Resolving Legal Uncertainty: The Unfulfilled Promise of Advance Tax Rulings

36 Pages Posted: 15 Jul 2009 Last revised: 15 Apr 2015

See all articles by Yehonatan Givati

Yehonatan Givati

Hebrew University of Jerusalem - Faculty of Law

Date Written: June 30, 2009


Advance tax rulings allow taxpayers to achieve certainty about the tax consequences of contemplated transactions, and are thus considered indispensable in the modern world of tax administration and compliance. After providing empirical evidence of tax law uncertainty, which should give rise to a demand for advance tax rulings, the article shows that advance tax rulings are in fact infrequently used. To explain this counterintuitive finding the article analyzes the taxpayers' strategic considerations when deciding whether to request an advance tax ruling. The strategic disadvantages of applying for an advance tax ruling are shown usually to outweigh the strategic advantages of such a request. Since the same strategic considerations apply when taxpayers decide whether to request an advance pricing agreement - a new procedure for resolving transfer pricing disputes - this analysis also explains why, despite considerable attention from scholars and practitioners in recent years, advance pricing agreements have been infrequently used, and are therefore unlikely to resolve the transfer pricing problem - probably the most significant problem in modern international taxation.

Keywords: Advance Tax Rulings, Private Letter Rulings, Advance Pricing Agreements

JEL Classification: K34, K23

Suggested Citation

Givati, Yehonatan, Resolving Legal Uncertainty: The Unfulfilled Promise of Advance Tax Rulings (June 30, 2009). Virginia Tax Review 29:137-175 (2009), Harvard John M. Olin Fellow’s Discussion Paper Series No. 30, Harvard Law School Program on Risk Regulation Research Paper No. 09-3, Available at SSRN:

Yehonatan Givati (Contact Author)

Hebrew University of Jerusalem - Faculty of Law ( email )

Mount Scopus, 91905

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