Corporate Tax Law: Structure, Policy and Practice PDF
Preview Corporate Tax Law: Structure, Policy and Practice
more information - www.cambridge.org/9781107033535 CORPORATE TAX LAW Structure,policyandpractice Structureissomethingthatmanycorporatetaxsystemslack.Focusingon structuraldefectsandhowtheyareaddressedinpractice,thiscomprehen- siveandcomparativeanalysisofcorporatetaxsystemsusesaconceptual frameworktoillustrateandanalysethemanydifficultissuesthatcorpo- rationspose.Thisframeworkisenhancedbytheexaminationofalarge bodyoflegalrulesandpracticalconsiderationsthatdemonstratehowcor- poratetaxsystemsworkinpractice.Whileadoptingabroadcomparative approach,theanalysisalsodrillsdownintothedetailofinfluentialcor- poratetaxsystemstoillustratethemajorissuestheyfaceandtheoptions availabletothem. Peter HarrisisareaderattheLawFacultyoftheUniversityofCam- bridge.HeisalsoDirectoroftheCentreforTaxLawattheLawFacultyand adirectorofstudiesandfellowofChurchillCollege. CAMBRIDGE TAX LAW SERIES Taxlawisagrowingareaofinterest,asitisincludedasasubdivisionin manyareasofstudyandisakeyconsiderationinbusinessneedsthrough- outtheworld.Booksinthisserieswillexposethetheoreticalunderpinning behindthelawtoshedlightonthetaxationsystems,sothatthequestions tobeaskedwhenaddressinganissuebecomeclear.Theseacademicbooks, writtenbyleadingscholars,willbeacentralportofcallforinformationon taxlaw.Thecontentwillbeillustratedbycaselawandlegislation. Thebookswillbeofinterestforthosestudyinglaw,business,economics, accountingandfinancecourses. SeriesEditor Dr Peter Harris, Law Faculty, University of Cambridge, Director of the CentreforTaxLaw. DrHarrisbringsawealthofexperiencetotheSeries.Hehastaughtand presentedtaxcoursesatadozenuniversitiesinnearlyasmanycountries andhasactedasanexternaltaxconsultantfortheInternationalMonetary Fundformorethanadecade. CORPORATE TAX LAW Structure, policy and practice PETER HARRIS cambridge university press Cambridge,NewYork,Melbourne,Madrid,CapeTown, Singapore,Sa˜oPaulo,Delhi,MexicoCity CambridgeUniversityPress TheEdinburghBuilding,CambridgeCB28RU,UK PublishedintheUnitedStatesofAmericabyCambridgeUniversityPress,NewYork www.cambridge.org Informationonthistitle:www.cambridge.org/9781107033535 (cid:2)c PeterHarris2013 Thispublicationisincopyright.Subjecttostatutoryexception andtotheprovisionsofrelevantcollectivelicensingagreements, noreproductionofanypartmaytakeplacewithoutthewritten permissionofCambridgeUniversityPress. Firstpublished2013 PrintedandboundintheUnitedKingdombytheMPGBooksGroup AcataloguerecordforthispublicationisavailablefromtheBritishLibrary LibraryofCongressCataloguinginPublicationdata Harris,Peter,1938– Corporatetaxlaw:structure,policyandpractice/PeterHarris. p. cm.–(Cambridgetaxlawseries) Includesbibliographicalreferencesandindex. ISBN978-1-107-03353-5(hardback) 1.Corporations–Taxation–Lawandlegislation. I.Title. K4544.H3752013 343.06(cid:3)7–dc23 2012037580 ISBN978-1-107-03353-5Hardback CambridgeUniversityPresshasnoresponsibilityforthepersistenceor accuracyofURLsforexternalorthird-partyinternetwebsitesreferredto inthispublication,anddoesnotguaranteethatanycontentonsuch websitesis,orwillremain,accurateorappropriate. CONTENTS Preface pagexiv Tableofcases xvi Tableofstatutes xx Listofabbreviations l Introduction 1 Approachandfocus 1 Whatisa‘corporation’andwhyisitimportant? 4 The‘corporatetaxsystem’ 8 Scopeandstructureofthebook 12 1 Taxationofcorporateincomewhenderived 17 1.1 Identifyingandclassifyingcorporations 19 1.1.1 Identifyingcorporations 22 1.1.1.1 Definition 22 Corporations 23 Unincorporatedentities 24 Exclusions 26 Foreignentities 29 1.1.1.2 Extensions 32 1.1.2 Classifyingcorporations 34 1.1.2.1 Basedonrelations 34 1.1.2.2 Basedonsitus:resident/non-resident 35 1.1.2.3 Basedonactivities:sizeandcharacter 37 1.1.3 Exploringrelationswithownersandcontrollers 38 1.1.3.1 Natureofownershipandcontrol 38 1.1.3.2 Degreesofownershipandcontrol 39 1.1.3.3 Commonownershipandcontrolof corporations 40 1.1.4 Responsestoconcentratedownershipandcontrol 42 1.1.4.1 Non-intervention:separateentityapproach 43 1.1.4.2 Erosionofidentity 46 Collapseofseparateidentity:consolidation 46 v vi contents Withinaseparateentityapproach:transferof taxattributes 48 Hybridapproaches 49 Problemswithminorityowners 49 Attributiontoallowners 50 Attributiontocontrollersonly 51 1.1.4.3 Reinforcementofidentity:independententity approach 53 1.1.5 Classifyingcorporationsbytheirownersandcontrollers 54 1.1.5.1 Controlledcorporations 55 Controlbyanindividual 56 Testofcontrol 56 Attributionofrights 58 Controlbyacorporation 60 Testofcontrol 61 Attributionofrights 63 Siblingcorporations 64 Controlbyasingleperson 64 Controlbyagroupofpersons 65 1.1.5.2 Closelyheldcorporations 67 Formofthreshold 69 Typeofparticipation 70 Attributionofparticipations 71 Typeofparticipator 75 Levelofparticipation 75 Typeofcorporation 75 1.1.5.3 Associatedcorporations 76 1.2 Corporatetaxbaseissues 78 1.2.1 Generalrules 79 Schedularvs.global 79 Shouldthecorporatetaxbasefollowfinancialaccounts? 86 Relationshipwithaccountinginpractice 88 1.2.2 Reinforcementofcorporateidentity:transferpricing 93 Arm’slengthpricing 93 Relevantrelationship 97 Attributionofrights 100 Correspondingadjustmentsandsubventionpayments 102 1.2.3 Erosionofidentity:corporategroups 103 1.2.3.1 Transactiondeferral 104 Deferralmechanism 105 Whatisagroup? 109 1.2.3.2 Lossrelief 112 Lossesofanindependentcorporation 113 Useinyearinwhichincurred 113 Carry-back 114 Carry-forward 115 contents vii Grouplossreliefmechanism 118 Pureconsolidation 119 Partialconsolidation 119 Losstransfer 120 Groupcontribution 124 Whatisagroup? 125 Minorityshareholders 128 1.2.3.3 Otherareas 130 1.2.4 Erosionofidentity:otherrelatedcorporations 131 Controlbytheindividual 131 Closelyheldcorporations 133 1.2.5 Interfacewithpersonalincometax 136 Interfacethroughevents 136 Specialrulesforindividuals:focusonsimplifiedtax base 138 1.3 Taxtreatment 142 1.3.1 Selectingthetaxsubject 144 Corporatetaxation:insearchofaphilosophy 144 Optionsfortaxsubject 148 1.3.2 Taxingthecorporation 150 1.3.2.1 Factorsinselectingacorporatetaxrate 151 Interfacingissues 151 Philosophicalissues 153 Sameratesasindividuals 153 Temporarysurrogate 154 Competition 157 1.3.2.2 Optionsinselectingacorporatetaxrate 159 Mainrate 160 Progressiverates 161 Differentiation 165 Anti-erosion:alternativeminimumtax 166 Anti-deferral:taxonexcessiveretention 167 1.3.3 Taxingownersandcontrollers 169 1.3.3.1 Factorsandoptionsforallocation 170 Partnershipmethod 170 Byreferencetovalueofshares 172 Capitalgainswithdeferralcharge 174 1.3.3.2 Partnershipmethod 175 1.3.3.3 Personalservicesincome 176 2 Taxationofcorporateincomewhendistributed 181 2.1 Classifyingcorporaterights 185 2.1.1 Identificationofmembershiprightswithcorporate profits 188 2.1.2 Hybridinstruments 191 viii contents 2.1.2.1 Debtinstruments 192 2.1.2.2 Preferenceshares 197 2.1.3 Excessivedebt 198 2.1.4 Amalgamationandfragmentation 204 2.1.4.1 Amalgamation 204 2.1.4.2 Fragmentation 207 2.1.4.3 Third-partyintermediation 207 2.2 Identifyingdistributions 208 2.2.1 Fundamentalfeaturesofdividends 209 2.2.1.1 Allocation 209 2.2.1.2 Quantification 211 2.2.1.3 Timing 211 2.2.1.4 Dualcharacter 212 2.2.2 Interceptingcorporateprofits:hiddenprofit distributions 215 2.2.2.1 Transfersofassets 216 Shareholderlevel 217 Corporatelevel 221 2.2.2.2 Assumptionorforgivenessofliability 224 2.2.2.3 Loansanduseofassets 225 2.2.2.4 Provisionofservices 228 2.3 Dualnatureofcorporateincome 229 2.3.1 Economicdoubletaxation:theclassicalsystem 230 2.3.1.1 Thecharge 231 Shareholdertaxation 231 Corporatedistributionstax 233 Withholdinganddualtaxation 234 2.3.1.2 Expensesinderivingdividends 235 2.3.2 Shouldcorporateincomebetaxedtwice? 239 2.3.2.1 Corporatevs.unincorporatedsectors 241 2.3.2.2 Dividendsvs.otherreturns 243 2.3.2.3 Distributionvs.retention 248 2.4 Dividendrelief 251 2.4.1 Optionsandfactorsinselectingdividendrelief 251 2.4.1.1 Types 252 2.4.1.2 Corporationandshareholdertaxbases 254 2.4.1.3 Preferenceincome 256 2.4.1.4 Extentofrelief 257 2.4.1.5 Dividendstreaming 258 Whatisdividendstreaming? 259 Whyengageindividendstreaming? 260 Optionsfordividendstreaming 262 2.4.2 Corporate-leveldividendrelief 262 2.4.2.1 Dividenddeductionsystem 263 Preferenceincome 264
The list of books you might like
