The Limits of the International Tax Regime as a Commitment Projector
The paper examines how transaction cost approaches (as developed by North and Williamson) can inform international tax law and policy discussions. The international tax regime evolved institutions and institutional arrangements to address transaction costs such as the risk that two countries might doubly tax the same cross-border business profits. It mainly sought to reduce this risk by serving as a ‘commitment projector’ that enables governments to make credible political promises to taxpayers, other members of the public and other governments that they will not overtax these cross-border profits. As a result of these political commitments, taxpayers do not need to incur transaction costs they would otherwise have to sustain to identify and protect their global tax liabilities. In other areas, however, the international tax regime does not facilitate credible commitments. The talk will focus on one such challenge to the regime, namely the 2010 U.S. proposal to create a global tax reporting system via the Foreign Account Tax Compliance Act or FATCA. By eschewing traditional bilateral and multilateral cooperation when it introduced FATCA, the United States subverted its ability to offer credible commitments and raised transaction costs for economic participants. The talk will review the impact of FATCA on U.S. expatriates (and others) in Canada as well as potential options available to the Canadian government to resist FATCA.
Anyone following FATCA in Canada knows that Prof. Cockfield has been tough on the regime, and I look forward to hearing him flesh out his position in person. The Colloquium is open to all. If you will be in Montreal on Monday, I invite you to join us at 11:35am at the McGill Law Faculty, Chancellor Day Hall Room 202, 3644 Peel Street.
I agree with prof. Cockfield's analysis, but in my opinion there is too much focus on cost and too little on the normative value of FATCA.
ReplyDeleteIt is not proven that FATCA is effective and necessary. The fact is that privileged information is handed out by governments who are bound to protect that information. it is not prooven that the tax payers have not complied with the US rules, but still their privileged information is given away. there are no restrictions on the holding period for the received information. procedural rules to protect the taks payer from harassment are not provided for in the instrument. US citizen are selected as a special species for who FATCA applies. this is in violation of the European Convention on Human Rights, even if discriminatory treatment of US citizens is allowed under the relevant Double tax treaty.