INTERNATIONAL TAX POLICY FORUM / GEORGETOWN UNIVERSITY LAW CENTER Reform of International Tax: Canada, Japan, United Kingdom, and United States January 21, 2011 Gewirz Student Center, 12th floor 120 F Street, N.W., Washington, D.C. 20036 International Tax Policy Forum International Tax Policy Forum and Georgetown University Law Center Conference on: REFORM OF INTERNATIONAL TAX: CANADA, JAPAN, UNITED KINGDOM, AND UNITED STATES Table of Contents 1) Agenda ................................................................................................................................................... 1 2) Sponsoring Organizations a) About ITPF ....................................................................................................................................... 2 b) About Georgetown University Law Center ....................................................................................... 3 3) Taxation of International Income in Canada, Japan, UK, and US a) International Tax Rules in Canada, Japan, the UK and US (J. Mintz Presentation) ....................... 4 b) Canada i) S. Richardson, Presentation on Canadian international tax reform (Jan. 2011) ....................... 9 ii) N. Pantaleo, Presentation on Canada's taxation of foreign business income (Jan. 2011) ..... 12 iii) Advisory Panel on Canada’s System of International Taxation, Enhancing Canada’s International Tax Advantage, (Dec. 2008) [Executive Summary] ........................................... 16 c) UK i) M. Williams, Presentation on UK international tax reform (Jan. 2011).................................... 24 ii) S. Edge, UK CFC Regime Inches Towards Safety," (April 22, 2010) ..................................... 27 iii) S. Edge, "Encouraging Progress on CFC Reform," Tax Journal (Feb. 8, 2010) .................... 30 iv) S. Edge, "Letter of advice to a US client making a new inward investment into the UK and seeking to fund part of the investment through local debt" .............................................. 34 4) Territorial Tax Proposals — Presidential Commissions a) Obama Administration i) President's Export Council (1) Letter from Council to the President, (Dec. 9, 2010) ........................................................ 38 (2) Transcript of meeting with the President, (Dec. 9, 2010) [Excerpt] .................................. 41 ii) National Commission on Fiscal Responsibility and Reform (1) The Moment of Truth , (Dec. 2010) [Excerpt] ................................................................... 44 iii) President's Economic Recovery Advisory Board (1) Tax Reform Report (Aug. 2010) [Excerpt] ........................................................................ 48 b) George W. Bush Administration i) President’s Advisory Panel on Federal Tax Reform (2005) (1) Simple, Fair, and Pro-Growth: Proposals to Fix America’s Tax System, (Nov. 2005) [Excerpt] ............................................................................................................................ 67 5) Articles Relating to Territorial Taxation and International Tax Policy a) J. Mintz and A. Weichenrieder, Chapter 6, "What Governments May Do: Policy Options" The Indirect Side of Direct Investment: Multinational Company Finance and Taxation, MIT Press (Sept. 2010) .................................................................................................................. 79 b) B. Mustard, N. Pantaleo, and S. Wilkie, "Why Not Kenora? Reflections on What Canada’s Approach to Taxing Foreign Business Income Is and Could Be," Report of Proceedings of the Sixty-First Tax Conference, 2009 Conference Report, Canadian Tax Foundation, (2010). ........ 101 c) D. Shaviro, "The Rising Tax-Electivity of U.S. Corporate Residence," NYU Law and Economics Research Paper Series, (October 2010) [Excerpt].................................................... 149 d) J. Hines, "Reconsidering the Taxation of Foreign Income," Tax Law Review, (Jan. 2009)......... 152 e) M. Graetz, "A Multilateral Solution for the Income Tax Treatment of Interest Expenses," Bulletin For International Taxation, (Nov. 2008) .......................................................................... 175 f) J. Hines, "Foreign Income and Domestic Deductions," National Tax Journal, (Sept. 2008) ....... 183 g) J.C. Fleming, Jr., R. Peroni, and S. Shay, "Some Perspectives From The United States On The Worldwide Taxation Vs. Territorial Taxation Debate," J. of the Australasian Tax Teachers Assoc. (2008) [Excerpt] ................................................................................................ 198 h) E. Kleinbard, "Throw Territorial Taxation from the Train," Tax Notes, (Feb. 5, 2007) ................. 202 i i) P. Merrill , O. Penn , H-M. Eckstein , D. Grosman, M. van Kessel, "Restructuring Foreign Source Income Taxation: U.S. Territorial Tax Proposals and the International Experience," Tax Notes, (May 15, 2006) .......................................................................................................... 220 j) M. Graetz and P. Oosterhuis, "Structuring an Exemption System for Foreign Income of U.S. Corporations," National Tax Journal, (Dec. 2001) ....................................................................... 234 k) R. Altshuler and H. Grubert, "Where Will They Go if we Go Territorial?" National Tax Journal, (Dec. 2001) .................................................................................................................................. 250 6) Biographies of Speakers ................................................................................................................. 273 ii Page 1 International Tax Policy Forum and Georgetown University Law Center Conference on: REFORM OF INTERNATIONAL TAX: CANADA, JAPAN, UNITED KINGDOM, AND UNITED STATES with a Keynote Address by Jason Furman (Deputy Director, National Economic Council) Date: Friday, January 21, 2011 Location: Georgetown University Law Center Gewirz Student Center, 12th floor 120 F Street, NW Washington, D.C. 20001 Register online at: https://www.law.georgetown.edu/cle/showEventDetail.cfm?ID=252 With the recent adoption of territorial (dividend exemption) tax systems in the UK and Japan, the United States is now the only G-7 country that taxes active business income of foreign subsidiaries under a worldwide tax system. This conference brings together tax authorities and practitioners from Canada, Japan and the UK to discuss why these countries switched from worldwide to territorial tax systems and what the results have been. Issues in the design of a territorial tax system for the United States will be discussed by a panel of tax experts. 8:30 a.m. REGISTRATION 8:55 a.m. WELCOME William Treanor (Dean, Georgetown University Law Center) John Samuels (VP and Sr. Counsel—Tax Policy and Planning, GE) 9:00 a.m. INTERNATIONAL TAX RULES IN CANADA, JAPAN, THE U.K., AND THE U.S.: A PRIMER Moderator: Charles Gustafson (Georgetown University Law Center) Presenter: Jack Mintz (University of Calgary) 9:30 a.m. ADOPTION OF DIVIDEND-EXEMPTION SYSTEMS IN CANADA, JAPAN AND THE UK: GOVERNMENT PERSPECTIVES Moderator: Will Morris (GE) Panel: Stephen Richardson (Dept. of Finance, Canada) Chizuru Suga (Ministry of Economy, Trade and Industry, Japan) Mike Williams (HM Treasury, U.K.) 10:15 a.m. BREAK 10:30 a.m. ADOPTION OF DIVIDEND-EXEMPTION SYSTEMS IN CANADA, JAPAN AND THE UK: PRACTITIONER PERSPECTIVES Moderator: James Hines (University of Michigan) Commenters: Stephen Edge (Slaughter & May, London) Nick Pantaleo (PwC, Canada) Gary Thomas (White & Case, Japan) 11:30 a.m. INTERNATIONALTAX REFORM OPTIONS FOR THE U.S. Moderator: Jack Mintz (University of Calgary) Panel: Rosanne Altshuler (Rutgers) Michael Graetz (Columbia Law School) James Hines (University of Michigan Paul Oosterhuis (Skadden Arps) 12:30 p.m. LUNCHEON 1:00 p.m. KEYNOTE ADRESS Introduction: John Samuels (GE) Keynote Speaker: Jason Furman (Deputy Director, National Economic Council) 1:30 p.m. ADJOURNMENT Page 2 International Tax Policy Forum Web site: www.itpf.org About the International Tax Policy Forum Member Companies Founded in 1992, the International Tax Policy Forum is an independent Abbott Laboratories Alcoa, Inc. group of approximately 40 major multinational companies with a American Express Company diverse industry representation. The Forum’s mission is to promote Avery Dennison Corporation BP America, Inc. research and education on the taxation of cross-border investment. Bank of New York/Mellon Although the Forum is not a lobbying organization, it has testified Barclays Capital Inc. before the Congressional tax-writing committees on the effects of CA, Inc. Caterpillar Inc. various tax proposals on U.S. competitiveness. The ITPF briefs Chevron Corporation Congressional staff periodically and sponsors annual public Cisco Systems, Inc. conferences on major international tax policy issues. The January Citigroup The Coca-Cola Company 2010 ITPF conference on "Locating the Source of Taxable Income in a DuPont Global Economy" was co-sponsored with the American Enterprise Eaton Corporation Eli Lilly and Company Institute. Emerson Electric Co. Exxon Mobil Corporation On the research front, the Forum has commissioned over 20 papers on General Electric Co. international tax policy topics such as the effects of the interest Goldman Sachs allocation rules on the competitiveness of U.S. firms, the compliance ITT Corporation Intel Corp. costs of taxing foreign source income, and the linkages between International Business Machines Corp. foreign