Itai Grinberg (Georgetown University Law Center) has posted Beyond FATCA: An Evolutionary Moment for the International Tax System on SSRN. Here is the abstract:
- The international tax system is in the midst of a novel contest between information reporting and anonymous withholding models for ensuring that states have the ability to tax offshore accounts. What is at stake is the extent of many countries’ capacity to tax investment income of individuals and business profits of closely held businesses through an income tax as the world continues to become increasingly financially integrated. This article claims that the global response to four competing and incongruent initiatives of the European Union, the OECD, the United States, and Switzerland, together represent an emerging international regime in which financial institutions act to facilitate countries’ ability to tax their residents’ offshore accounts. The growing consensus that financial institutions should act as “tax intermediaries” cross-border represents a remarkable shift in international norms that has yet to be recognized in the literature. What remains is a contest as to how financial institutions should serve as tax intermediaries cross-border, and for which countries. Different outcomes in this contest may portend starkly different futures for the extent of cross-border tax administrative assistance available to most countries. The eventual triumph of an information reporting model over an anonymous withholding model is key to (1) allowing for the taxation of principal, (2) ensuring that most countries are included in the benefit of financial institutions serving as tax intermediaries cross-border, and (3) encouraging taxpayer engagement with the polity and supporting sovereign policy flexibility, especially in emerging and developing economies. The article closes with observations about how to reconcile the emerging automatic information exchange approaches and develop a multilateral system.
