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Mitchell Kane (NYU) presents The Use and Abuse of Location-Particular Rents (with  Adam Kern (Covington & Burling, Washington, D.C.)) in the present day as a part of the OMG Transatlantic Tax Talks Sequence (OMG = Oxford-Michigan-MIT-Munich-Georgetown):

A central query in worldwide tax legislation is how finest to allocate taxing rights throughout nations. Most students and lots of policymakers agree that the present worldwide tax regime is damaged, and they’re contemplating formidable new reforms. A perfect conceptual foundation for allocating taxing rights throughout states would (i) allow nations to lift massive quantities of income; (ii) allowthem to do that effectively; and (iii) allocate rights pretty. This idea can be the holy grail of worldwide taxation.

Many tax students consider that they’ve discovered the grail. They are saying that each nation must have the appropriate to tax its location-specific rents. Roughly, a location-specific lease is an financial lease that’s tied to a selected location. It’s a return to an element of manufacturing that exceeds what that issue’s proprietor requires to be able to deploy that consider its present location, a return that might not have been earned elsewhere. Location-specific rents probably exist in massive portions. Furthermore, since taxes imposed on location-specific rents have a tendency to not trigger taxpayers to shift their actions, they’re environment friendly. Lastly, since location-specific rents can solely be earned in a single location, it strikes many students as honest for every location to have the ability to tax its personal location-specific rents. The rents which are particular to any given location, so it’s thought, signify an unambiguous, unique contribution of that society to international financial exercise.

On this article, we push again on this rising consensus. We make clear what location-specific rents are, offering the primary rigorous definition of location-specific lease to look in both the authorized or the financial literature. We then present that location-specific rents usually are tough to measure. And we present that, even when a agency’s rents which are particular to a selected location had been measured, they’d not signify the unique contribution of that location to the agency’s revenue.

We then determine a extra restricted function for location-specific rents in worldwide tax coverage. In some particular contexts, the hurdles to measuring location-specific rents are surmountable. Furthermore, since location-specific rents may be taxed effectively, all else being equal, it’s good to extend nations’ combination capability to tax them. Incessantly, nonetheless, all else will not be equal: usually, rising one nation’s capability to tax location-specific rents will come on the expense of people that reside out of the country, or we should select which nation must have the appropriate to tax some location-specific rents. To handle these conditions, we have to depend on a basic principle of world distributive justice. Such a principle in all probability wouldn’t indicate that every nation must have the appropriate to tax its personal location-specific rents.

https://taxprof.typepad.com/taxprof_blog/2022/02/kane-presents-the-use-and-abuse-of-location-specific-rents-today-at-the-omg-transatlantic-tax-talks.html