Paul L. Caron

Wednesday, February 6, 2013

Avi-Yonah: Should the U.S. Dictate World Tax Policy?

Reuven S. Avi-Yonah (Michigan), Should the U.S. Dictate World Tax Policy? Reflections on PPL Corporation v. Commissioner:

The Supreme Court’s decision to grant certiorari in the PPL case offers it a unique opportunity to change the law regarding foreign tax credits that has significantly impeded the ability of other countries to engage in meaningful tax reform. In 1938, the Court said in dicta that to qualify for the foreign tax credit a tax had to be an income or excess profits tax (or a tax imposed in lieu thereof) under U.S. tax principles. This statement has led to an elaborate set of regulations defining what is an income tax, which has significantly hampered the ability of foreign countries to adopt tax reforms for fear that their taxes would not be creditable. It is time for the Court to declare that any tax whose burden falls on the taxpayer, i.e. any direct tax, is a creditable tax, and do away with the cumbersome structure of the I.R.C. Section 901 regulations.

Scholarship, Tax | Permalink

TrackBack URL for this entry:

Listed below are links to weblogs that reference Avi-Yonah: Should the U.S. Dictate World Tax Policy?:


Under current law I dont see how the Supreme Court can change it. The statute states income tax and the regs under 901 are valid even if they may be bad policy. Yes the original policy came from the courts but it has long been regified. Odd statement by a usually smart prof.

Posted by: mike fox | Feb 7, 2013 7:46:27 PM

Professor Avi-Yonah is a bright guy, a shining star among taxprofs. In this thoughtful and provocative essay, he argues that the Supreme Court should retool section 901 to better accommodate the tax policies of foreign sovereigns. At first blush, Avi-Yonah's proposal seems like a bad idea for at least two reasons. First, the Supremacy Clause makes no room for foreign tax law. Second, the kind of international tax reform that Avi-Yonah advocates, regarding the definition of creditable taxes, is most properly the subject of tax treaties, not judicial fiat.

Posted by: Jake | Feb 6, 2013 6:25:38 PM

Interesting position - and headline. In reading the author's 3 page paper, I discover that the US is "dictating" world tax policy because it is deciding what foreign levies qualify as "income" taxes for the FTC. Apparently the author believes that the US should interpret its own tax rules in a way that allows foreign governments the greatest freedom to impose levies that qualify for the US credit. And if the US fails to follow Professor Avi-Yonah's prescription, the US is dictating. Regardless of the correct outcome - a bit of hyperbole perhaps.

Posted by: air65cav | Feb 6, 2013 7:38:25 AM