Previous Academic Research Projects
Cross-border taxation of services in the context of the UN Model
The tax treatment of services has been a priority issue of the UN Committee of Experts on International Cooperation for a number of years. Nevertheless, since the creation, in its Fourth Session (2008), of the Subcommittee on Article 14 and Services, the introduction of a new and revolutionary approach to cross-border taxation of services has been gradually taking shape culminating in the recent proposal, presented in the Tenth Session of the Committee (2014), for the introduction of a new article on services in the UN Model tax Convention.
The object of the project is not the analysis of the very article and its proposed Commentary but rather the consideration of its pros and cons as compared to other traditional or new-style approaches to the taxation of cross-border services (Services PE, Services related to Royalties or Intra-group services approach). This comparative methodology enables: a) Taking into account certain sensitivities of Members of the Committee and Commentators as related to the original proposal and providing additional background for the eventual introduction of an alternative provision in the Model; b) Offering developing countries a clear guidance on the effects and alternatives of the current proposal as compared to traditional solutions. c) Considering the gradual withdrawal of the OECD and the UN Model as refers taxation of services and the potential influence of the UN Project and final outcomes of BEPS Action 1 (Digital Economy) in an eventual (re)rapprochement.
Special Tax Zones
The concept Special Tax Zone (STZ) is used for very different kind of areas where tax regulations are more beneficial than in the generally applicable tax system of the surrounding jurisdiction or country. Special tax zones may be free trade zones (FTZ) within a certain economic development zone, such as the FTZ within Madeira’s special regime or the FTZs within the numerous economic development zones in China, or they may be called enterprise zones, free economic zones, free zones, tax-free zones, or similar. STZs may provide zero or low tax rates for corporate income tax, VAT or excise tax. The tax incentives may also be tax holidays, accelerated depreciation or incentives for research and development. These benefits are often limited for a certain period of time. Compared to pure tax havens, STZs rather intend to increase the well-being within the zone and the surrounding jurisdiction than provide tax advantages for foreign mailbox companies.
STZs are popular especially in developing countries. Increasing pressure from the OECD, the European Union and single countries on profit shifting and tax base erosion along with tax haven considerations (as well as claims of distortion from domestic non-STZ companies) may have an impact on the future of the STZ tax benefits. This collaborative study aims to obtain a structured view on selected STZs, their tax incentives and practices, their acceptability, possibly classify the zones, and provide recommendations on the practices and tax issues for the STZ residence countries as well as for multinational enterprises, the OECD and the European Union.
BRICS and Taxation (BRICS Project)
Between developed and developing countries there is a block of emerging economies, commonly known as the BRICS (Brazil, Russia, India, China and South Africa). These countries present a specific profile (large economics, substantive rates of growth, etc.) and are also assuming a distinctive and new position in the international tax scene. IBFD could not overlook this new phenomenon in the tax scene. The goal is to study the deviations of these countries’ policies regarding the positions of both developed and developing countries. Based on the findings, research is to be done in order to assess if those deviations amount to idiosyncrasies of the countries or to common features of this new block of countries.
The book BRICS and the emergence of International Tax Coordination was published in February 2015. The book launch took place in Cape Town, South Africa in February with presentations following in China and Russia. IBFD Academic has been involved in the establishment of the BRICS Law Institute as well as in other talks in South Africa with Prof. Salvatore Mancuso (UCT) on perspectives of cooperation with BRICS non-tax legal researchers.
Phase II of the BRICS research project also started in 2015. One key document for this second phase is the new protocol signed between IBFD and Ural State Law University, Ekaterinburg, Russia (14 May 2015). This document draws a working plan for joint research activities on international tax law issues and cooperation in connection with the establishment of the BRICS Law Institute. The core areas to explore in the future are: a) constitutional and legal principles with special, but not exclusive emphasis on their implications for tax matters, b) rights and obligations arising in legal relations between taxpayers and tax authorities, also considering how such rights and obligations arise in legal relations concerning other branches of law; c) administrative and judicial tax procedures, including legal remedies, in purely domestic and cross-border situations; d) legal drafting, capacity building and exchange of expertise in tax matters arising in this field.
Research & Development in Taxation (EURIDTAX project)
The research project arose from the finding that there is an exponential growth of tax preferential regimes officially justified by the need to promote research and development in Europe (including the IP box and the patent box regimes). They are included within the policies of using public resources for fostering R&D activities. Nonetheless, in practice, these regimes create problems for the stability of the tax systems, as they may be viewed as engaging in harmful tax competition. The research group aims to study them and to outline their profiles of compatibility with the European Union law and international tax law.
The research is carried out in connection with the report for one of the main subjects of the IFA 2015 Basel Congress, Tax Incentives on Research and Development (R&D), whose general reporter is Prof. Dr Robert Danon (one of the members of this project). The results of the research have also be presented in Basel at the seminar on patent boxes (chaired by Prof. Dr María Teresa Soler Roch and involving two more EURIDTAX members on the panel) and within the main topic of discussion with two more presenters besides the general reporter.
At the end of May 2015, a two-day invitation seminar was held at IBFD, attended by most researchers who are members of the EURIDTAX research group. Speakers presented on topics connected with the research and linked their work to their preparation for the IFA Basel main topic 1 and seminar. Although not open to the public, this meeting got the attention of the OECD, who sent Mr David Bradbury to this meeting. As a follow-up of the invitation seminar, IBFD Academic started informal talks with the OECD about possible joint ventures on this field.
Cross-border Tax Issues Related to Individuals in the EU
In 2010, the European Commission in its communication on Removing cross-border tax obstacles for EU citizens, highlighted the difficult legal framework that EU citizens face in their daily life. More specifically from a tax perspective, EU individuals moving cross-border or abroad temporarily or permanently have to deal with many tax obstacles mostly caused by differences and mismatches between national tax systems (the so-called disparities). These tax obstacles (can) discourage individuals from exercising their full rights to be active across national borders within the EU and benefiting from the internal market.
Following up on its communication, in 2014, the Commission established a dedicated Group of experts to gather ideas on how to tackle these tax obstacles that hinder the cross-border activity of individuals in the internal market. The group has been working on a report covering this matter in order to define actions that need to be taken to tackle and solve these fundamental issues at the EU level. IBFD has supported and contributed to this project.
This research project addresses some of the issues that are under scrutiny of the Commission and of the expert group. More specifically, it starts from the idea that the tax barriers hindering the exercise of the fundamental freedoms are one of the most relevant failures of the internal market and, therefore, they should be addressed by Member States as a matter of urgency in a comprehensive manner.
Against this background, the research is aimed at identifying the cross-border tax problems that individuals face within the EU and at outlining possible solutions and best practices. As for the tax obstacles, the focus will be on both substantial and procedural obstacles, with a particular attention to highly mobile workers, short-term posted workers and frontier workers and taking into account all those situations that may cause double taxation. Concerning the solutions, a wide range of solutions can be proposed going from hard law measures (such as EU directives) to soft law instruments.
Environmental Taxation and State Aid (“Ecotax” Project)
In order to determine the feasibility and details of a possible collaborative research project, a workshop was held at the University of Aarhus, Denmark, on 31 October 2013. Both the Academic Chairman Prof. Dr Pasquale Pistone and Dr Estela Ferreiro attended and made presentations on relevant topics. Research teams were created in order to work on the different issues identified in the workshop.
The synergies for this group of universities made it possible for the University CEU San Pablo (Madrid, Spain), with Prof. Dr Marta Villar Ezcurra, as coordinator, to apply for a Jean Monnet Research Grant (which indeed was awarded) with a project called “Energy taxation and State aid control: looking for a better coordination and efficiency”. The research project (2014-2016) is based on the organization of seven different seminars, in which each working team presents a paper that is discussed by an expert on the topic, external to the project. Furthermore, two conferences have been planned in order to present the initial (January 2015) and final (June 2016) results of the research, that will be published at the same time as peer-reviewed books.
Multilateralization of International Tax Law
This project focuses on the validity and use of multilateral frameworks in light of the current developments in international taxation. Whereas the major international trade agreements are multilateral (i.e. WTO), increasingly, scholars argue that the current challenges of international taxation cannot be longer confined to bilateral treaties. As such, the effective implementation of the worldwide automatic exchange of information would ensure a more transparent environment in the field of mutual assistance. Furthermore, the entrenchment of a multilateral approach in international taxation is also embedded within the BEPS project. The Action 15 of the BEPS Action Plan provides for the development of a multilateral instrument to implement the measures that have been reached in the course of the BEPS project and amend bilateral treaties.
This phenomenon of multilateralism as a new mode of governance in international taxation triggers important research questions to which this research project intends to provide an answer. Firstly, which are the pros and cons of using a multilateral framework for tax matters? Secondly, how do the developments in the BEPS Project affect the network of bilateral tax treaties in force, (i.e. Action 6 of BEPS dealing with tax treaty abuse practices)? Thirdly, since the taxpayer's rights are always deferred to the national state, would a multilateral instrument be the suitable mechanism to protect taxpayer's rights? Fourth, which are the possible mechanisms to effectively enforce a multilateral instrument, taking into account the traditional strong resistances of the states to comply with international obligations?
The starting point of this research project is to shed light on the definition of multilateralism. Therefore, the first task pursues to place under scrutiny the current “forms” of multilateralism on international taxation. Not only a critical assessment needs to be done concerning the current multilateral framework, but also by pointing out the shortcomings, loopholes and mismatches. The research argues that there is room for improvement and for achieving a real Global International Tax Law. The second part of the research is devoted to pulling out a uniform and consistent bill of taxpayer’s rights in a fragmented legal system that serves as a basis for the achievement of a multilateral framework of rights. Finally, this research project focuses on the interplay between the multilateral treaty produced in the context of Action 15 BEPS and the current treaty networks.
Tax issues of Developing Countries and Sustainable Tax Transparency Project (DeSTaT Project)
IBFD’s support for this project follows the request made by the group on 3-5 July 2013, during the yearly meeting held at the WU University of Vienna.
The core goal of the DeSTaT collaborative research project is to explore the opportunities and challenges faced by developing countries in the current climate of global fiscal transparency. The final output of this empirical analysis shall be the definition of comprehensive best practices that are derived not from a top-down decisional process but from a bottom-up survey carried out, as far possible, at the “field study” level.
In this respect, the research project aims at achieving a fruitful North-South dialogue, where, North Research Units are entrusted with the drafting of questionnaires that are then addressed by the Southern Research Antennae. To this end, while maintaining the necessary academic independence, local Antennae have often engaged in fruitful dialogue with the local tax administrations. The presence of a “BRICS” country in each of the two geographic samples is meant to show that, within the broader taxation and development discourse, there is room for a plurality of perspectives, especially when the samples include countries that have a more established tradition in international tax law and, arguably, a comparatively more sophisticated tax administration. The representation of all BRICS countries is at the same time helpful in achieving the goals scheduled for 2014 and 2015 (that is, producing sound research results regarding taxation in the BRICS and, as a consequence, enhance visibility of IBFD in this group of countries).
The topics covered include: i) General tax treaties vs TIEAs; ii) Aggressive tax planning; iii) FATCA and its implementation in developing countries: iv) Tax information and the prohibition of retroactivity; v) Taxpayer’s rights; vi) Revenue sharing in exchange of information; vii) Automatic exchange of information; viii) SMEs and simplified regimes; ix) Taxpayer procedural rights in exchange of information; x) BEPS and developing countries; xi) Transparency and legal interpretation by tax authorities; xii) Transfer pricing documentation requirements and developing countries; xiii) Withholding taxes and transparency; xiv) The shift from bilateralism to multilateralism in international taxation from the perspective of developing countries; xv) Cooperative compliance in developing countries; xvi) IT and transparency in developing countries.
Taxation of the Financial Sector (FTT Project)
IBFD together with other leading institutions and researchers that were already working in the field of transactions taxes decided to join forces and create a collaborative research project in this area. This project aims to study the impact of the financial transaction tax, proposed by the European Commission, in our economy. The study also covers the compatibility of the proposal with primary EU law and in particular with the rules on enhanced cooperation.
The first written outcomes of this research project were already published. Heber and Sternberg have published a paper in the first edition of 2016 of the WTJ. Two doctoral researchers have in the meantime defended their PhDs in 2015: Eleni Apostolidou from University Paris 1 Sorbonne-Panthéon, France (thesis title: The Introduction of an EU FTT through the Enhanced Cooperation Procedure), and Carmel Said Formosa, from WU Wien, Austria (thesis title: An Analysis of Financial Transaction Tax as proposed by the European Commissions’ Proposal for Enhanced Cooperation COM(2013) 71, An Interdisciplinary Approach).
The first book is nearing completion. Most of the chapters have already been delivered. Given the current situation at the EU level (a new amended directive is expected in the next months) the book was put on hold. We hope to revitalize it as soon as the new (and hopefully) definitive FTT proposal is released. We continue to monitor closely all developments in this field.