children; (2) the Fourteenth Amendment to the Constitution, under which almost all children born on U.S. soil are U.S. citizens; and (3) broad-scale proposals to grant lawful immigration status to a substantial percentage of the current unauthorized population. I first explain how arguments both for and against the DREAM Act reflect some mix of fairness and pragmatism. Though birthright citizenship seems different from the DREAM Act, the arguments are similar. I next show that although children figure much more prominently in the DREAM Act and birthright citizenship, similar patterns of argument apply to broad–scale legalization, and the arguments in favor are just as strong. Finally, I explain that the "rule of law" is a highly malleable concept that provides no persuasive case against any of these ways to confer lawful immigration or citizenship status. Rule of law arguments in favor of conferring status are stronger than rule of law arguments against doing so.

New Paper: What is Freedom For?

Leslie Green asks What is Freedom for? Answer:

Two conceptions of the value of political freedom are popular. According to one, freedom serves autonomy, creating one's own path through life. According to the other, freedom serves authenticity, keeping faith with an identity one did not choose. This paper bridges the gap between these views in several ways. It shows that autonomy embraces some of the unchosen aspects of life that authenticity stresses, and that authenticity is consistent with scope for choice within an unchosen identity. It is also shows that both views share a stake in a neglected value, self-knowledge. Partisans of authenticity cannot keep faith with their identity if they do not know what it truly is. Partisans of autonomy cannot choose a path in life without knowing what the options are for them, and these options can be affected instrumentally and constitutively by their identity, which they therefore have a stake in knowing. Of course, there can be more than one sound argument in favor of freedom. But contrary to what many suppose, autonomy and authenticity are complementary, not competing, in making that case. The differences between them are matters of nuance and degree.

Interesting. We see the term freedom used fairly frequently in tax policy debate--certainly, freedom is a concept that animates the anti-tax crowd. Murphy & Nagel did the best work, I think, in showing the unstated assumptions and flawed thinking that goes in to seeing taxation as an affront to freedom; this paper seems to complement that work.

International Law and Language Policy

Here is an interesting new book, by Jacqueline Mowbray: Linguistic Justice: International Law and Language Policy (Oxford 2012).  From the abstract:

Globalization and migration are producing societies of increasing linguistic diversity. At the same time, English is achieving unprecedented global dominance, smaller languages are becoming 'extinct' at an alarming rate, and ethnic tensions in countries from Belgium to Tibet continue to centre on questions of language. Against this background, the issue of how to ensure justice between speakers of different languages becomes a pressing social concern. Matters of 'linguistic justice' are therefore drawing increasing scholarly attention across a range of disciplines. 

How does international law contribute to linguistic justice? This book explores that question by conducting a comprehensive, interdisciplinary examination of international law on language ... the book explores the conceptual framework which underpins international law on language, unearthing underlying assumptions and ideas about what constitutes a 'just' language policy from a legal perspective. ..

This explores an interesting aspect of international society and culture.  More at the link.  

Recent scholarship of interest

Here are some recent papers of interest:

On the power and role of the state:

• Bernard Schneider, The End of Taxation without End: A New Tax Regime for U.S. Expatriates, arguing that the US should settle for residence based taxation like everyone else in the world. Has a nice section on the history of the practice.
• Claudia Williamson, Contracting Institutions, asking what constrains the state from plundering its people, if the state has monopoly power, and concluding that cultural norms do.
• Martha Fineman, Beyond Identities: The Limits of an Antidiscrimination Approach to Equality, comparing legal cultures of equality and concluding that in the US, human need is seen as a matter of individual responsibility alone while other constitutional democracies also see it as a state responsibility. 

On the inequitable impact of tax treaties:

• Fabian Barthel & Eric Neumayer, Competing for Scarce Foreign Capital: Spatial Dependence in the Diffusion of Double Taxation Treaties, when bilateral FDI positions are asymmetric (as between rich and poor countries), capital importers (poorer countries, usually) lose by entering into a tax treaty; they sign anyway because of competition. Studies DTTs between 1969–2005.

On subsidies & industrial policy:

• Stephanie Rickard, A Non-Tariff Protectionist Bias in Majoritarian Politics: Government Subsidies and Electoral Institutions. Examines how different governments use trade protection via tariffs and subsidies, and finds that majoritarian systems are biased toward both.

And on methodology in legal scholarship:

• Tom Ginsburg, Pitfalls of Measuring the Rule of Law, pointing out methodological challenges for rule-of-law scholarship, calling for caution in policymaking (same argument as I made about using "case studies" to advance international tax principles, you can find that here)

Another paper on arbitration-as-law

There seems to be a surge of articles on arbitration-as-law lately: the latest, Judging Lite: How Arbitrators Use and Create Precedent, involves empirical research involving hundreds of US arbitration award records, and it provides some interesting insights.  The article was reviewed on jotwell, excerpt:

...The criticisms include the concern that widespread arbitration mandates will lead to a privatization of public law, with arbitrators that are not bound by public law authorities producing awards of no precedential value. 

...Mark Weidemaier worked from [various databases of arbitration awards].  He analyzed these awards to gauge the extent to which arbitrators cited and engaged with precedent. 

Weidemaier, not surprisingly, found very little citation to precedent in securities awards because reasoned opinions accompanying those awards are extremely rare.  Among labor awards, 48.6% cited to at least one precedent, as did 66.7% of employment awards, and 71.8% of class action awards. 

...Weidemaier attributed the differences in types of authorities cited to the different nature of each type of arbitration.  Labor arbitration is concerned predominantly with interpreting and applying collective bargaining agreements and is frequently fact-based, making it more likely that arbitrators will not cite any precedent and more likely that when they do cite precedent, it will be other arbitration awards.  Employment awards are much more likely to be adjudicating statutory claims, resulting in arbitrators looking to judicial authority interpreting the statute.  Arbitral authority is far less relevant.  Class awards look more to judicial authority but many deal with whether class arbitration is permitted under the contract and, consequently, in Weidemaier’s view, they are more likely than employment awards to look to arbitral awards interpreting similar contracts.

... Candidly acknowledging many limitations to his study, Weidemaier found no evidence outside of securities arbitration that arbitrators were deciding cases in an ad hoc fashion.  Rather, he noted, the process has become highly legalized and arbitrators appear to be trying to follow the public law when it is at issue before them.  ... he suggests that judges discuss arbitral authority in their opinions, thereby providing valuable feedback to the arbitrator community.

Jotwell reviewer Martin Malin calls Weidermaier's article "required reading for all participants in the on-going debate over arbitration mandates." You can read his whole review here.