The arbitration, a form of private justice paid by the parties, and the right of access to justice regardless the financial obstacles guaranteed by the European Convention of Human Rights are predetermined to have a difficult relationship. Nevertheless, their “marriage”…

Congratulations to JILP Managing Editing Harold Williford for outstanding success in the Orison S. Marden Moot Court Competition.  Based on his combined brief and oral argument score, he will be among the twelve competitors advancing to the Spring Semi-Final Round.  In addition, Harold is…

NYU reached the semi-finals at the 2012 Foreign Direct Investment International Arbitration Moot in Boston, Massachusetts.  The Journal of International Law & Politics had four members on the team with Wonjoo Choe, Matthew Delja, Benjamin Guthrie, and Rebecca Shieh participating.  Matthew received…

The Journal of International Law and Politics is pleased to invite you to attend our 2012 symposium this Thursday, October 25th. Our all day event, entitled "Tug of War: The Tension Between Regulation and International Cooperation," will feature panel discussions…

It is our pleasure to announce the winner of the Journal of International Law and Politics Peer Review Award for Volume 44: Harlan Grant Cohen, for his piece Finding International Law, Part II: Our Fragmenting Legal Community. The award recognizes…

JILP is currently soliciting applications for membership on the journal from NYU LL.M. students. Those who are accepted will be “Graduate Editors” on JILP, and will be responsible for three hours per week of office hours and for fulfilling other…

The Editorial Board is excited to announce that NYU's Journal of International Law and Politics (JILP) will release its inaugural peer review issue in which all leading articles will be selected with the assistance of leading academics in the field. …

Taxes not only serve to raise public revenues but also to shape the behavior of taxpayers, and thus of the economy as a whole.  The tax neutrality of Adam Smith is, therefore, the most hypocritical aspiration of any tax policy.  Importantly, governments today not only seek to shape the behavior of its residents, but also of the foreigners who interact with the country—thereby transforming the territoriality of tax jurisdiction into another hypocrisy.  And the effects of this phenomenon have an increasing impact on international politics, as well as certain trade policies did in other not so far times.

On October 26, 2011, the Committee on Ways and Means of the U.S. House of Representatives issued a discussion draft for a “comprehensive tax reform” of the U.S. international taxation system.  The issuance’s purpose is to seek feedback from interested professionals and stakeholders in order to improve the proposal.  And this proposal, usually called “The Camp Tax/Territorial Proposal” due to the fact that Congressman Dave Camp presides the Committee on Ways and Means, is very important to be ignored.  This reform, in fact, posits a modification that we could consider a kind of “revolution” in the U.S. income tax system.  It proposes a change from a “worldwide tax system” to a “territorial tax system,” and offers a reduction of the corporate tax rate (from 35% to 25%) and, as an accompanying and instrumental benefit, a “repatriation tax holidays.”

In a few words, a worldwide tax system (also know as residence-based tax system) imposes taxes on any income regardless its physical origin (source), both domestic and foreign.  Instead, a territorial system only taxes the domestic (residence) source income while exempting the foreign one.  In both scenarios, the income is typically taxed first in its source country and, in a cross-border arrangement, afterwards in the taxpayer’s residence country.  So, to alleviate the contingent double taxation, the worldwide system grants a credit for foreign taxes paid (the so-called “foreign tax credit,” which operates as an advance of domestic taxes) whereas the territorial system simple exempts the foreign source income.  Also, in a worldwide system such as the U.S. system, taxation on foreign income derived from business (“active income”) is normally deferred until brought to the U.S. (“repatriation”) whereas foreign income derived from investments (“passive income”) is generally taxed as soon as it is earned through a number of quite complex mechanisms, such as the U.S. Subpart F rules (Controlled Foreign Corporations or “CFC”) and others.  The accompanying benefit to this reform, the “repatriation tax holidays,” attempts precisely to incentive U.S. investors to rapidly repatriate their active income earned abroad through a very appealing tax treatment, which consists basically in a reduced tax rate along with a comfortable installment period to pay the taxes (for details, click here).

Although at a first sight (and as many are today arguing), this reform would favor allocating of U.S. investments abroad through exempting foreign source income, a more thoughtful consideration reveals the contrary.  Importantly, the first goal at hand is to repatriate U.S. investments currently invested abroad, and that is actually an objective with empirical support from the experience of other countries which have implemented a territorial tax system such as The Netherlands and notably, the U.K. (for further information, see links below).  On the other hand, nothing in this proposal indicates that the Committee on Ways and Means attempts to decrease the U.S. revenues by exempting foreign source income that, as argued, would be generated by U.S. investments that would move abroad by virtue of this reform.  To the opposite, the reform also aims to increase the U.S. tax revenues just as it has happened in The Netherlands and U.K.  So, this policy has actually worked so far.  Consequently, we may conclude that the proposed reform assumes that, in the long-term, the income generated by U.S. investments will then be produced only in the U.S. and not abroad.  Why?

There is a follow-up discussion today on Opinio Juris in response to the JILP Symposium. Today's dialogue focuses on the article published in 44:2 by Ryan Goodman. To read the follow up, click here.