The Battle over Taxing Offshore Accounts

81 Pages Posted: 20 Sep 2014

See all articles by Itai Grinberg

Itai Grinberg

Georgetown University Law Center

Date Written: 2012

Abstract

The international tax system is in the midst of a contest between automatic information reporting and anonymous withholding models for ensuring that nations have the ability to tax offshore accounts. At stake is the extent of many countries’ capacity to tax investment income of individuals and profits of closely held businesses through an income tax in an increasingly financially integrated world.

Incongruent initiatives of the European Union, the Organisation for Economic Cooperation and Development (OECD), Switzerland, and the United States together represent an emerging international regime in which financial institutions act to facilitate countries’ ability to tax their residents’ offshore accounts. The growing consensus that financial institutions should act as cross-border tax intermediaries represents a remarkable shift in international norms that has yet to be recognized in the academic literature.

The debate, however, is about how financial institutions should serve as cross-border tax intermediaries, and for which countries. Different outcomes in this contest portend starkly different futures for the extent of cross-border tax administrative assistance available to most countries. The triumph of an automatic information reporting model over an anonymous withholding model is key to (1) allowing for the taxation of principal, (2) ensuring that most countries are included in the benefit of financial institutions serving as cross-border tax intermediaries, (3) encouraging taxpayer engagement with the polity, and (4) supporting sovereign policy flexibility, especially in emerging and developing economies. This Article closes with proposals to help reconcile the emerging automatic information exchange approaches to produce an effective multilateral system.

Keywords: tax law, offshore accounts, cross-border tax, FATCA, information exchange, tax evasion, tax compliance, international tax, taxation-transnational

JEL Classification: H24, H26, K00, K34, K39

Suggested Citation

Grinberg, Itai, The Battle over Taxing Offshore Accounts (2012). UCLA Law Review, Vol. 60, pp. 304-383, 2012, Available at SSRN: https://ssrn.com/abstract=2497998

Itai Grinberg (Contact Author)

Georgetown University Law Center ( email )

600 New Jersey Avenue NW
Washington, DC 20001
United States
202-661-6615 (Phone)

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