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A Coordinated Withholding Tax on Deductible Payments

5 Pages Posted: 9 Dec 2009  

Reuven S. Avi-Yonah

University of Michigan Law School

Date Written: June 2, 2008


Prof. Avi-Yonah proposes a 35 percent withholding tax on deductible payments made to a non-U.S. resident, in coordination with other OECD members. The tax is aimed at U.S. residents posing as foreign investors and would be refundable when the beneficial owner shows that the payments have been reported to tax authorities in the owner’s country of residence. Parts of this paper are based on Avi-Yonah’s ‘‘Memo to Congress: It’s Time to Repeal the U.S. Portfolio Interest Exemption,’’ Tax Notes Int’l, Dec. 7, 1998, p. 1817, Doc 98-35627, or 98 TNI 234-26. However, that paper was written at a time when conditions in the U.S. economy were favorable enough to envisage a unilateral repeal of the portfolio interest exemption. No such course is advocated under current economic conditions.

The proposal is made as a part of the Shelf Project, a collaboration by tax professionals to develop and perfect proposals to help Congress when it needs to raise revenue. Shelf Project proposals are intended to raise revenue, defend the tax base, follow the money, and improve the rationality and efficiency of the tax system. The tax community can propose, follow, or edit proposals at A longer description of the Shelf Project can be found at ‘‘The Shelf Project: Revenue-Raising Projects That Defend the Tax Base,’’ Tax Notes, Dec. 10, 2007, p. 1077, Doc 2007-22632, or 2007 TNT 238-37.

Shelf Project proposals follow the format of a congressional tax committee report in explaining
current law, what is wrong with it, and how to fix it.

Copyright 2008 Reuven S. Avi-Yonah.

Keywords: tax reform,deductible payments

JEL Classification: H20

Suggested Citation

Avi-Yonah, Reuven S., A Coordinated Withholding Tax on Deductible Payments (June 2, 2008). The Shelf Project; Tax Notes, Vol. 119, p. 993, June 2, 2008. Available at SSRN:

Reuven S. Avi-Yonah (Contact Author)

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States
734-647-4033 (Phone)

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