Monday, October 15, 2012
Arthur Cockfield (Queen’s University, Faculty of Law) presents The Limits of the International Tax Regime as a Commitment Projector at McGill University, Faculty of Law today as part of its Tax Policy Colloquium Series hosted by Allison Christians:
The paper examines how transaction cost approaches (as developed by North and Williamson) can inform international tax law and policy discussions. The international tax regime evolved institutions and institutional arrangements to address transaction costs such as the risk that two countries might doubly tax the same cross-border business profits. It mainly sought to reduce this risk by serving as a ‘commitment projector’ that enables governments to make credible political promises to taxpayers, other members of the public and other governments that they will not overtax these cross-border profits. As a result of these political commitments, taxpayers do not need to incur transaction costs they would otherwise have to sustain to identify and protect their global tax liabilities. In other areas, however, the international tax regime does not facilitate credible commitments. The talk will focus on one such challenge to the regime, namely the 2010 U.S. proposal to create a global tax reporting system via the Foreign Account Tax Compliance Act or FATCA. By eschewing traditional bilateral and multilateral cooperation when it introduced FATCA, the United States subverted its ability to offer credible commitments and raised transaction costs for economic participants. The talk will review the impact of FATCA on U.S. expatriates (and others) in Canada as well as potential options available to the Canadian government to resist FATCA.