Interlinking between Income Tax, Citizenship and Democracy? A Case Study of Canada and China

The interlink between taxation, citizenship and democracy appears to be obvious in Western democracies: citizens are voters, taxpayers and beneficiaries of public spending funded by tax revenues. The literature on the politics of taxation suggests that democratic institutions affect taxation at every stage of the policy-making process, the type of elections and governance model influence the level of redistribution and complexity of the tax system, democracies generally choose policies that are more favorable to the poor than non-democracies, the tax mix varies with the nature of the political regime, and more repressive governments rely less on personal income taxation. Political citizenship is not identical to tax citizenship as most countries rely on residence as the basis of tax jurisdiction and some citizens living abroad are not tax residents. However, citizenship can be viewed as a proxy for domicile and, in effect, correspond to residence in most cases. The principle of “no taxation without representation” captures the quintessential link between taxation and democracy. This paper examines the interlink in Canada and China

Tax Transplants and the Critical Role of Processes: A Case Study of China

This paper seeks to explore the above question by drawing insights from existing literature. The existing body of literature is rich in documenting the phenomenon of legal transplants, theorising why legal transplants take place and presenting the debate on the relevance of local culture to the adaptation of the transplants. In terms of tax transplants, there is an emerging strand of literature that examines the unique characteristics of tax transplants, the common core of tax law, and the global tax convergence. However, there is a lack of analysis focusing on the critical role of processes in legal and tax transplants. Through a case study of the Chinese tax transplants, this paper seeks to test the theories of legal transplants and to demonstrate the importance of process in successful transplants. It examines two types of processes: tax processes and transplantation processes. Tax processes include the political process, administrative and compliance process, and dispute resolution process. Tax transplantation processes include the process of selection, translation, adoption and adaptation. The central claim of this paper is that processes matter in tax transplants. Taxation science is capable of being borrowed and duplicated. Tax processes in a country are defined by its general political, legal and institutional culture, and thus vary from country to country. Many tax rules or principles are the outcomes of tax processes in the country of origin and their implementation depends on a certain set of administrative processes. The transplantation of a tax rule or principle is likely to fail if it is done without the necessary processes, or at least, without a full appreciation and accommodation of the differences in processes

China’s Rising (and America’s Declining) Influence in Global Tax Governance?

What are the implications of China’s rise for the US dominance in global tax governance? Will the signs of “decoupling” or parallel standards in other areas, such as technology (e.g., 5G) and COVID-19 vaccine appear in tax policy? Will China go along with the US-catalyzed global minimum tax in Pillar Two and US-modified reallocation of residual profits to market jurisdictions under Pillar One? This article considers these questions in light of the broader historical and geopolitical context. 11 Section 2 provides an overview of the nature, purpose and legal instruments of international taxation and highlights the significance of the China versus US relationship for global tax governance. Sections 3 – 5 discuss the changing roles of China and US in the past 100 years: the US’s role in creating and expanding the international tax system from 1920s to 1979; China as a norm-taker and the US as a dominant norm-setter from 1980-2007; and China and the US in the context of BEPS 1.0 (2013-2015 G20/OECD Base Erosion and Profit Shifting Project) and BEPS 2.0 (Pillar One and Pillar Two to address challenges of digitalization of the economy). Section 6 speculates about the future by teasing out the areas of convergence and divergence between two countries. The article notes in conclusion that it is unlikely that decoupling would occur in international taxation, but it remains uncertain how China’s role would play out in the next steps of BEPS 2.0 and beyond

Pension Power: Unions, Pension Funds, and Social Investment in Canada

This is a review of the book Pension Power: Unions, Pension Funds, and Social Investment in Canada

Taxation of Non-residents on Business Profits

The taxation of non-residents on business profits is important to developing countries in terms of raising revenue and encouraging foreign investment and trade. The source country has the legitimate right to tax business profits arising in its jurisdiction. Tax treaties impose no limits on such taxing rights, other than the obligation to tax net profits (instead of gross profits) in some situations, once the threshold for taxation is satisfied. As such, this source of tax revenue belongs to the source country. There is generally little expectation of the residence country of a non-resident taxpayer in sharing the tax revenue. It is true that the residence country also has a right to tax the profits, but it generally provides a credit for the source country tax or exempts them from tax in order to prevent double taxation. If the residence country provides a credit for taxes paid to the source country, the non-collection of the taxes owed to the source country is a fiscal transfer to the residence country, with no benefit to the taxpayer

The Great Fiscal Wall of China: Tax Treaties and Their Role in Defining and Defending China’s Tax Base

By taking the Great Wall of China as an analogy for China’s treaty policy, the author considers key aspects of China’s treaty network and its implications, and whether or not this constitutes a “Great Fiscal Wall of China.”Cited with the permission of IBFD

The Future of the Corporate Form in Income Tax: A Case Study of Canada

A corporation is nothing but a piece of paper. And yet, this piece of paper enjoys the status of a person and has an independent identity as a taxpayer (the “separate entity principle”). It can generate tremendous value for its shareholders through tax savings resulted from tax deferral, tax shifting, and tax subsidies. Why does tax law allow such value to exist? Is there any hard line constraining the scope of the tax benefits associated with the corporate form? To what extent can the two pillars (Pillar One and Pillar Two) crush the corporate form? What is the future of corporate form in income taxation? This paper seeks to answer these questions through examining the Canadian income tax system

Tax Transplants and Local Culture: A Comparative Study of the Chinese and Canadian GAAR

This Article discusses, compares, and analyzes the transplanted General Anti-Avoidance Rule (GAAR) in China and the GAAR in Canada. It demonstrates the similarity between the GAARs on paper and the divergence between the GAARs in action. It argues that the divergence is largely attributable to the differences between Canada and China in the general legal system, legal institutions, judicial and taxpayer attitudes towards tax avoidance, and the ideology of tax avoidance