The session on the first day was chaired by Joanna Wheeler, Prof. Wim Wijnen and Prof. Huub Bierlaagh.

Bernadette Schäfers (University of Hamburg) gave a presentation on international tax aspects of foundations that pursue public benefit purposes. Although her thesis will deal with corporate, gift and inheritance tax, she concentrated her presentation on the corporate tax aspects relating to cross-border activities of German foundations and the activities of foreign foundations in Germany. One of the main questions in the thesis is the scope of the definition of foundations with public benefit purposes. She pointed out that this issue becomes especially relevant where the activities of a foundation do not directly benefit the German state or its citizens. A second area of research is the treatment of foundations under tax treaties, i.e. the OECD Model Convention and in special rules under existing tax treaties.
During the discussion period following Ms Schäfers' presentation, questions were raised on whether pension funds were to be included in the definition of foundations and the general relevance of foundations in practice. The discussion moved on to the question whether problems arising in general with respect to cross-border activities of foundations can be solved under the OECD income tax treaty or whether specific bilateral or multilateral instruments might be needed for this purpose.

João Taborda da Gama (University of Lisbon) gave a presentation on "Advance Rulings: Between Rule of Law and Legitimate Expectations". His presentation focused on three main topics: the gratuitousness of advance rulings, the withdrawal of advance rulings and advance rulings in the light of tax harmonization in the European Union. The presenter asked whether gratuitousness of advance rulings has an impact of the effectiveness of the tax administration and the issuance of advance rulings. His analysis was based on Portugese practice and law and took a public law perspective. With respect to the first topic, the audience queried whether the signfiicant fees paid for services rendered might not affect the actions of the issuing authorities. Also, the question was raised whether advance rulings should be considered part of administrative activities not normally carried out for a fee. On the second topic, discussion focused on the procedure for withdrawing an advance ruling and under which circumstances they may be withhdrawn. The presenter drew a clear line between cases where a change of law leads to a withdrawal of the request and other cases where no change of law precedes the withdrawal. Finally, in the context of EC tax harmonization, whether harmonization of the procedure was possible at all at this stage was discussed.

"Tax problems caused by globalisation; the case of and the solution for financial instruments" was the title of the presentation by Anuschka Bakker (University of Leiden). Ms Bakker described the general problems relating to the definition of hybrid financial instruments as well as distortions arising in their tax treatment because of their hybrid nature with debt and equity elements. Her thesis concentrates on whether these distortions in taxation can be minimised by harmonizing the criteria so as to avoid classification and timing problems relating to hybrid financial instruments or by introducing special tax rules at domestic or EU level. The audience discussed possibilities of harmonization at the EU and OECD level. A question was put whether a solution could not be found by going to the root of the problem; in other words, whether a system could be found where no distinction is made between debt and equity. Various attempts to find such a solution in the past were discussed. Ultimately, this discussion led to the question whether the solution should not rather be sought at an accounting level in view of the fact that IAS and GAAP are commonly used nowadays by the corporate entities using the financial instruments. in conclusion, the group discussed whether tax treatment should in general follow accounting treatment.

Gillian Lockwood (Queen Mary University) gave the final presentation on the first day. Her topic was the rationale and development of the securitization process in the UK and the US. The presentation focused on the description and definition of standard asset-backed securitiziation. This choice was mainly due to the fact that the thesis is still in its initial phase. Ms. Lockwood has not yet elaborated the method and the main disussion points of the thesis. In view of her extensive practical experience in the financial sector, her presentation contained both theroetical and practical aspects related to securitization and repackaging. The group discussion focused on tax-related questions surrounding whole repackaging transactions involving several tax jurisdictions. The presenter addressed problems of double taxation resulting from the difference in taxation of the same transaction in the various countries. Finally, the existence and the absence of specific rules for securitization was discussed in the various jurisdictions.

Prof. Kees van Raad took the chair on the second day.

The first student to present his research was Björn Mattsson (University of Lund). Mr Mattsson pointed out that his research on the topic "taxation of permanent establishments" was in its initial stage. He expects to analyse the differences between the taxation of permanent establishments and PEs in Sweden from the perspective of non-discrimination principles under Swedish law, EC law and Sweden's tax treaties. Group contribution rules are an important area of the research because even after a recent revision of group contribution rules to comply with European Court of Justice decisions, there are some inconsistencies in the treatment of Swedish subsidiaries in relation to PEs. Prof. van Raad commented that it is important to narrow the topic of the research and to have the dissertation title reflect this.

Freek Snel (University of Amsterdam) gave a presentation on the avoidance of cumulating income tax in situations where one entity participates in another, in cross-border as well as in domestic situations. He will look at various aspects of this topic: the right for the source state to tax income; capital export neutrality (CEN) and capital import neutrality (CIN) principles; and issues relating to the allocation/deduction of expenses incurred by parent companies for funding subsidiaries. Prof. Ault remarked that since CEN and CIN principles have already been extensively dealt with in the tax literature, it might be wise to focus on the allocation of expenses.

Fabrizio Bulgarelli (University of Bologna) spoke on CFC rules and harmful competition from an Italian perspective. Since he is just beginning his research, his talk focused on the main features of Italy's CFC rules and their compatibility with Italian tax treaties and EC law. He expects, however, to examine whether the following proposals would make the Italian CFC legislation compatible with tax treaties and EC law:

• exclusion of all EU Member States from application of the Italian CFC rules;
• introduction of new provisions in new Italian treaties to safeguard applicability of those rules;
• re-negotiation of the existing Italian treaties to safeguard their applicability; and
• introduction of a European Model Tax Convention.

The fourth presentation of the second day was given by Alexander Rust (University of Munich), who summarized his research on the same topic as that of Mr Bulgarelli, but looking at the German rather than the Italian CFC legislation. In addition, because of the specific German situation, he examined the compatibility of German CFC rules with German constitutional law. The German rules have been extensively amended in the past few years. At present, they apply if the country where the CFC is located imposes low taxation (less than 25% tax rate); the CFC derives passive income; and there is a qualifying participation (i.e. exceeding 50%). Prof. Soler commented that CFC rules targeting passive income are not in conflict with the freedom of establishment principle in EC law. Nevertheless, they may infringe the free movement of capital principle. Prof. Ault remarked that ring fencing is bad tax competition, whereas a general low tax rate applicable to all corporations in a jurisdiction is good tax competition. He also questioned whether the application of CFC rules with a view to achieving CEN is compatible with EC law.

Prof. Hugh Ault led the discussions.

Shay N. Menuchin (London School of Economics) kicked off the third session with a presentation on "International Tax Arbitrage" (ITA) and made a link to the presentations of Anuschka Bakker and Gillian Lockwood at the earlier sessions. He defined ITA as a situation whereby a given taxpayer structures his affairs in a way that allows him to comply with the tax laws of two or more jurisdictions while receiving a tax advantage for free (without any net investment) as a result of the inherent inconsistency between the tax law of the different jurisdictions, thus reducing his overall world tax liability. Mr Menuchin is looking at the position taken by both Rosenbloom and Avi-Yonah in order to determine whether ITA is something that should be condemned. Only if that question is answered in the positive will the method come into play. This involves an examination of the coherence (or lack of coherence) of the anti-arbitrage mechanisms from an over-all policy perspective. Thus, the thesis focuses on an analysis of the validity of a two-prong hypothesis: first, there is nothing wrong with ITA from a policy perspective and second, even if there was, nothing feasible or practicable can be done about it.

Prof. Ault summarized the comments of the audience by saying that it is very difficult to give a general answer whether tax arbitrage is good or bad. Dr. Roxan responded that the answer has to do with the interaction of taxpayer behaviour and government policy. Joanna Wheeler asked what standard you use; in other words, when do you have a situation worth labelling a problem? Dr. Roxan questioned whether there is, in fact, an international standard - perhaps you have to look at ITA from one country's perspective.

Akiyuki Asatuma (Tokyo University) presented the results of his research on permanent establishment taxation and royalties. His sketched his attempt to answer the question: what is intellectual property? The general comments form the audience were that the topic, while a rich and fruitful one, needs to be narrowed. Prof. Soler suggested replacing "place of business" with "source of income" and recommended the book by Eric Kemmeren on the principle of origin. Prof. Ault thought that a useful approach would be to look at the differences between Art. 7 and Art. 12 of the OECD Model.

The next presenter, Tomasz Kardach (University of Lódz), spoke on tax treaty interpretation. He described the main purpose of his research as an attempt to identify and describe the general rules of interpretation of tax treaties. Special emphasis will be put on differences in interpretation in selected countries (United States, Canada, Great Britain, Germany, Austria, France and Poland). The situation in Poland was brought up in the group discussion: how do Polish courts deal with the OECD Model? Mr Kardach told the meeting that at present 30 cases on international tax are before the Polish courts, but it is not possible to say what the role of the OECD Commentary will be. Suggestions were made on ways to narrow the scope of the research topic.

Marciano Seabra de Godoi (Complutense University of Madrid) gave the last presentation of Session Three on "The Improper Use of Tax Treaties and the Role of Domestic Anti-Avoidance Rules". His study looks at the topic from three angles: (1) the OECD, US and UN Model Conventions, (2) state practice and (3) tax scholars' views. Members of the audience debated on the boundaries between domestic systems and tax treaty law: how can these be clearly defined? Mr Seabrea took a strong position in favour of the tax treaty system, because of its simplicity.

Prof. Mariá Teresa Soler Roch chaired the session on Day Four.

Marco Greggi (University of Bologna) spoke on his thesis topic: "The entitlement to deduction of the VAT paid by the taxable person in Europe". Mr. Greggi discussed the concept of "inherence" in VAT. He used the term "inherence" to indicate the relation between the incurred VAT costs of an enterprise and its business activity. He examined whether an inherent link is required between the VAT costs and the business activity in order to be able to deduct the input VAT costs for VAT purposes. In his doctoral thesis, Mr Greggi will focus on two issues:

• clarifying the concept of inherence, i.e. when goods and services can be considered inherent to a taxable transaction in the VAT system; and
• how to deal with the different solutions adopted by the EU Member States.

Questions raised and remarks made by the audience included:

• whether the general principle that the customer should carry the actual VAT burden, should not be applied also for the purposes of inherence;
• the term "economic activity" is determined differently for VAT purposes than for purposes of direct taxation, and this difference is also reflected in the application of the concept of inherence in the two fields. VAT costs incurred in connection with operations that are not taxable transactions for VAT purposes (e.g. holding activity), may attract different tax treatment; and
• the Sixth Directive does not require states to apply the same rules regarding the deductibility of costs.

Jonathan Rosengren (University of Helsinki) discussed the anti-avoidance rule for company restructuring, which was the subject of his LLm thesis. He conducted a research on the application of anti-avoidance rules to the different forms of company restructuring. His primary focus was on the Finnish domestic law in conjunction with the EC Merger Directive. He raised the question whether it is necessary to implement anti-avoidance rules and whether those should be identical in the EU Member States. He suggested that the principle of neutrality makes an intervention defensible only in those cases where the restructuring is made purely for tax reasons. He noted, however, that in practice it is very difficult to determine the real nature of a restructuring. Generally, he found that the risk of tax avoidance is probably the highest in the case of a restructuring with exchange of shares.
The audience commented that:

• the purpose of the Merger Directive is to enable a tax-neutral restructuring by allowing a tax deferral for hidden reserves. The Merger Directive is not aimed at ensuring tax exemption;
• the EU Member States have different anti-avoidance rules, but the goal is that the different rules have the same or similar consequences; and
• where the circumstances and the different stages of a restructuring, or a chain of restructuring suggest that the entire restructuring is actually made for tax reasons, the anti-avoidance rules should be applicable.

Tomi Viitala (Turku School of Economics and Business Administration) presented his research on the tax treatment of investment fund investments within the European Union. His goal is to analyse the differences between international tax law and EC law in the context of investment funds. In his presentation, the focus was on: (1) how can EC law effect investment funds and (2) is there a conflict between international tax law and EC law? The European Union aims at establishing a Single Market. This includes investments made by investment funds. In this context, the two relevant provisions of EC law are: free movement of capital and freedom to provide services. Although there are no ECJ cases in this field yet, Mr Viitala thinks that the Member States apply several potentially restrictive tax measures. These measures discourage investment and probably cannot be justified under EC law.
He further compared the different approaches applied to economic double taxation and to tax control/evasion under Community law and under international tax law. The main observations from the audience concerned:

• the applicability of tax treaties with respect to investment funds; and
• whether there is a real difference in the tax treatment of resident and non-resident investment funds under the domestic legislation of EU countries.
  Additionally, it was suggested that a theoretical model (i.e. matrix) showing the different methods of the taxation of investment funds would be useful.

The final presenter was Tom O'Shea (Queen Mary University), who discussed the double tax treaty network of the EU Member States and its interaction with the Internal Market. Mr O'Shea's research traces the development of competence in relation to double tax treaty matters in the European Union. In the first part of his thesis, he investigates the double tax treaty network of the EU Member States. In the second part, he deals with the Internal Market and its implications. He raises several questions, among which whether the Community has exclusive competence for the Internal Market and whether this means that Member States no longer have the competence to negotiate tax treaties. He suggested that the answer to these questions is a theoretical "yes", considering the recent development on the field of air transportation agreements. The main criticism from the audience was that a non-EU state cannot be forced by the EC Treaty to apply the same conditions in its tax treaties to all EU Member States. The non-discrimination requirement within the European Union is not binding for non-EU states. It was further noted that without the tax treaties concluded by the Member States, the situation would only be worse. Therefore, there is no justification for speaking of non-discrimination in connection with a tax treaty with a non-EU state. Under EC law, the Member States still have the competence to conclude tax treaties (in contrast to air transportation treaties), and they are also allowed to negotiate different tax treaties. It was pointed that Mr O'Shea's position would lead to a situation similar to a most- favoured nation clause.

Dr Margaret Lamb (Senior Lecturer, Warwick Business School) gave two afternoon seminars entitled "Tax Research: Defining, Doing, Explaining". After a general introduction on how to come to grips with a tax research problem, the students split into groups in order to discuss the structure and the requirements of their own university PhD programmes. In an afternoon seminar, the participants were introduced to the services and facilities available at IBFD, in particular the library. In addition, Viola Habakuk (IBFD) gave a seminar on the use of the Internet in tax research that was attended by fourteen students. In the week following the seminar, English-language tutoring, with an emphasis on international tax terminology, was offered as an option.

Joanna Wheeler thanked all of the participants for their lively and thought-provoking contributions, and especially the professors who attended as guests. All participants are welcome to return at a later meeting to report on the progress of their research. She stressed that university teachers are encouraged to attend and that their input is highly appreciated by both the research students and the Academic Council.