In recent years, the international tax planning strategies of multinationals have become a source of – often heated – debate. This course provides learners with the tools to become fully informed participants in the debate by explaining the foundations and practice of international tax law as well as addressing current developments and the ethical aspects of tax planning.
Interview Robert Stack
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Del curso dictado por Universiteit Leiden
Rethinking International Tax Law
516 calificaciones
De la lección
Tax planning & ethical dimensions
This sixth and last module will be about the ethical aspects of tax planning. Prof. Douma will be interviewing a number of key stakeholders in the current debate to reflect on what we have learned in the previous modules. In addition, you will find the final exam which will enable you to complete the course.
Conoce a los instructores
Prof. Dr. Sjoerd DoumaFaculty of Law
International Tax Center
Hi, today I'm talking to Bob Stack, Deputy Assistant Secretary for
International Tax Affairs at the US department of the Treasury.
Bob, good morning.
Well, great that you can join us today.
Could you perhaps start off by telling us a little bit more about yourself?
>> Sure, I'd be happy to.
And, first, thank you for the opportunity to be present in your program.
I know it's a very prestigious and important one, and
I'm delighted to be here today.
I was born in Brooklyn, New York.
I'm a native New Yorker.
3 of my four grandparents were born in Ireland, and so
I'm one of those typical 2nd generation immigrant families to New York City,
and went through the Catholic school system in New York City.
After I got out of college from the state University of New York, I went off
to teach high school in Brooklyn where I taught both English and French.
And the French link is part of my love of all things international,
which has stayed with me really my whole life.
Then I went to Law School at Georgetown in Washington and when I got out in 1984 I
began, I will wait for your last question on what interested me in tax,
but I began my career as a tax lawyer in law firms, which I pursued for
25 years before assuming my current position in the government 2 years ago.
In the United States we don't have such a tradition of
Companies stay lined up for in the government or in private practice.
We have some degree of movement back and forth.
>> All right.
>> So I came into government 2 years ago.
>> So you probably very much involved in international debate on text
planning which has become a bit heated in last years.
What is your view on the debate?
So I think that, one way we talk about this in the United States is,
there's certainly no doubt that the international tax system,
which goes back about 100 years, probably never envisioned situations in which
tax havens could kind of rack up lots of income, and
we came to call that stateless income.
And so we are kind of fully committed to looking at ways to
structure ourselves to avoid the stateless income problem.
What's really important though in this debate, I think for
students to appreciate, is the actors in this space
are not just corporations but their also countries.
And so countries as been as
complicit in creating the stateless income as have the companies.
And so you really need, as a policy maker, what I need to do is look at U.S.
laws U.S. regulations.
And ask how we can write our rules so
that we minimize let's the stateless income and we're working on that.
>> Yeah too perhaps go on a little bit further.
What kind of measures is the US thinking of?
Sure, let me just finish off my, on point to kind
of bridge to our current point is If you think of very simple things,
like why would a country have a 0 withholding tax on dividends and
royalties to a tax haven?
And if they do that,
isn't the country inviting investors to come in through the tax haven.
>> In the EU, you have a particular problem of the money flows
around the EU because of the directive with 0 withholding taxes, and
then there are jurisdictions within the EU that invite companies to go to tax havens,
because they say, oh, if you're in a tax haven,
we'll also give you a 0 withholding tax when the money leaves the EU.
>> Now in the US, first, we have a 30% withholding
tax on any dividend, interest, or royalty that goes out to a non treaty country.
So it's very difficult to invest in the US directly through a non tax agent.
What we've looked at recently is really I would say 3 main pillars of US tax reform.
Let me start with 2 that are in our budget proposal.
1 is something new, it's called the minimum tax.
And what the minimum tax does, it says to a US resident in multinational, we
want you to do your business and pay your tax where you actually have operations.
And if you're doing that in countries with a greater than 19% rate,
that's our budget proposal,
you're not going to have to pay tax again in the US when you bring the money home.
So, what that does is, you're in Germany, you're in France, just go there,
do your business It's what we call quasi-territorial system.
But if you want to be in a country with a super low rate or no tax,
we're just going to tax you immediately on the income that flows into the tax haven.
Now there's a wrinkle.
We give you a little credit, I don't want to get too technical for
some activity that might be natural to the taxing.
So we give a percentage of your assets as a tax-free return, but
after that, here the theory is,
that when companies are getting very high returns in low tax jurisdictions,
our theory is that its applicable probably to intangibles and
things that are very easily moved into those jurisdictions so
the mean tax is something that we think could really
put a dent in the stateless income problem and in the best issue and
interestingly enough it has been difficult to get other countries
in the BEPS process to go along with this simple idea and
the reason is they want to present their jurisdiction as a very favorable place for
companies to come and engage in the very kind of activity that we all think is.
Anyway, am I speaking too long?
Can I go through the other.
>> No, I think it's still extremely interesting.
>> The second prong is that we're working on both of the.
Multinationals May for example have $1 million of debt to 3rd parties.
Let's say that $1 million of debt to the 3rd party produces
$100,000 of interest expense for the multinational.
I know that's a very high rate, but it's easy math.
Now what happens for those of you studying tax brackets is what happens is
that multinational can now take its capital and lend it around the world and
lo and behold it won't just have $100,000 in interest deductions,
it could have another million in interest deductions.
Because it chooses to capitalize in various jurisdictions of debt.
What I interest proposal did in the US budget,
it says you know what we think a multi national should get no
more in interest deduction around the world than it really has to 3rd parties.
And what that would do it would protect the very commonly used technique of
interest stripping by multi-nationals out of all our jurisdictions.
Again, interestingly, it's been a difficult sell here at the OECP,
where I am for meetings today in Paris.
Again, why? Because countries.
It's not the companies.
Countries are saying well,
you know, we really want to be an attractive place to invest, so
we don't mind giving a little extra juice through the interest deduction.
And then the 3rd pillar, you mentioned our treaties last week.
One of the things, when treaties were traditionally entered into, let's say,
30 40 years ago, the global system was very static.
The tax rates of all of the developed countries are pretty much the same.
The tax systems are the same,
and the treaties are among basically the developed countries.
Today is a new phenomenon.
First, when you enter into a treaty,
you might have entered into the treaty when that country had also a 25% tax rate.
But after you enter that treaty,
that country enacts something called a patent box.
And now, we had agreed to, let's say,
lower our royalty withholding rate from 30 to 0 in our treaty.
But now, we find ourselves, we're going to let you get a 0% withholding
rate on a royalty into a patent box that would be taxed at 10% and
nobody has to do any real research and
development in the country that's getting that has put the patent box in place,
so in very short what our new model provisions did last week was it said
we will not give a reduced rate to what we call special tax reviews,
which are regimes that are basically trying to local income and
interest in royalties essentially.
So those 3 pillars are, I would say,
the fundamentals on the international that I think I would highlight few today.
>> Well thanks Bob, these are three extremely interesting points which
tie in very well with everything we have discussed in our course so far.
So thanks a lot for your insights.
May I perhaps close the interview with asking you a more personal question, and
that is what is it that drives you personally in tax?
>> It's a great question and I thank you.
Told me the other day so I've had a little time to think about it.
I find, first of all, when I mentioned my background,
I started out as a French teacher.
I think the students do appreciate is that the older I get,
the more I realize how much serendipity plays a role in life.
When I was in college I majored in English and French as a minor and
if you had said to me when I was 20 that I'd be a tax lawyer I you might as well as
have said I'd be a rocket scientist, or I'd land on the moon it was completely
outside of my thinking but when I got to law school I did all that.
I took a couple of tax courses, and what's sometimes interesting in life
I did well in them, and then I thought well maybe I can do this.
And then when I got to my first law job, they actually asked me to take a time
doing tax as kind of a would you like it.
I did that.
I did like it, and I'll talk a little bit about what I like and then because I
am basically an internationalist from a very young age,
I started to do anything I could in international tax in my firm.
And then I did that for 25 years.
What I think is good about it is it is actually a very intellectual construct.
What happens in tax and I think as you students move along into it,
you often think of it as kind of a logic system, if you will.
And you start to kind of know what the answers should be.
One of the interesting things in tax season across jurisdictions,
the rules really are similar in the sense that they're conceptually similar.
They may vary in some particulars of course.
And of course, you need to kind of know the particular rules in your jurisdiction.
But part of the fun, when you've practiced tax a while,
is to be able to kind of speak the language and think the logic of tax.
I think in this work over here, the OECD, I'll just add that
this has a level that is new to me because I grew up as a practicing tax lawyer.
And now we're in the policy and political domain.
And the degree to which the political issues let's say we
gave the technical issues is more than I would have experienced in practice.
And so that's been a little more of a learning curve for me here at the OCD.
>> Thanks a lot, Bob and enjoy your day today over there in Paris.
Thank you, and thanks for having me.
Bye. >> Bye.
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