Tuesday, November 21, 2006
Ruth Mason (NYU) has published U.S. Tax Treaty Policy and the European Court of Justice, 59 Tax L. Rev. 65 (2005). Here is the abstract:
This Article considers the effects of EC law on U.S. tax treaty policy. The discussion is framed by the controversy over the legality of tax treaty limitation on benefits clauses (LOBs) in the wake of recent ECJ decisions. Professor Mason argues that U.S. tax treaty policy is on a collision course with the tax jurisprudence of the ECJ. She suggests possible solutions to the inevitable conflict between U.S. tax treaties and EC law, including voluntary harmonization. By curing EC law conflicts present in current bilateral treaties, the Member States may reduce the risk that their treaties will be reviewed by the ECJ, a court hostile to both national revenue needs and Member State direct tax competence. Voluntary harmonization of tax treaties with EC law could take several forms, including amending the U.S. model for use in bilateral U.S.-EU Member State tax treaties, or entering into a multilateral tax treaty between the United States and the whole EU. Professor Mason discusses the efficiency benefits that a multilateral treaty would offer, as well as the potential impediments to such a treaty from the perspectives of both the United States and the EU Member States. The United States may oppose a multilateral tax treaty with the EU, since the United States has greater bargaining power in the bilateral treaty context than it would in a multilateral setting. In contrast, the EU Member States may see preemptive harmonization as an opportunity to reduce the risk of further encroachment on Member State direct tax sovereignty by the ECJ.