Simplification in Transfer Pricing

It is the aim of this contribution to sustain that, despite the inherent complexity that the enforcement of the arm’s length rationale entails, it is feasible—and desirable—to introduce simplification measures without abandoning this worldwide accepted standard, especially in the context of developing countries and despite reticence shown by international organizations such as the OECD. Complexity in transfer pricing erodes fairness and equity and promotes profit shifting, which paradoxically constitutes the opposite outcome that this set of rules wants to achieve. This is the reason why it is urgent to propose and encourage the adoption of a means to neutralize unnecessary complexity in this field. The adoption of rebuttable predetermined margins and/or methods is proposed as the best solution in a context in which policymakers want to keep the arm’s length rationale intact. Also, even despite its shortcomings, irrebuttable predetermined safe harbors should be considered potentially feasible and a valid policy option.

Main Tax Policy Matters for Establishing Chile as a Regional Operative Investment Hub

Unlike other OECD countries, Chile has not yet established a uniform tax policy toward foreign investment. Moreover, Chile had past experiences of unsuccessful legislation on specific exempted investment vehicles created with the purpose of establishing the country as a hub or platform for foreign investment. An effective international tax policy design requires taking a holistic view of the challenges and their corresponding solutions. As a country’s tax regime is a key policy instrument that may negatively or positively influence investment, Chilean tax policy is being oriented in this regard. This Article reviews the progress of those projects and current legislation, compares other OECD countries’ experiences in this matter, analyzing the main facts or elements to consider upon deciding the relevant tax policy, and finally proposes a tax regime that could make Chile more competitive when attracting foreign operative investment, focused on a more regional approach. Accordingly, this Article also intends to serve as guide or help to be considered by regulators on the hard road of designing tax standards.

In Lieu of GILTI

Prior to the 2017 tax reform (TCJA), with a few exceptions, the United States only taxed the foreign income of its domestic corporations when profits were distributed to its U.S. shareholders as dividends. Through this policy, the United States supported its domestic corporations’ active overseas business operations by allowing equal economic competition with foreign entities without the additional burden of paying the U.S. income tax. However, corporations were able to use this ability to electively defer U.S. tax on foreign income as a tax planning technique, which, in part, contributed to the accumulation of large amounts of untaxed “offshore” earnings by U.S. multinational corporations. The U.S. Congress essentially terminated deferral and this tax planning technique when it enacted the current tax on global intangible low-taxed income (GILTI) as part of the TCJA. But GILTI is a formulaic calculation that taxes income regardless of the taxpayer’s intent, use of profits, or the income’s potential for aggressive tax planning. Although GILTI protects against the use of aggressive tax planning techniques, it compromises the tax policy goal of allowing U.S. corporations to compete in foreign jurisdictions unhindered by the U.S. income tax. In lieu of GILTI and the section 245A deduction, this Article proposes a new Subpart F inclusion for excessive unrepatriated earnings based on the concept of distributable net income. This proposal would be superior to the current GILTI regime because it would allow multinational corporations to use deferral for the beneficial goal of supporting foreign active business operations, but would prevent the use of deferral for tax planning purposes.

War Triggered by a Ten Cents Tax on Natural Resources

This Article is intended to provide an historic tax analysis on the most controversial cause of the Pacific War (1879–1884) between Chile and the alliance of Peru and Bolivia, restating the importance of taxation on natural resources and the political consequences of inadequate tax policy measures.

Focus on the Facts

This Essay highlights the importance of the data analysis process (the curation) as part of analyzing and determining the strength of tax positions. This short Essay will review some of these challenges and discuss what can be done about them.

Latin American Opposition to Mandatory Arbitration in Tax Treaties

The international tax regime has recently made large strides toward a reform of its dispute resolution mechanism. Long-anticipated, mandatory tax treaty arbitration is finally gaining legitimacy beyond limited use by a few countries. Yet, the opposition to international arbitration among developing countries, led by Latin American countries, has not waned. This Article tracks this opposition to its origins and argues that it is misguided in the case of tax treaty arbitration, which such countries should rather generally support.

Mayday—Brexit

On 31 January 2020, the United Kingdom left the European Union Brexit. A number of tax consequences both in the United Kingdom as well as in other member States will follow from leaving as a member of the European Union and the European Economic Area. This Article analyzes some of the income tax consequences, from a Swedish perspective, that follow from Brexit.

Taxing Cross-Border Services

Many developing countries have been trying to expand in the last decades their taxing powers on cross-border services rendered by non-residents beyond the rigid framework of the current international tax regime. However, this expansion has been carried on unilaterally and sometimes in an unplanned manner. This contribution describes the Brazilian and Argentinian experiences and tries to extract some policy lessons therefrom.

On the Fragility of the International Taxation Legal System

This Article focuses on the OECD’s work on harmful tax competition todemonstrate how the OECD and subsidiary bodies’ governance structure,and the standard-settingprocess, built a fragile international taxationlegal system that is not just impairing legitimate tax competitionbut also failing to promote cooperation among tax jurisdictions. Theoption for the harmful tax competition work among other tax issuescovered by the OECD is justified by the difficulties faced by the WTODispute Settlement Body (DSB) while adjudicating the Argentina-FinancialServices dispute. In this dispute, Panama challenged theimposition of defensive tax measures against harmful tax competitionbased on a list of non-cooperativetax jurisdictions issued by the Argentine tax authority. The clash between the international tradelegal system and the international tax system unveiled the fragilities ofthe last related not just to the global governance structure but also theinternational tax standards for harmful tax competition. In spite ofthe recent efforts by the OECD by the lauching of the BEPS Project, thechallenge of making the international taxation system work for allMembers and non-Membersremains.

Taxpayers' Rights

This Article addresses the challenges, trends, and evolution of Taxpayers’ Rights both in the Unites States and in Latin America, particularly by comparing the U.S. Taxpayers’ Bill of Rights and the recently adopted Taxpayers’ Rights Letter from the Latin American Institute of Tax Law (ILADT). Furthermore, although in Latin American this is a relatively more recent topic, nonetheless, in the United States it is not, and the Article also addresses the evolution of taxpayers’ rights both from the point of view of the U.S. Constitution as well as iconic decisions from the U.S. Supreme Court.