The James Hausman Tax Law and Policy Workshop
Presents:
Daniel N. Shaviro
Digital Services Taxes and the Broader Shift from Determining the Source of Income to Taxing Location-Specifics Rents
Wednesday October 16, 2019
12:30pm - 2:00pm
Falconer Hall, 84 Queen's Park
Solarium(FA2)
Abstract: In recent decades, a number of fantastically successful, mainly American, multinational entities (MNEs) have risen to global economic hyper-prominence. While their market capitalizations and profits are high, reflecting that they earn substantial rents or quasi-rents, their aggregate global taxes are generally quite low, reflecting their ability to create stateless income. Often, these MNEs are technology companies – but not always. Starbucks, for example, enjoys high global profits and low taxes despite its following a classic brick-and-mortar retail business model. This reflects that, like its more obviously high-tech peers, it relies on valuable intellectual property that helps it in creating both global pretax profitability and stateless income. Such MNEs’ rise has placed substantial pressure on existing corporate income tax models. While the existing models might perhaps be significantly improved, this would still leave market countries (where the MNEs’ consumers are located) well short of being able to tax, as fully as they might like, the location-specific rents that these companies earn by interacting with their residents. Market countries that use novel tax instruments, such as properly designed digital services taxes (DSTs) to expand their capacity to reach such location-specific rents, are not acting unreasonably, as judged within existing (and fairly lax) norms for constraining and channeling countries’ self-interested behavior. DSTs also have the potential (although whether it will be realized is uncertain) to improve, rather than worsen, global efficiency and distribution. Whether they prove permanent or merely transitional, DSTs look like harbingers of a new era in which entity-level corporate taxation rightly focuses more on locational rents, and less on decades-old doctrinal and semantic debates concerning the supposedly “true” source of economic income and value creation.
Daniel Shaviro, the Wayne Perry Professor of Taxation at NYU Law School, is a graduate of Princeton University and Yale Law School. Before entering law teaching, he worked at Caplin & Drysdale, a leading tax specialty firm, and at the Joint Congressional Committee on Taxation. Shaviro began his teaching career at the University of Chicago Law School in 1987, and he joined the New York University School of Law in 1995. Shaviro’s scholarly work mainly examines tax policy, budget policy, and entitlements issues. His books include Dangerous Grandiosity: Literary Perspectives on High-End Inequality Through the First Gilded Age (Anthem Press, forthcoming 2020); Fixing U.S. International Taxation (Oxford U. Press, 2014); Decoding the U.S. Corporate Tax (Urban Institute Press, 2009), Taxes, Spending, and the U.S. Government’s March Toward Bankruptcy (Cambridge U. Press, 2006), Making Sense of Social Security Reform (U. Chicago Press, 2000), When Rules Change: An Economic and Political Analysis of Transition Relief and Retroactivity (U. Chicago Press, 2000), and Do Deficits Matter? (U. Chicago Press, 1997). In addition to his scholarly work, Shaviro has published a novel, Getting It (iUniverse 2010), and he has a blog at http://danshaviro.blogspot.com.
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