Professor Rebecca Kysar gave a presentation at Pepperdine University’s School of Law about the upheaval of the international tax system and her perspective on the U.S.’s involvement with the complex network of tax treaties.
In fact, little evidence or theory exists to support entrance into tax treaties by the United States, and examination of investment flows indicates the treaties likely lose significant U.S. revenues. Additionally, they enable taxpayer abuse, stagnate domestic policy, and thwart reforms of the antiquated international tax system. These consequences are particularly problematic for the United States. Other nations, after all, have been able to supplement their revenues and pursue destination-based taxation through treaty-friendly VATs. Although tax treaties may have, at one time, served salutary purposes, modern circumstances call into question the relinquishment of taxing jurisdiction by source countries. I suggest that nations unravel the jurisdictional provisions from the treaties, abandoning or scaling them down through the new multilateral instrument. Rather than assessing antiquated notions of worldwide efficiency, the challenge for the international tax system going forward will be to attempt some degree of coordination while also imparting flexibility to advance national interests in setting revenue policy. This solution aims to thread that needle.