Alvin C. Warren

Income Tax Discrimination and the Political and Economic Integration of Europe

In recent years, the European Court of Justice (ECJ) has invalidated many income tax law provisions of EU member states as violating the guarantees of the European constitutional treaties of freedom of movement for goods, services, persons, and capital. These decisions have not, however, been matched by significant European income tax legislation, because no European political institution has the power to enact such legislation without unanimous consent from the member states. Under the treaties, the member states have retained a veto power over income tax legislation. In this Article, we describe how the developing ECJ jurisprudence threatens the ability of member states to use tax incentives to stimulate their domestic economies and to resolve problems of international double taxation. We conclude that the ECJ approach is ultimately incoherent because it constitutes an impossible quest - in the absence of harmonized income tax bases and rates throughout Europe - to eliminate discrimination based on both origin and destination of economic activity. We also compare the ECJs jurisprudence with the resolution of related issues in the U.S. taxation of interstate commerce and international taxation. Finally, we consider the potential responses of both the European Union and the United States to these developments.

US income taxation of new financial products

This paper discusses the response of the US federal income tax to financial innovation. Income taxation in the US and elsewhere has traditionally relied on distinction, such as the difference between fixed and contingent returns, that can be undermined by new financial products. The principal tax law responses to innovative products have been: (1) transactional analysis, which aggregates or disaggregates new transactions to conform them to existing legal categories, (2) taxation of changes in market value, rather than realization events, (3) taxation based on an assumed formula, and (4) anti-avoidance administrative procedures.

Deferral and Exemption of the Income of Foreign Subsidiaries: A Review of the Basic Analytics

Current proposals to replace the U.S. foreign tax credit with an exemption for the income of foreign subsidiaries of U.S. companies make timely a review of the basic analytics of taxation under the two systems. This brief note reviews the key relationships, highlighting some that are not always fully appreciated in policy discussions.