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7 Account. Econ. Law [i] (2017)

handle is hein.journals/acteol7 and id is 1 raw text is: Reuven Avi-Yonah' International Tax Avoidance - Introduction University of Michigan, Ann Arbor, MI, USA, E-mail: aviyonah@umich.edu Abstract: Tax avoidance and evasion is a hot topic. On the evasion (illegal activity by individuals) front, the various leaks culminating in the Panama Papers have once again revealed the scope of evasion by the global elite. Gabriel Zucman conservatively estimated the annual revenue loss at $200 billion. On the tax avoidance (legal activity by corporations) front, the OECD BEPS project has estimated the scope of avoidance by multinationals at be- tween $100 and $240 billion per year. By comparison, total US corporate tax revenues are about $400 billion per year. The articles in this volume reflect various aspects of these troubling phenomena (from the perspective of citizens who pay their tax bills and bear the burden of budget cuts by governments starved of revenues). David Quentin discusses tax avoidance in transnational supply chains of multinationals. Blazej Kuzniacki analyzes tax avoidance in EU law, which has been the focus of a lot of activity recently (e. g., the proposed Anti-Tax Avoidance Directive by the EU Commission). Rifat Amir Azam Pichhadze and myself discuss the idea of statu- tory General Anti-Abuse Rule (GAAR) a global minimum effective tax rate as a global general anti-avoidance rule in the US and Canada contexts Keywords: tax evasion, tax avoidance, BEPS DOI: 10.1515/ael-2016-0071 Tax avoidance and evasion is a hot topic. On the evasion (illegal activity by individuals) front, the various leaks culminating in the Panama Papers have once again revealed the scope of evasion by the global elite. Gabriel Zucman conservatively estimated the annual revenue loss at $200 billion' On the tax avoidance (legal activity by corporations) front, the OECD BEPS project has estimated the scope of avoidance by multinationals at between $100 and $240 billion per year.2 By comparison, total US corporate tax revenues are about $400 billion per year. Both numbers seem low. Various authors have estimated the scope of evasion from the US as $50-$70 billion per year, and the US is far from the worst country in this regard (and has gotten better recently because of increased enforcement efforts).3 Better estimates exist for tax avoidance by American multinationals, which costs the US Treasury over $100 billion per year.4 The overall effect of avoidance on the US Treasury is reflected in the US tax expenditure budget, which now has deferral of tax on the offshore profits of US multinationals as the second largest tax expenditure overall, at $1.3 trillion over ten years ($130 billion per year). US Multinationals have accumulated over $2.5 trillion in low tax jurisdictions and cannot repatriate this huge pile of cash because they would have to pay the US corporate tax, which at 35 % is the highest in the OECD. The articles in this volume reflect various aspects of these troubling phenomena (from the perspective of citizens who pay their tax bills and bear the burden of budget cuts by governments starved of revenues).5 Yuri Biondi writes from an accounting perspective about the firm as an Enterprise Entity and the tax avoidance conundrum. Matthias Thiemann and Tim Buettner discuss the political economy of the OECD BEPS project. David Quentin discusses tax avoidance in transnational supply chains of multinationals. Blazej Kuzniacki ana- lyzes tax avoidance in EU law, which has been the focus of a lot of activity recently (e. g., the proposed Anti-Tax Avoidance Directive by the EU Commission).6 Amir Pichhadze and myself discuss the idea of statutory General Anti-Abuse Rule (GAAR) in the US and Canadian contexts. In the end, I believe that the current international corporate tax regime is hopelessly broken and based on outdated concepts like physical presence and the arm's length standard. It is time for something new, and that is the destination-based corporate tax, or DBCT. The DBCT is an updated version of an old proposal: To treat multinational corporations as a single enterprise, and tax them based on where their sales are, as opposed to the current rules that treat each subsidiary as a separate entity and attempts to allocate profit based on hypo- thetical prices or profits that would have applied had these entities not been related to each other.7 In addition, current rules require a physical presence in a market jurisdiction before it can tax an enterprise selling into that market. In contrast, the DBCT taxes corporations where the market is, and the market is much less prone to tax competition than the location of corporate production or headquarters. That is why the UK, Australia, India Reuven Avi-Yonah is the corresponding author. © 2017 Walter de Gruyter GmbH, Berlin/Boston. DE GRUYTER Accounting, Economics, and Law: A ConviviUM. 2017; 20160071

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