Monday, March 21, 2005

WTO rules vs Income Tax Treaties - Additional Reading

For the true aficionados here are some extra references to articles that discuss the issues mentioned in my earlier post.

Paul R. McDaniel, The David R. Tillinghast lecture - Trade agreements and income taxation: Interactions, conflicts, and resolutions, Tax Law Review, 2004, 57, pp. 275

In this Article the author expands upon prior work in which he briefly explored how trade agreements and a nation's corporate income tax system do and should interact. The author examined the World Trade Organization (WTO) decision in the challenge by the European Union (EU) to the Foreign Sales Corporation (FSC) provisions of the Code. The Author also reviews the similar attack by the European Commission on prohibited state aids under the Treaty of Rome. In this article the author undertakes a detailed examination of the WTO decisions in Section II and then in Section III, assess the correctness of the decisions from a legal/structural perspective; that is, were the decisions legally correct under WTO agreements and were they consistent with the structure of a corporate income tax? Section IV analyzes the decisions from an economic perspective. What was the impact of the decision on both U.S. and worldwide welfare? In Section V, the author addresses whether the decisions unduly impinged on U.S. sovereignty and discuss some political arguments made to support the U.S. position in the FSC/ETI disputes. Section VI summarizes the conclusions the author draws from the analyses.

Joel Slemrod &Reuven Avi-yonah, (How) should trade agreements deal with income tax issues?, Tax Law Review, 2002-4, pp. 533-554

What is the relationship between the international tax regime, as embodied in bilateral international tax treaties, and multilateral free trade agreements like the General Agreement on Tariffs and Trade? Are their fundamental goals consistent or inconsistent? If they are inconsistent, should the tax treaties or the GATT be changed to remedy the inconsistency? If they are consistent, should the scope of either be expanded to include the other? These are the underlying policy questions on which this Article is meant to shed light. The authors begin by stating and, in violation of a longstanding scholarly tradition, briefly answering three intermediate questions. They then expand on the reasoning that leads them to these answers and address the broader questions stated above.

Paul R. McDaniel, The Impact of Trade Agreements on Tax Systems, Intertax, 2002-5, pp. 166-171

Countries entering into trade agreements, in order to assure free movement of goods, labour and capital, give up significant aspects of their sovereignty. The impact that these non-tax agreements have or should have on their signatories' tax systems is examined in the context of the treaty provisions governing the World Trade Organization and those governing the EU.


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