Wednesday, April 6, 2022
Avi-Yonah, Kim & Sam: A New Framework For Digital Taxation
Reuven S. Avi-Yonah (Michigan; Google Scholar), Christine Kim (Utah; Google Scholar) & Karen Sam (Michigan), A New Framework for Digital Taxation, 63 Harv. Int’l L.J. __ (2022):
The worldwide tax regime has extensive implications for enterprise, commerce, and the worldwide political economic system. Beneath present regulation, multinational enterprises don’t pay their justifiable share of taxes to market nations the place income are generated as a result of market nations are solely allowed to tax firms with a bodily presence there. Digital firms, like Google and Amazon, can function fully on-line, thereby avoiding market nation taxes. Multinationals may also exploit present tax guidelines by shifting their income to low-tax jurisdictions, thereby avoiding taxes within the residence nation the place their headquarters are situated.
Just lately, a worldwide tax deal was reached to deal with these points. Proposed by the OECD/G20 Inclusive Framework and endorsed by almost 140 nations, this international tax deal units forth two Pillars that reform the outdated worldwide tax regimes. Pillar One addresses digital taxation whereas Pillar Two addresses a worldwide minimal tax. Nevertheless, it’s uncertain that the worldwide tax deal might be efficiently carried out, particularly with respect to Pillar One. As the main points of Pillar One have grow to be more and more advanced and degraded by political compromises and carve-outs, it dangers being a framework with out substance. Additionally, nations are unlikely to repeal a longtime tax instrument, Digital Companies Taxes (“DSTs”), which is an adamant requirement of america in adopting Pillar One.
This Article affords the primary complete critique of the worldwide tax deal and assesses its prospects and issues. It evaluates the U.S. responses to the proposed international deal and to DSTs. It presents the challenges, similar to treaty overrides, that can happen if america implements Pillar One by government settlement in order to bypass the treaty ratification. This Article suggests separating the 2 Pillars to protect the worldwide minimal tax. Relating to DSTs, the Article gives a number of empirical research that show the hurt retaliatory tariffs trigger. Lastly, it endorses the U.N. digital taxation proposal and proposes a brand new Knowledge Excise Tax as a normative various.
https://taxprof.typepad.com/taxprof_blog/2022/04/avi-yonah-kim-sam-a-new-framework-for-digital-taxation.html
