Conflicts in the attribution of income to a person

No metaphor is dearer to the hearts of Australian tax scholars and practitioners than the fruit and tree depiction of income and capital. An important characterisation in early economic theory, the agricultural allegory was imported into Australian income tax law not long after the adoption of the first federal legislation from the 1920 decision of the U.S. Supreme Court in Eisner v. Macomber. Australian tax lawyers cite Eisner v. Macomber and its fruit and tree analogy as judicial endorsement of the distinction between income and capital and the immunity from income taxation of gains associated with the latter. However, the case states quite explicitly that both income and capital gains constitute 'income' for 'income tax' purposes. To find support in the judgment for a contrary proposition is possible only if the Supreme Court's ruling is carefully dissected and the extracted parts quoted out of context. This article explains how Australian tax lawyers, judges and scholars have used the case as support for a conclusion opposite to that set out in the judgment. The peculiar Australian legacy of Eisner v. Macomber serves as a useful reminder of the narrow and parochial origins of Australian tax jurisprudence and the slowness of its evolution.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1666189_code996462.pdf?abstractid=1666189&mirid=5

The Ironic Australian Legacy of Eisner v. Macomber

The New Zealand tax system allows the possibility of double taxation through the mis-matching of characterisations of business and investment entities in a large number of circumstances. However, practical problems are uncommon. To avoid difficulties, the principle of private international law which states that courts recognise the law and judgements of each other could be followed.

Recognition of Foreign Enterprises as Taxable Entities

This report was prepared for the 2014 International Congress of the International Fiscal Association. The general reporters for the Congress asked IFA branches around the world to prepare a report designed to provide information on how countries address (1) the question of when domestic and foreign entities are treated as transparent or taxable and (2) conflicts between different countries’ treatment of entities as transparent or taxable for treaty purposes. This report constitutes the IFA U.S.A. Branch’s submission to the general reporters.The report is divided into two sections. The first section of the report provides a general description of how both domestic and foreign entities are classified under U.S. federal tax law. The second section of the report focuses on how the United States deals with conflicts in entity classification when applying tax treaties. This section of the report consists of an analysis of a series of different scenarios posed by the general reporters to all IFA branches where different countries classify the same entity differently (i.e., one or more countries treat the entity as taxable while one or more other countries treat the entity as transparent).

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID2472096_code266933.pdf?abstractid=2429396&mirid=1&type=2

Qualification of Taxable Entities and Treaty Protection

Two principle purposes of the OECD/G20 BEPS project can be identified: First, to combat against aggressive tax planning which results in less than single taxation, and secondly, to allocate taxing rights to the state in which the economic activity gives rise to income. This note demonstrates that Article 1(2) tends to enable diametrically opposite results.

BEPS Hybrid Entities Proposal: A Slippery Slope, Especially for Developing Countries

In International Taxation of Trust Income, Mark Brabazon establishes the study of international taxation of trust income as a globally coherent subject. Covering the international tax settings of Australia, New Zealand, the UK, and the US, and their taxation of grantors/settlors, beneficiaries, trusts, and trust distributions, the book identifies a set of principles and corresponding tax settings that countries may apply to cross-border income derived by, through, or from a trust. It also identifies international mismatches between tax settings and purely domestic design irregularities that cause anomalous double- or non-taxation, and proposes an approach to tax design that recognises the policy functions (including anti-avoidance) of particular rules, the relative priority of different tax claims, the fiscal sovereignty of each country, and the respective roles of national laws and tax treaties. Finally, the book includes consideration of BEPS reforms, including the transparent entity clause of the OECD Model Tax Treaty.

International Taxation of Trust Income: Principles, Planning and Design

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International Taxation of Trust Income: Principles, Planning and Design