Tax Havens: International Tax Avoidance and Evasion

Addressing tax evasion and avoidance through use of tax havens has been the subject of a number of proposals in Congress and by the President. Actions by the Organization for Economic Cooperation and Development (OECD) and the G-20 industrialized nations also have addressed this issue. In the 111th Congress, the HIRE Act (P.L. 111-147) included several anti-evasion provisions, and P.L. 111-226 included foreign tax credit provisions directed at perceived abuses by U.S. multinationals. Numerous legislative proposals to address both individual tax evasion and corporate tax avoidance have been advanced. Multinational firms can artificially shift profits from high-tax to low-tax jurisdictions using a variety of techniques, such as shifting debt to high-tax jurisdictions. Because tax on the income of foreign subsidiaries (except for certain passive income) is deferred until income is repatriated (paid to the U.S. parent as a dividend), this income can avoid current U.S. taxes, perhaps indefinitely. The taxation of passive income (called Subpart F income) has been reduced, perhaps significantly, through the use of hybrid entities that are treated differently in different jurisdictions. The use of hybrid entities was greatly expanded by a new regulation (termed check-the-box) introduced in the late 1990s that had unintended consequences for foreign firms. In addition, earnings from income that is taxed often can be shielded by foreign tax credits on other income. On average, very little tax is paid on the foreign source income of U.S. firms. Ample evidence of a significant amount of profit shifting exists, but the revenue cost estimates vary substantially. Evidence also indicates a significant increase in corporate profit shifting over the past several years. Recent estimates suggest losses that may approach, or even exceed, $100 billion per year. Individuals can evade taxes on passive income, such as interest, dividends, and capital gains, by not reporting income earned abroad. In addition, because interest paid to foreign recipients is not taxed, individuals can evade taxes on U.S. source income by setting up shell corporations and trusts in foreign haven countries to channel funds into foreign jurisdictions. There is no general third-party reporting of income as is the case for ordinary passive income earned domestically; the Internal Revenue Service (IRS) relies on qualified intermediaries (QIs). In the past, these institutions certified nationality without revealing the beneficial owners. Estimates of the cost of individual evasion have ranged from$40 billion to $70 billion. The Foreign Account Tax Compliance Act (FATCA; included in the HIRE Act, P.L. 111-147) introduced required information reporting by foreign financial intermediaries and withholding of tax if information is not provided. These provisions became effective only recently, and their consequences are not yet known. Most provisions to address profit shifting by multinational firms would involve changing the tax law: repealing or limiting deferral, limiting the ability of the foreign tax credit to offset income, addressing check-the-box, or even formula apportionment. President Obama’s proposals include a proposal to disallow overall deductions and foreign tax credits for deferred income, along with a number of other restrictions. Changes in the law or anti-abuse provisions have also been introduced in broader tax reform proposals. Provisions to address individual evasion include increased information reporting and provisions to increase enforcement, such as shifting the burden of proof to the taxpayer, increased penalties, and increased resources. Individual tax evasion is the main target of the HIRE Act, the proposed Stop Tax Haven Abuse Act, and some other proposals

Tax Transparency and Corporate Tax Avoidance

This analysis will look into the emerging global trend for increased tax transparency from large businesses and corporations. Tax transparency has been a growing topic globally and there has been some recent progress in several countries. This analysis will begin by looking into the motivation behind increasing the amount of transparency around a business’ tax affairs. After exploring some key driving factors, a few of the new major tax initiatives and the details encompassed in them will be discussed. The specific countries that will be focused on are the United States, Australia, and the United Kingdom. Overall, this analysis is intended to be an unbiased look into the present developments occurring on how large businesses should deal with their tax affairs. It is apparent that the issue of tax transparency is being addressed in various ways in different countries, and barely addressed at all in some. The future of corporate tax transparency is unclear, but changes are being implemented today that must be followed in order to see their full impact in the future. This analysis will also briefly look into the impact that increasing tax transparency has had so far as well as possible speculations for the future

The U.S.-Singapore Free Trade Agreement: Effects After Five Years

[Excerpt] The U.S.-Singapore Free Trade Agreement (FTA) (P.L. 108-78) went into effect on January 1, 2004. This report provides an overview of the major trade and economic effects of the FTA over the three years ending in 2006. It also includes detailed information on key provisions of the agreement and legislative action. The U.S.-Singapore FTA has taken on new importance in trade policy because the United States is engaged in negotiations to join the Trans-Pacific Partnership (TPP). The TPP negotiations are the first major market-opening initiative of the Obama Administration. On December 14, 2009, United States Trade Representative Ron Kirk notified Congress of the intent to enter into the TPP negotiations. The objective is to shape a high-standard, broad-based regional free trade agreement with Australia, Brunei Darussalam, Chile, New Zealand, Peru, Singapore, and Vietnam. The first round of negotiations began March 15, 2010, in Sydney, Australia. The U.S.-Singapore FTA has provided greater access for U.S. companies, has been instrumental in increasing bilateral trade, and has provided reassurance to Singaporeans of U.S. interest in the country. As a city-state, Singapore operates as an entrepot with essentially free trade. Under the FTA, concessions dealt mainly with providing greater access for American service providers and with strengthening the business environment in areas such as the protection of intellectual property rights and access to government procurement. In 2009, the United States ran a $6.6 billion surplus in its balance of merchandise trade with Singapore, up from$1.4 billion in 2003, but down from the $12.0 billion in 2008. U.S. exports of goods to Singapore surged from$16.6 billion in 2003 to a peak of $27.9 billion in 2008 before declining to$22.3 billion in 2009. Even with this rapid increase in U.S. exports to Singapore, the U.S. share of Singapore’s imports has declined from 16% in 2003 to 12% in 2009. The main reason for this is that Singapore’s overall trade is booming. Still, Singapore imports more from the United States ($28.5 billion) than from China ($26.0 billion).The U.S. balance of trade in services with Singapore declined from a surplus of $4.0 billion in 2001 to$1.2 billion 2005 but has risen to $4.2 billion in 2008. A significant increase has been in income from U.S. direct investments in Singapore. U.S. access to the Singaporean market for multinational corporations seems to have been enhanced considerably under the FTA. U.S. income from assets in Singapore rose from$6.7 billion in 2003 to $21.1 billion by 2008. On the U.S. import side (Singapore’s exports), a noteworthy development is that U.S. imports of pharmaceuticals from Singapore have risen from$0.09 billion in 2003 to $3.0 billion in 2007 before declining to$2.0 billion in 2008. Singapore has developed as a regional center for multinational pharmaceutical companies. This apparently was partly triggered by provisions in the FTA that required Singapore to strengthen its intellectual property protection. Negotiations for the U.S.-Singapore Free Trade agreement were launched under the Clinton Administration in December 2000. The FTA became the fifth such agreement the United States has signed and the first with an Asian country. This report will be updated as circumstances warrant

Ethics and taxation : a cross-national comparison of UK and Turkish firms

This paper investigates responses to tax related ethical issues facing busines

Assessing the Value of International Workers:a Case of Shell Petroleum Development Company in Nigeria

As a result of globalization, many companies, be it corporate, public or international operates on a global scale. With the rise of companies operating in a global village, many companies are also expanding internationally. Mostly, international organizations operating abroad are faced with employees of foreign cultures with an entirely different perspective. Oftentimes, cross-cultural issues arise in the management of the company's human resources (HR). According to Laroche (1998), the rapid globalization of the world's economy has brought forth several changes. In view of this, it is the intention of this non-empirical article to investigate how to assess the international workers, by adopting the latest management trend

Adapting Corporate Governance for Sustainable Peace

In previous work, we argued that there is a link between corporate governance and the reduction of violence. In this manuscript, we further explore that link with a focus on how corporations can work toward the goal of reduction of violence in the societies in which they operate. Here, we pose the question of how well suited various corporate governance regimes are to face these complexities, and how they can do so in ways that are consistent with their fundamental principles. We focus on the corporate governance regimes of the United States, Germany and Japan. A common denominator of the political entities addressed is a commitment to a political regime of democracy. Section I outlines our thesis that corporations are in a position to make contributions to peace in society because of shifting political balances of power. It elaborates with the idea that our contemporary world has shifted from traditional balance of power conceptions in terms of the near universal embrace of parliamentary democracy requiring some reformulated description of the optimal relations among democracy, peace, and globalization. This section establishes the general parameters of the argument that democracy and peace are linked and that there are serious charges that globalization works against democracy and thereby threatens the sustainability of peace. Section II analyzes comparative models of corporate governance and considers the extent to which contemporary corporate governance models look to peace and workplace security as aims they should achieve. Concluding remarks follow in Section III.http://deepblue.lib.umich.edu/bitstream/2027.42/39917/3/wp532.pd

Cross-Country Ethical Dilemmas in Business: A Descriptive Framework

As businesses span the globe, multinational and translational companies conduct their business operations in foreign settings, especially in developing countries and in countries in transition from Communist regimes. This poses new challenges to expatriate managers and to home-based staff in charge of foreign affiliates. They are called on to determine the right versus the wrong, the good versus the bad over international business transactions, negotiations, advertisement and supply chain management taking place in foreign settings. As most of the time, businessmen lack a certain degree of cultural awareness and knowledge, managing ethical diversity over cross-country business transactions ends up to be a major challenge for business people. This paper’s aim is to provide an introductory sketch on the cross-country issues facing international business, through detailed description of their level of disclosure (Political, Corporate, Internal) diverse areas and connected situations. The pros and cons of the traditional paradigms used by business people in dealing with such circumstances (Universalism and Relativism) will be weighed. In addition examples of “irresponsible business practices” resulting from cultural misunderstandings, ignorance and lack of contextualization on the behalf of business people will be provided.Business ethics, Cross-country ethical dilemmas, Corporate Social responsibility, Diversity

Business and Human Rights as a Galaxy of Norms

In the last several years, there has been an increasing tendency to view the impacts of transnational business operations through the lens of human rights law. A major obstacle to holding companies accountable for the harms that they impose, however, has been the separate legal identity of corporate subsidiaries and of contractors in a company\u27s supply chain. France\u27s recently enacted duty of vigilance statute seeks to overcome this obstacle by imposing a duty on companies to identify potential serious human rights violations by their subsidiaries and by companies with which they have an “established commercial relationship.” Failure to engage in such vigilance can subject a company to liability for damages resulting from such failure. This Article situates the new French duty of vigilance within a broader set of norms that can be characterized as the Business and Human Rights Galaxy. This Galaxy consists of five rings that represent standards and expectations ranging from classic enforceable “hard law” to voluntary principles generated by private parties, multi-stakeholder initiatives, and international organizations. The provisions in these rings are related in fluid and dynamic ways and exert varying degrees of gravitational influence on one another. Thus, for instance, what are conventionally regarded as forms of hard law may draw on voluntary private standards in setting expectations for behavior, and soft law norms may be incorporated into legally enforceable contract provisions between companies and their suppliers. This Article suggests that appreciation of these dynamics can furnish guidance in interpreting the novel duty of vigilance that the new French statute establishes. In particular, the common law duty of care and the United Nations Guiding Principles on Business and Human Rights can illuminate the nature and scope of the duty of vigilance. At the same time, the introduction of the new French statute into the Business and Human Rights Galaxy means that it too has the potential to influence provisions in other rings of the Galaxy

Transnational Corporations and Developing Public International Law

In recent years the international community has been developing various international codes of conduct, many of which will contain rules governing the behavior of transnational corporations (TNCs). Most of these rules are being developed with little or no direct TNC participation. Professor Charney argues that because TNCs represent major, independent centers of influence, failure to include them in the codes of conduct negotiations may result in rules that do not accurately reflect the realities of TNC interests and power. If the international community later seeks to convert these rules into legal norms, TNC resistance will probably place costly strains on both the rules and the entire international legal system. Professor Charney concludes that the international community should permit TNCs and other interested power groups to participate directly in the development of international norms applicable to their interests. But he cautions that it would be unwise to give TNCs complete international legal personality because this, too, might place undue strains on the international legal system

CURRENT ISSUES AFFECTING TRADE AND TRADE POLICY: AN ANNOTATED LITERATURE REVIEW

This review provides a base of literature describing current issues and research on the impacts of lobalization and the industrialization of agriculture and recent approaches to analyze and model agricultural trade and trade policies. Three key factors of the survey are differentiated goods, global economic integration and international supply chain linkages. The review covers 182 publications, which are presented alphabetically by author with a brief annotation describing how it relates to the above criteria. The articles are also indexed by keyword. A brief summary highlights the documented literature and includes a series of issues for future discussion and research.International Relations/Trade,