Global Perspectives on Income Taxation Law

202 Pages·2011·0.726 MB·English

by  Reuven Avi-Yonah, Nicola Sartori, Omri Marian

GLOBAL PERSPECTIVES ON INCOME TAXATION LAW
This page intentionally left blank
GLOBAL PERSPECTIVES ON
INCOME TAXATION LAW

Reuven S. Avi-Yonah, Nicola Sartori,
and Omri Marian
1
1
Oxford University Press, Inc., publishes works that further
Oxford University’s objective of excellence
in research, scholarship, and education.
Oxford New York
Auckland Cape Town Dar es Salaam Hong Kong Karachi
Kuala Lumpur Madrid Melbourne Mexico City Nairobi
New Delhi Shanghai Taipei Toronto
With offi ces in
Argentina Austria Brazil Chile Czech Republic France Greece
Guatemala Hungary Italy Japan Poland Portugal Singapore
South Korea Switzerland Thailand Turkey Ukraine Vietnam
Copyright © 2011 by Oxford University Press, Inc.
Published by Oxford University Press, Inc.
198 Madison Avenue, New York, New York 10016
http://www.oup.com
Oxford is a registered trademark of Oxford University Press
All rights reserved. No part of this publication may be reproduced,
stored in a retrieval system, or transmitted, in any form or by any means,
electronic, mechanical, photocopying, recording, or otherwise,
without the prior permission of Oxford University Press.
Library of Congress Cataloging-in-Publication Data
Avi-Yonah, Reuven S. (Reuven Shlomo), 1957-
Global perspectives on income taxation law / Reuven Avi-Yonah, Nicola Sartori,
Omri Marian.
p. cm.
Includes bibliographical references and index.
ISBN 978-0-19-532136-4 (pbk. : alk. paper)
1. Income tax—Law and legislation.
I. Sartori, Nicola. II. Marian, Omri. III. Title.
K4505.A94 2011
343.05’2—dc22 2010044231

Printing number: 9 8 7 6 5 4 3 2 1
Printed in the United States of America
on acid-free paper
Reuven
—To Orli , my inspiration
Omri
—To Taly , Yonatan, and Alma
Nicola
— To my wife, Paola
This page intentionally left blank
Contents
Preface / xi
Foreword / xiii
I ntroduction / xv
1 . Some Theoretical Aspects of “Comparative Taxation” / 1
I. What is comparative taxation? / 1
II. Some possible approaches to the study of
comparative tax law / 2
A. The functional approach to comparative tax studies / 4
B . Comparative tax law as a study of cultural differences / 7
C . The critical approach to comparative tax studies / 9
D. Comparative tax study as an exercise in economic analysis / 10
1. The economic principles of taxation: effi ciency,
equity, and simplicity / 12
E. What to expect next / 16
2. Taxable Income / 17
I. Taxable income defi nition: global vs. schedular and
source vs. accretion / 17
II. Taxation of fringe benefi ts / 23
III. Imputed income from owner-occupied housing / 27
IV. Windfalls / 32
V. Damage awards / 34
A. Taxation of damage awards / 35
1. The treatment of damage awards / 35
2. The issue of deferred damage compensation / 37
B. Which “damages” receive favorable treatment?
physical? mental? reputation? / 37
VI. Cancellation of indebtedness / 38
A. Inclusion of debt relief in gross income / 38
B. Exceptions to inclusion / 40
VII. Gifts and bequests / 40
A. Personal gifts and bequests / 41
B. Commercial gifts / 44
VIII. The realization requirement / 45
vii
viii / Contents
3. Deductions / 47
I. Business expenses / 48
A. Commuting, clothing, and other nondeductible expenses / 48
1. Commuting / 48
2. Clothing / 50
B. Child care costs / 51
C. Travel and entertainment / 53
1. Business entertainment / 53
2. Business travel / 54
D. Capital expenditures / 55
E. Depreciation / 56
F. Business interest / 58
G. Losses / 59
1. Capital losses / 59
2. Other loss limitations / 61
II. Personal expenses / 61
A. Apportionment of personal/business expenses / 61
B. Medical expenses / 62
C. Charitable contributions / 64
D. Home mortgage and other personal interest / 65
4. The Taxpaying Unit / 67
I. Introduction / 67
II. The basic issue and the two main models: how should we defi ne
taxable units? individual vs. family taxation / 67
A. Concrete examples of countries adopting the individual model / 7 0
B. Concrete examples of countries adopting hybrid solutions / 71
C. Concrete example of a country adopting the family model / 73
III. Anti-assignment of income rules / 73
A. The reason for anti-assignment of income rules / 73
B. The solutions adopted by some industrialized countries: examples / 74
5. Tax Accounting / 77
I. The taxable period and the accounting period:
general defi nitions / 77
A. Defi nitions, main issues, and possible solutions / 77
B. The solutions adopted by some countries: examples / 78
II. Cash model versus accrual model / 80
A. The accounting methods: cash versus accrual / 80
B. The solutions adopted by some countries: examples / 82
III. Net operating losses / 84
A. Main issue and possible solutions / 84
B. The solutions adopted by some countries: examples / 84
Contents / ix
6. Taxation of Capital Gains and Losses / 87
I. General defi nitions: capital gain and losses, realization, basis / 87
A. Defi nition of capital gain or loss / 87
B. The concept of realization and recognition / 89
C. The concepts of “basis” (or fi scal value) and “amount realized” / 91
II. Nonrecognition transaction and exemption transactions / 92
A. Nonrecognition transactions / 92
B. Examples of concrete policy choices / 94
III. Taxation of capital gains and capital losses: ordinary
income vs. separate income / 97
7. Tax Avoidance / 101
I. General defi nitions: tax evasion, tax avoidance,
and licit tax savings / 101
I I. Substance over form (the experience of common
law countries) / 104
III. Abuse of law (the experience of civil law countries) / 105
IV. Hybrid solutions / 107
8. Selected Business Tax Issues / 113
I. Introduction / 113
II. The defi nition of a business entity for tax purposes / 114
A. The importance of entity classifi cation for tax purposes
in the study of tax convergence / 114
B. Corporate entity defi nitions for tax purposes: examples
from the G7 countries / 115
1. Canada / 115
2. France / 119
3. Germany / 120
4. Italy / 122
5. Japan / 123
6. United Kingdom / 124
7. United States / 127
C. Summary / 129
III. Corporate residency / 130
A. Conventional determinants of corporate residency / 130
B. Characterizing “real seat” of a corporate entity in the G7 / 134
C. Summary / 137
IV. Corporate tax rates / 137
V. Some general remarks on corporate tax base / 140
VI. Corporate/shareholders tax integration of distributed profi ts / 143
A. Defi nition of integration and general issues / 143
B. Some specifi c integration methods adopted by countries / 146