The three-day conference on Comparative Tax Law and Culture concludes today at the Monash University Prato Centre in Prato, Italy. The conference is sponsored by the Cegla Center for Interdisciplinary Research of the Law at Tel Aviv University and the Monash University Taxation Law and Policy Research Institute. Here are today's presenters and their papers:
III. Comparative Notions of Income, Expenses and the Family (Continued)
The Social Norm of Tipping, its Correlation with Inequality and with Differences in Tax Treatment Across Countries, by Yoram Margalioth (Tel Aviv University Faculty of Law):
Whereas in many countries, most notably in Europe where the practice originated, a service charge is now the norm, tipping has become quintessentially American. Consumers of yesterday left no more than 10 percent on fountain counters. Beginning in the late 1970s, the going rate rose to 15 percent and it is steadily edging toward 20 percent.
People who tip may be perceived as imposing a negative externality on others who tip less generously or do not tip at all. I suggest that as inequality grew in the United States, affluent people increased the amount they tipped in order to improve their relative positioning; that is, their status. This puts pressure on those who are somewhat less affluent to increase the amount of tip that they left, beginning a cascade effect to the detriment of all. Evidence supports the view that expenditure cascades in housing and other areas are at least in part a consequence of increased income inequality. Tipping seems to me to be part of that trend. One of the goals of the tax system is to mitigate negative externalities, and indeed there are significant differences across countries (and cultures) in the ways they treat tip income for tax purposes.
In this paper, I explore the different tip practices comparing the US with some European, Asian and South American countries assuming they reflect differences in underlying social norms; examine their correlation with income inequality; and compare the tax treatment and the rationale for it wherever I can find it, in an effort to support (or refute) the above theory.
Commentator: Tsilly Dagan (Bar Ilan University Faculty of Law)
Ordinary People Necessary Choices—A Comparative Study, by Tsilly Dagan (Bar Ilan University Faculty of Law):
This article will focus on the concept of deductible expenses. Tax law in most Anglo-American countries allows taxpayers to deduct business-related expenses, but not personal expenses. Distinguishing between disallowed personal expenses and deductible business-related expenses is traditionally considered a matter of technical classification. By contrast, I argue that the deductibility of expenses is closely related to social, cultural and political features of different societies. If this hypothesis proves right, the specific elements that make up this distinction are likely to vary across time and place.
In order to demonstrate this, The comparative part of this project will focus on three countries -– Canada, the US, and Israel -– in order to check to what extent do these three countries differ in the way they interpret expenses to be "ordinary and necessary" for the production of income in one specific context—that of childcare deductions. All three countries belong to the British tax family; hence follows a similar general pattern of determining taxable income. Yet, each of these legal systems developed independently for decades. If tax doctrine is indeed culturally sensitive, one would expect to find differences in the details of such countries' tax doctrine.
Two of the countries—Canada and Israel – have given the deductibility of childcare expenses extensive consideration in recent years. I will thus discuss the Symes case in Canada and the Perry case pending at the Israeli Supreme Court. I will also compare these cases to the prevailing law and scholarship in the US.
Commentator: David Duff (University of British Columbia Faculty of Law)