Volume 40, Issue 1

Latest Issue, Vol. 39, Issue 3

Volume 39, Issue 2

Symposium on Foreign Direct Investment

A Critical Reassessment of the Role of Neutrality in International Taxation

By: Elkins, David | December 9, 2019

Neutrality plays a central role in the literature on international taxation. In its most prevalent form, the concept of neutrality posits that in order to maximize aggregate global welfare, capital needs to flow to where it would produce the highest pretax return. The thesis of this Article is that neutrality is ordinarily inapplicable in the field of international taxation.

When considering neutrality in the international arena, the problem that one encounters is that the term “international taxation” is commonly used to describe a number of very different types of tax regimes (what the Article refers to as “intranational taxation,” “supranational taxation,” and “inter-jurisdictional taxation”). Although the literature tends not to distinguish among them, the different types of international tax regimes are conceptually distinct and require radically dissimilar guiding principles. The Article argues that neutrality is an appropriate principle with regard to only one type of international taxation: a hypothetical non-Pigouvian supranational tax. With regard to intranational taxation, neutrality has no role to play, as a rational country will exploit its tax system to promote the welfare of its own constituents without regard to which investments it would have attracted in a no-tax world. With regard to a hypothetical Pigouvian supranational tax and in particular with regard to the much-scrutinized field of inter-jurisdictional taxation, neutrality is irrelevant, as here it is the after-tax return and not the pretax return that is determinative of allocative efficiency. Promoting neutrality would undermine the very goals that the principle of neutrality purports to serve. The Article concludes by noting that the current discourse with regard to international taxation is fraught with conceptual confusion. First, there is a tendency to rely upon concepts that were developed within the context of domestic taxation without a thorough examination of their applicability to the international arena. Second, there is a tendency to lump together a number of very distinct types of tax regimes under the overbroad category of international taxation, and to ignore the fact that due to the fundamental dissimilarities among them, the principles of tax theory relevant to each will also be different.

Corporate Social Responsibility versus Shareholder Value Maximization: Through the Lens of Hard and Soft Law

By: Yan, Min | December 9, 2019

Even with a significant increase in the number of firms around the world engaging in corporate social responsibility (“CSR”), many people still perceive CSR as a voluntary commitment and shareholder value maximization (“SVM”) as a mandatory requirement. This paper borrows the concept of hard law and soft law in terms of coerciveness and overturns the stereotype that SVM is a hard-law constraint and CSR a soft-law constraint. The paper first demonstrates that directors of the board are not obliged to maximize shareholder value even in the Anglo-American jurisdictions where shareholder primacy culture is more dominant. Next, the paper critically discusses an enforceable regulatory regime for CSR. After studying various countries’ practices, this paper highlights three main forms of the hard-law approach for CSR: namely through (i) enacting mandatory CSR laws to directly promote socially responsible behavior; (ii) defining minimum standards for corporate behavior to deter socially irresponsible behavior, and/or (iii) mandatory disclosure of CSR-related issues. The conventional (economic) justification for CSR is subsequently challenged, i.e., why we should align CSR with SVM after the above misunderstandings are corrected. More importantly, in addition to overcoming the weakness of soft law’s non-coerciveness, the hard-law approach will also provide additional grounds for furthering CSR.

How Countries Seek to Strengthen Anti-Money Laundering Laws in Response to the Panama Papers, and the Ethical Implications of Incentivizing Whistleblowers

By: Del Mundo, Carmina Franchesca S. | December 9, 2019

The Panama Papers is currently the world’s largest whistleblower case that involved 11.5 million leaked documents and over 214,000 offshore entities. It all linked back to one Panamanian law firm, Mossack Fonseca. In 2016, over 400 investigative journalists collaboratively and simultaneously published stories that exposed the money laundering and tax-evading schemes committed by the rich and powerful. This included political figures and heads of states, celebrities, sports figures, criminal organizations, and terrorist groups.

This article aims to dissect the innerworkings of Mossack Fonseca’s asset-shielding strategy and investigate how the Panamanian law firm was able to circumvent the tax and anti-money laundering laws of over 50 countries. We will also examine the global responses to the Panama Papers, the proposed reforms and strategies, and the obstacles to moving forward. Finally, this article explores the ethical duties of lawyers, the significance of attorney-client privilege, and the implications of monetarily incentivizing whistleblowers.