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Should the US Dictate World Tax Policy? Reflections on PPL Corporation v. Commissioner

4 Pages Posted: 31 Jan 2013 Last revised: 4 Feb 2013

Reuven S. Avi-Yonah

University of Michigan Law School

Date Written: January 29, 2013

Abstract

The Supreme Court’s decision to grant certiorari in the PPL case offers it a unique opportunity to change the law regarding foreign tax credits that has significantly impeded the ability of other countries to engage in meaningful tax reform. In 1938, the Court said in dicta that to qualify for the foreign tax credit a tax had to be an income or excess profits tax (or a tax imposed in lieu thereof) under US tax principles. This statement has led to an elaborate set of regulations defining what is an income tax, which has significantly hampered the ability of foreign countries to adopt tax reforms for fear that their taxes would not be creditable. It is time for the Court to declare that any tax whose burden falls on the taxpayer, i.e. any direct tax, is a creditable tax, and do away with the cumbersome structure of the IRC section 901 regulations.

Keywords: PPL case, foreign tax credit

JEL Classification: H25, K34

Suggested Citation

Avi-Yonah, Reuven S., Should the US Dictate World Tax Policy? Reflections on PPL Corporation v. Commissioner (January 29, 2013). U of Michigan Public Law Research Paper No. 308. Available at SSRN: https://ssrn.com/abstract=2208524 or http://dx.doi.org/10.2139/ssrn.2208524

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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