Tax Competition, Tax Arbitrage, and the International Tax Regime
Reuven S. Avi-Yonah
University of Michigan Law School
U of Michigan Law & Economics, Olin Working Paper No. 07-001
U of Michigan Public Law Working Paper No. 73
This paper argues that a coherent international tax regime exists, embodied in both the tax treaty network and in domestic laws, and that it forms a significant part of international law (both treaty-based and customary). The practical implication is that countries are not free to adopt any international tax rules they please, but rather operate in the context of the regime, which changes in the same ways international law changes over time. Thus, unilateral action is possible, but is also restricted, and countries are generally reluctant to take unilateral actions that violate the basic norms that underlie the regime. Those norms are the single tax principle (i.e., that income should be taxed once - not more and not less) and the benefits principle (i.e., that active business income should be taxed primarily at source, and passive investment income primarily at residence).
Number of Pages in PDF File: 41
Keywords: tax competition, tax arbitrage, international tax regime
JEL Classification: H25, H26
Date posted: January 14, 2007
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