Wednesday, September 16, 2020

Tax Policy Colloquium, week 4: Adam Kern's Illusions of Justice in International Taxation

 Yesterday at the Tax Policy Colloquium, Adam Kern presented his paper, Illusions of Justice in International TaxationIt is a chapter from his Princeton Politics Department dissertation in process (in the realm of political theory) entitled Principles of International Taxation. Kern is also an NYU Law grad who took the colloquium a couple of years back. The project aims to bring philosophical principles and expertise to bear on international taxation – to date a very under-inhabited field by philosophers, although a few, such as Peter Dietsch, who appeared at our colloquium a few years back, have been working in it.

The project, like Liam Murphy’s and Thomas Nagel’s The Myth of Ownership, has both what one might call a destructive or ground-clearing component – aiming to clear away ill-reasoned implicit philosophizing in the field – and a constructive one, aiming to erect something else in its place.

The chapter we discussed is mainly concerned with ground-clearing. As such, like Murphy-Nagel, it has relatively little to say to the likes of me, since I already agreed with its critiques of what I would agree are ill-founded and ad hoc normative principles. Nonetheless, it may make a significant contribution to the field, given that those principles may be far more widely accepted than I tend to realize. I tend to focus on their proponents’ complementary arguments that raise consequentialist and indeed welfarist issues.

The project differs from, without contradicting, my international tax writings in that it is centrally concerned with exploring what would be a globally just international tax regime. My work generally takes for granted national “selfishness” (i.e., exclusive or nearly exclusive concern with the welfare of one’s own people), not because that is necessarily morally defensible, but because it’s the world we live in & which mainly interests me. I do think about multilateral cooperation to achieve better end-states, insofar as it appears to be feasible or sustainable within the selfish framework, and I also consider the possibility (since it appears to be realistic) that countries may value cooperating rather than defecting in a prisoner’s dilemma-type setting, even if they could get away with more defecting than they undertake, so long as they believe that others tend to be similarly minded. But that still is very different than asking what a given country would do if it accepted that global justice should guide its actions.

Okay, turning to the paper itself: It discusses the Capture Principle, which it defines as holding that (i) countries have a package of rights to tax income generated from activities inside their borders, and (ii) the value of the package should be proportionate to the amount of income generated from such activities. Put more in everyday language, I would say that the Capture Principle holds that source-based income taxation is just. Hence, countries not only can (and perhaps even should?) justly engage in it themselves, but should accept the justice of other countries doing so as well. The paper rejects this principle, and a subsequent chapter apparently does the same for the Affiliation Principle (and hence for residence-based income taxation).

At least from this chapter, it is not entirely clear to me what a given country that currently is engaged in source-based and residence-based corporate (and other) income taxation should do once it realizes that the Capture and Affiliation Principles are wrong. And the project does not rule out the possibility that these approaches could be largely sensible in practice, albeit as interpreted and modified to further, rather than set back, global justice. But they don’t stand on their own as inherently just or as having more than contingent and instrumental value. By analogy, consider the Murphy-Nagel rejection of entitlement to one’s own market-derived labor income as inherently just. This does not contradict viewing market arrangements as having desirable incentive effects that might lead to a system in which people’s after-tax returns are generally strongly affected by the level of their pretax earnings.

Very quickly, the chapter’s main arguments can be summarized as follows: Proponents of the Capture Principle, as applied to the source-based taxation of foreign multinational companies (MNCs), base it on a notion of reciprocity between the MNCs’ foreign owners and their domestic customers. (As an aside, I would tend to think of the relevant reciprocity as more between different countries’ governments, acting on behalf of their own residents.)  But all their arguments fail, even if one accepts arguendo their underlying moral premises.

First, the Principle of Fair Play, which abhors free-riding, posits that, since the MNCs are benefiting from locally created public goods and infrastructure, they have a moral obligation to contribute to funding it. The paper argues, however, that merely positing a duty so to contribute does not show that such contributions should depend on applying source-based corporate income taxation. What ought to be contributed is indeed the very question at issue.

Second, the Compensatory Principle finds a moral obligation to reimburse the source jurisdiction for the (marginal?) costs imposed by the MNC’s inbound activity. As an aside, I have always found this frequently-heard argument peculiar, because countries generally want inbound investment and consumer goods, based on their considering these things net benefits to themselves, not net costly. Arguing that it’s only fair to reimburse costs is a bit ill-directed to the circumstance of perceived net benefit. This is why countries typically welcome inbound investment, as well as inbound consumer goods unless they are being protectionist, even if they would also like (subject to concerns about tax competition) to get some revenue.  However, since the paper is generally accepting arguendo the contested principles’ underlying premises, it emphasizes the fact that marginal cost imposed is so ill-related to domestically sourced income. It contrasts, for example, an MNC that sends heavily laden trucks along a country’s roads, in the course of generating only minimal profits, with one that makes a ton of money through derivatives trading.

Third, the Contributory Argument, in two different flavors, purportedly supports source-based corporate income taxation of foreign-owned MNCs. In its proprietary version, it notes that, if countries rightfully have the property right to exclude outside access from their physical space and consumer markets, a source-based corporate income tax follows from that. The paper responds that there may be no particular reason why the access fee would take that form. (But might it be a permissive form?) In its distributive version, the contributory argument asserts that nations are entitled to their shares of the global surplus that they help create, ostensibly justifying the use of a source-based corporate income tax to realize that rightful claim. The paper responds that the creation of global surplus is simply too intermingled among all nations to allow for treating source-based income as a proxy therefor.

A war fought on enemy territory – Again, in all these cases, the paper accepts arguendo lines of argument that the author may not accept – and, in one case, expressly states in a footnote that he does not accept – in order to show that, even if  the broad principles are valid, the conclusions don’t follow.

Two other arguments that it appears to accept arguendo – and that I myself don’t accept, very likely with the author’s agreement – are that (1) the geographical source of income can meaningfully be determined, at least in principle, and (2) for the distributive version of the Contributive Argument, that (a) allowing producers to reap the full market prices from what they offer is not just potentially efficient but also independently just, and (b) that this just claim transfers from a given individual to his or her country. In common with Murphy and Nagel, I think of markets as being rightly favored in appropriate circumstances because of their efficiency properties in those circumstances, not on independent grounds of moral entitlement to the market values one is able to realize.

Accordingly, the chapter’s main structure is to attack propositions in the form A -> B, based on accepting A arguendo even though welfarists such as me (and also many non-welfarists, including Kern) would not accept A to begin with, other than conceivably on contingent empirical grounds.

The use of source-based corporate income taxation in international tax policy – Many of the paper’s rebuttals reflect corporate income taxation’s unrelatedness to rationales for taxing outside MNCs. The case for income taxation stands on views about tax burden distribution as between (resident) individuals. Its origins and rationale have nothing to do with the international setting. But once one has an income tax on resident individuals, one may have good reason for extending it first to resident corporations, and then to foreign corporations on what is deemed to be their domestic source income. Even if these two extensions make perfect sense, however, it would be a surprising coincidence if the income taxes thereby imposed on foreign MNCs happened to match the various rationales that have been extended for source-based taxation of outsiders.


But what are the proponents of the Capture Principle really (or mainly or also) saying? – While there are also reasonable consequentialist arguments in favor of source-based corporate income taxation, I agree that the views justifying the Capture Principle on separate moral grounds can be found in the literature. But I wonder if the paper takes them more seriously than one needs to – or perhaps, even than the proponents really take these arguments themselves. They often are trying to rationalize current practice, or else something close to it or plausibly evolved from it, rather than seeking to deduce in the abstract how cross-border taxation might work. So perhaps what they are mainly saying is that a system that assigns a large role to source-based corporate income taxation (a) is not wholly ridiculous, and (b) facilitates desirable multilateral coordination. E.g., all income is “taxed once,” even leaving aside residence-based taxation, if everyone has a source-based tax, their rules for it are reasonably consistent, and tax havens don’t end up with much under these rules because so little happens in the havens on either the production or the consumption side.


For myself, that claim is good enough, not to prove itself or resolve anything, but to help set up a framework for analysis, including by interrogating it, and potentially rejecting it in whole or in part on empirically rooted consequentialist grounds. Plus, again I’m personally interested less in the ideal, which I see as beyond practical reach anyway, as in thinking about how countries’ (and their political actors’) incentives and perceived interests shape behavior, hopefully in directions that might be better rather than worse from both a national and a global standpoint.


Thus, as with Murphy-Nagel (and this, of course, is good company), I view it as an allied and constructive effort that doesn’t speak as much directly to me as to others who may need to have their consciousnesses raised, so to speak.

9 comments:

Local Packers and Movers bangalore said...


Packers And Movers Bangalore Local Household Shifting Service, Get Free Best Price Quotes Local Packers and Movers in Bangalore List, Compare Charges, Save Money And Time at
Local Packers And Movers Bangalore

Jack Lucas said...

I frequently get cold sores(which lasts for 5-6 days on my lips and its painful both physically and mentally) .. As a bodybuilder, I basically get outbreak due to the daily pressure and heat in the body.. Recently I stumbled upon my salvation. I found a herbal remedy to cure hsv completely, in just 4weeks ..

I got to know about Dr Utu after seeing a lady's testimony online. I reached the doctor and I ordered for herpes herbal medicine. He sent the herbs to me and I started making use of them. In just 2days, the cold sores are cleared. 4weeks after medication, I went to the hospital for test of cold sores and it was completely NEGATIVE.

By following every prescription, i was able to cure my cold sore in less than 4weeks. 100% natural herbs no after effect.
Note: Please do let others know if this work for you.
The doctor's email is drutuherbalcure@gmail.com
Note : follow all instructions accordingly..

If you are sure that you have benefited from this African herbs be courageous to inform others.
Thanks in advance

Jack Lucas said...

I frequently get cold sores(which lasts for 5-6 days on my lips and its painful both physically and mentally) .. As a bodybuilder, I basically get outbreak due to the daily pressure and heat in the body.. Recently I stumbled upon my salvation. I found a herbal remedy to cure hsv completely, in just 4weeks ..

I got to know about Dr Utu after seeing a lady's testimony online. I reached the doctor and I ordered for herpes herbal medicine. He sent the herbs to me and I started making use of them. In just 2days, the cold sores are cleared. 4weeks after medication, I went to the hospital for test of cold sores and it was completely NEGATIVE.

By following every prescription, i was able to cure my cold sore in less than 4weeks. 100% natural herbs no after effect.
Note: Please do let others know if this work for you.
The doctor's email is drutuherbalcure@gmail.com
Note : follow all instructions accordingly..

If you are sure that you have benefited from this African herbs be courageous to inform others.
Thanks in advance

Bryant Lisa said...

Happiness is all i see now, i was herpes sicker for 6 years but i thank God for directing my footsteps to Dr Emu, he gave me instructions and i followed and in 2 weeks i was completely cured using his medicine, I am now Herpes Negative Contact Dr Emu for more information, He also has other cure to other ailment, HIV AIDS, CANCER, DIABETES, HEART DISEASE, HEPATITIS B/C And also restore broken relationships such as Ex HUSBAND, Ex WIFE, BROKEN MARRIAGES, Any kind of Problem in any relationship can be restore back in 24hours, Just Email: emutemple@gmail.com  Whatsapp or call: +2347012841542

Unknown said...

Hello Everybody,

My name is Bhagwan Kumawzt by name and I live in the POLAND and i am a happy woman today? and i told my self that any lender that rescue my family from our poor situation get any kind of loan you need today, thank you, as you read greatest testimony of my life. with whatsapp+919667837169

Testimony of a serious loan acquired, thank you very much Dr. Mark for your loan assistance of 100,000(US DOLLARS) without any upfront fee,that you give me. I will talk about your services to those around me who need a loan or financing. I am happy with the loan you have granted me Do not hesitate,if you need a loan and a real legit loan lender so just kindly contact him now and get your loan via:: markthomasfinanceltd@gmail.com whatsapp number: +919667837169

Whats-App no +919667837169
Company Name Ronnie Finance Ltd
Dr. Mark Thomas

SarahpWatsonf said...

Coach Outlet Online
Michael Kors Bags Outlet
Cheap Real Yeezys
Cheap Yeezys
Michael Kors Purse Outlet
Coach Outlet Store Online
MK Outlet
Coach Bags Clearance
Coach Bags Outlet

Brittany Seiber said...

To know more about Chief Dr Lucky you can visit his website (https://chiefdrluckyherbaltherapy.wordpress.com/)
 
 A friend that suffered from Herpes and was cure with the help of this great herbal doctor Chief Lucky so i decided to contact him for help in getting rid of my families genital herpes virus 1/2 which i did and all i was told to provide was just some useful information and some materials used in preparation of the natural cure and that i did and now i am the happiest person on earth because i am writing this testimony of mine with joy and happiness in my heart to the whole world to know that natural remedy is real because i am a living testimony of Chief Lucky traditional herbal cure and i want you all to contact Chief Lucky via his email: chiefdrlucky@gmail.com or WhatsApp him +2348132777335 am sure he will help you too.

Ric Clayton said...

I really want to thank Dr Emu for saving my marriage. My wife really treated me badly and left home for almost 3 month this got me sick and confused. Then I told my friend about how my wife has changed towards me. Then she told me to contact Dr Emu that he will help me bring back my wife and change her back to a good woman. I never believed in all this but I gave it a try. Dr Emu casted a spell of return of love on her, and my wife came back home for forgiveness and today we are happy again. If you are going through any relationship stress or you want back your Ex or Divorce husband you can contact his whatsapp +2347012841542 or email emutemple@gmail.com website: Https://emutemple.wordpress.com/ Https://web.facebook.com/Emu-Temple-104891335203341

FIRMWARE HACKS said...

It Tears me Up Whenever we receive complaints from Clients About Their Experience With the Hackers They Met Before They Heard about us.
These Days There Are alot of Hackers Online, You Just Have to Be Careful about who you meet for help, because many people now don't know who to ask for help anymore but there's actually a solution to that which I am giving you for free, Don't go out there seeking for Hackers Yourself, Because the probability of getting a Real Hacker Out there Is Very Slim . ❌❌ ❌ Most Of Them are actually not who they say they're, they are just here to Rip people Off, You Can Always Identify Them With Their False Advertisements and False Testimonies Trying To Lure you Into their Arms, And most of them use yahoomails, gmails and other cheaper email providers which could easily expose their vulnerabilities, Please Don’t Fall For Them🚷 Come To Think Of It, Why would a Legit Hacker Be using a gmail or a cheap email provider that exposes his vulnerabilities????⚠️⚠️⚠️
Well, Our Purpose Here Is To Link You Up With Top Legit Hackers With Great Online Reputations and Impressive LinkedIn Profiles That’ll Blow Your Mind.

☑️ COMPOSITE FIRMWARE SECURITY SPECIALISTS is here to Provide you with The Best Hackers, So you can get saved from The Arms of the Fake Hackers❌❌.


☑️All our Specialists are well experienced in their various niches with Great Skills, Technical Hacking Strategies And Positive Online Reputations And Recommendations🔘
They hail from a proven track record and have cracked even the toughest of barriers to intrude and capture all relevant data needed by our Clients.

We have Digital Forensic Specialists, Certified Ethical Hackers, Software Engineers, Firmware Security Experts, Private investigators and more. Our Goal is to make your digital life secure, safe and hassle free by Linking you Up With these great Professionals such as JACK CABLE, ARNE SWINNEN, SEAN MELIA, DAWID CZAGAN, BEN SADEGHIPOUR And More. These Professionals are Well Reserved Professionals who are always ready to Handle your job with great energy and swift response so that your problems can be solved very quickly.
All You Need to Do is to send us a mail and we’ll Assign any of these specialists to Handle your Job immediately.

☑️ Below Is A Full List Of Our Services:
▪️ FUNDS RECOVERY ON SCAM INVESTMENTS, BINARY OPTIONS TRADING and ALL TYPES OF SCAMS.
▪️ WEBSITE AND DATABASE HACKING 💻
▪️ CREDIT REPAIR. 💳
▪️ PHONE HACKING & CLONING (giving you 📱 Unnoticeable access to everything Happening on the Target’s Phone)
▪️ CLEARING OF CRIMINAL RECORDS ❌
▪️ SOCIAL MEDIA ACCOUNTS HACKING 📱
▪️RECOVERY OF DELETED FILES 📤
▪️LOCATION TRACKING 📌
▪️BITCOIN MINING ⛏ And lot More.


☑️ CONTACT:
.....
firmwarehacks@gmail.com
🔘2021 © composite firmware specialists
🔘Want faster service? Contact us!
🔘All Rights Reserved ®️