Wednesday, March 21, 2007
Postlewaite Presents The C-T-B Election: Is It Time to Close Pandora's (Check-the-) Box? Today at Tel Aviv University
Philip F. Postlewaite (Northwestern) presents The C-T-B Election: Is It Time to Close Pandora's (Check-the-) Box? (with Stephanie Hoffer (Northwestern)) at Tel Aviv University today as part of its Tax Policy Colloquium hosted by Yoram Margalioth. Here is the abstract:
Like Pandora’s box which, notwithstanding the admonition of others that such action would change the world dramatically by introducing evil, she opened because her curiosity overcame her, the Check the Box Regulations have had a similar seismic impact on the administration of the United States tax law in the international context.
The Regulations allow an enterprise to be treated as transparent in one jurisdiction and as a separate entity in the other—an opportunity far more difficult to accomplish under prior law. Not only can the enterprise select its classification, but it also possesses the flexibility after the initial election to transform its essence for tax purposes by a mere “checking of the box” should such prove advantageous.
The paper describes some of the tax planning opportunities created by the Regulations and illustrates how this flexibility in the international arena distorts existing tax policy. It concludes by offering a number of alternative solutions ranging from a modification of the per se listing for foreign enterprises to outright repeal of the Regulations for foreign enterprises. Under any circumstances, it is time to close the box in such cases.