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).
Monday, January 21, 2013
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:
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A couple of comments:
ReplyDelete1. There is currently a fight going on over on Linkedin as to what exactly are your legal credentials to discuss FATCA. You can join in for yourself on FATCA Knowledge and Networking Group.
http://www.linkedin.com/groups/FATCA-Knowledge-Networking-3980909/about
2. After reading this story about a proposed LBO of Dell Computer I am kind of curious as what exactly are the "Killer B" and "Deadly D" tax shelters.
http://taxprof.typepad.com/taxprof_blog/2013/01/dell-is-.html
http://www.bloomberg.com/news/2013-01-18/dell-leveraged-buyout-may-hinge-on-cash-hoard-outside-u-s-.html
Over the years, U.S. companies have employed a variety of tax-planning techniques for bringing that cash back to the U.S. while still avoiding the income-tax hit. The strategies have spawned colorful nicknames, inspired by the relevant sections of the tax code, like the “Killer B” and the “Deadly D.”
Some companies have found ways of using a merger transaction to repatriate cash without triggering certain taxes. Merck & Co. (MRK), based in Whitehouse Station, New Jersey, brought more than $9 billion from abroad through its 2009 purchase of Kenilworth, New Jersey-based Schering-Plough Corp., routing the money through Dutch subsidiaries, Bloomberg News reported in 2010.
“There are ways of doing it in the context of a buyout or merger that are more flexible than what you can do in the normal operation of a business,” said Reuven Avi-Yonah, a tax professor at University of Michigan Law School.
The issue I keep having trouble understanding is that the people who support FATCA and believe it requires multilateralisation don't really "get" the current IGA process. Take the paragraph below which is found on one of Dick Harvey's Paper's on FATCA linked below.
ReplyDeletehttp://papers.ssrn.com/sol3/papers.cfm?abstract_id=2029963
The remainder of the FATCA section of this article will assume the US and other countries are pursuing a broad global solution to the offshore account problem being faced by many “residence” countries, as opposed to just trying to work around various local country restrictions surrounding FATCA. Section 3.1.2 will discuss the potential benefits of a multilateral system, while Section 3.1.3 will focus on key design issues.
I personally have to strongly disagree with premise of the above. From the looks of things all the IGA's attempt to do is work around local country restrictions on compliance with a "broader" "global" "multilateral" solution like recipriciocity ia only an aspiration. I find notable that both Itai Greenberg and Dick Harvey whom in goverment were both involved in developing FATCA now claim to support a "multilateral" solution and furthermore believe a multilateral solution is necessary but yet believe the current IGA process is a real stepping stone to it. The "current" officials at Treasury seem to view the IGA's from a very narrow viewpoint of simply facilitating technical compliance with the FATCA statute(which given the FATCA statute provides no authority for IGA's is in itself strange).