Perhaps I can be forgiven for a spasm of institutional chauvinism. There is no place like NYU Law School, in the U.S. or indeed around the world, for studying tax law and policy. A case in point today came from an event that was organized pretty much on the fly, yet drew a strong audience response.
Professor Alfons Weichenrieder of the Economics Department at Goethe University in Frankfurt is a leading researcher in the field of international taxation. Like several other excellent economists in this field in both the U.S. and Europe, he is interested in understanding the institutional details of how countries' tax systems work, recognizing that one can't otherwise do good empirical research about international taxation. In addition, like some but not all of the economists whom I have met, he is interested in talking to lawyers.
He was in the U.S. for a conference that we both attended last Friday, and had asked me if, while in the area, he could present a paper at NYU Law School. We thought that this would be great, the only question being whether we'd be able to deliver a proper audience, but we figured we'd do our best.
The event took place from 6 to 7 pm today. He presented his paper (co-authored by Martin Ruf) "CFC Legislation, Passive Assets, and the Impact of the ECJ's Cadbury Schweppes Decision." The background here is that in 2006, in the Cadbury Schweppes decision, the European Court of Justice, on grounds that many fair-minded people find considerably short of being persuasive, held that the U.K. could not use its controlled foreign corporation (CFC) rules to combat tax planning games that placed passive income (via foreign subsidiaries of a U.K. company) in low-tax Ireland, rather than high-tax England, unless the taxpayer was making use of a "wholly artificial" arrangement.
The decision undermined EU countries' ability to address income-shifting games through the use of subsidiaries in low-tax members of the EU. A number of EU countries, I believe including Germany, responded to the Cadbury Schweppes decision by loosening their CFC rules in the interest of advance compliance.
Using a unique data set concerning German companies, the Weichenrieder-Ruf paper examines the question of whether there are empirical traces suggesting that German companies responded to the new opportunities afforded. Although the response appears not to have been huge - in part, perhaps, because of uncertainty regarding how aggressively Germany would push on the decision's permitting the disallowance of tax benefits from "wholly artificial" arrangements - there nonetheless are discernible signs that companies responded by holding more passive assets through EU subsidiaries, albeit less through subsidiaries in outside tax havens such as the Cayman Islands.
OK, onto the NYU Law School chauvinism. One point is simply that we had an event like this, and have many such in the course of a typical semester. But another point is that, despite a late start on our part in promoting the event (basically because everyone is every busy), we got more than 20 people to show up (and then engage in lively discussion), on short notice, on a Thursday night from 6 to 7 pm, with no food available (other than a Cadbury chocolate bar that Alfons whimsically brought), on a rather specialized topic, for an empirical paper by an economist who is not from the U.S. and thus is not known to most people here, and on a night when many or even most of the tax students who might have come were unavailable because they were going to Washington for a job fair. The audience included NYU students, NYU faculty, and tax people from outside the institution who are regularly participating members of our broader community.
I tend to doubt that all this could have happened at any other U.S. law school.