Picciotto2004 - Tax Jurisdiction Global Apportionment Law School Sol Picciotto Presentation to 2nd Essex Conference 1st-2nd July 2004 Tax

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1 Presentation to 2 nd Essex Conference 1st-2nd July 2004 Tax Competition and Tax Avoidance: Implications for Global Development Tax Jurisdiction & Global Apportionment Sol Picciotto Law School 2 Direct Taxes: employment income investment income: passive/portfolio active/direct Indirect Taxes: sales (VAT) transactional: stamp duty, air tickets, insurance Capital: Property gains death duties Source or Residence deduction withholding Destination or Origin Place of transaction Physical location Residence Domicile/Residence Place of employment
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3 Jurisdiction to Tax Investment Income Home State Residence/nationality where recipient located Capital-export equity Host State Source: where income earned Capital-import equity investor business Home state Residence Host state Source investor Withholding Deduction at source 4 National Taxation of Transnational Firms “In a business of this nature you cannot say how much is made in this country and how much in another. You kill an animal and the product of that animal is sold in 50 different countries. You cannot say how much is made in England and how much is made abroad. That is why I suggest that you should pay a turnover tax on what is brought into this country. … It is not my object to escape payment of tax. My object is to get equality of taxation with the foreigner and nothing else.” (Sir William Vestey, to Royal Commission on Tax, 1915)
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5 Taxing Residents on all income (residents in the territory) capital-export equity equal tax on investments at home/abroad Taxing Income from All Sources (income earned in the territory) capital-import equity same taxes on all local business whoever the investor Firm X (investor) Affiliate X-1 dividend/interest/fees B A investors Juridical Double Taxation same person’s income taxed twice if earned abroad Economic Double Taxation same income stream (intra-firm payments) taxed twice 6 Preventing Double Taxation of International Investment Income Investor X in A taxed @ 40% B taxes all income @ 30% X-1 declares £100 profit as dividend to investor A B applies 30% to all dividends at source (withholding tax) A unilaterally US since 1917 taxes worldwide income subject to Credit to encourage international investment 1. Foreign income exemption dividend of £70 untaxed in A incentive to invest in lower-tax state 2. Foreign tax paid = expense £70 taxed @ 40% = £28 X’s net income £70-28=£42 (on domestic investment = £60) 3. Foreign tax credit X’s total income £100 charged £40 A credits £30 tax paid in S X’s net income £60 X pays higher of Home/Host tax rate (same rate as domestic investment in A, higher than investor in B)
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7 Tax Treaties League of Nations conference 1928: Model treaties Direct Taxes Succession Duties Administrative Assistance in Assessment Assistance in Collection of Taxes Mexico drafts 1943, London 1946
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This note was uploaded on 06/20/2011 for the course ECON NgocAnhNo1 taught by Professor Ngocanhno1 during the Spring '11 term at Université de Genève.

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Picciotto2004 - Tax Jurisdiction Global Apportionment Law School Sol Picciotto Presentation to 2nd Essex Conference 1st-2nd July 2004 Tax

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