TAXATION
EVALUATION BEPS: A RECONSIDERATION OF THE BENEFITS PRINCIPLE AND PROPOSAL FOR UN OVERSIGHT
Reuven S. Avi-Yonah & Haiyan Xu
The Financial Crisis of 2008 and Great Recession that followed have exacerbated income inequality within and between countries. In the aftermath of the economic turbulence, politicians have turned their attention to the twin problems of individual tax evasion and corporate tax avoidance. U.S. legislators enacted the Foreign Account Tax Compliance Act (FACTA), leading to the United States signing a series of Intergovernmental Agreements (IGAs) for the exchange of tax information. The Organization for Economic Co-operation and Development (OECD) developed the Multilateral Agreement for Administrative Assistance in Tax Matters (MAATM) and initiated the Base Erosion and Profit Shifting (BEPS) project to reduce tax evasion and tax avoidance globally. Although these efforts were well-intended, this Article argues that the tax policy response to the Financial Crisis and Great Recession has ultimately been inadequate. The problem, which is discussed in-depth in the sections that follow, is the benefits principle.
TAXATION
TAMING THE DRAGON: DRAWING LINES — A CASE STUDY ON FOREIGN HEDGE FUND LENDING TO U.S BORROWERS AND TRANSACTING IN U.S. DEBT SECURITIES
Julie A.D. Manasfi
Legislators, judges, and administrative agencies often have to distinguish between similar transactions for tax purposes. To help, Congress has drawn some lines via certain categories. These categories, or “cubbyholes,” raise “line drawing” issues of whether seemingly similar benefits qualify as taxable under specific categories. One line drawing area where the stakes are high is in the taxation of foreign persons lending money to U.S. borrowers and transacting in U.S. debt securities. The relevant category that determines federal income tax consequences to those transactions is whether persons are “engaged in a U.S. trade or business.” The stakes are high in these situations because of the legal uncertainty in these transactions, which may create interconnectedness and credit channels, increase systemic risk, and make our system more fragile.
BANKRUPTCY & RESTRUCTURINIG
BARGAINING BANKRUPT: A RELATIONAL THEORY OF CONTRACT IN BANKRUPTCY
Jonathan C. Lipson
This Article studies the growing use of contract in bankruptcy. Sophisticated “distress” investors (for example, hedge funds and private equity funds) increasingly enter into contracts amongst themselves and corporate debtors during bankruptcy in order to evade “mandatory” rules on the priority of distribu- tions, thus preferring themselves at the expense of other stakeholders (for example, employees of the corporate debtor). Bankruptcy courts that supervise these cases struggle with these priority-shifting contracts. They are asked to approve them, but have little theoretical or doctrinal guidance on how to assess them.
SECURITIES & FINANCIAL REGULATION • INVESTING & ASSET MANAGEMENT
PUFFERY ON THE MARKET: A BEHAVIORAL ECONOMIC ANALYSIS OF THE PUFFERY DEFENSE IN THE SECURITIES ARENA
Adi Osovsky
Puffery statements in the securities arena are statements that are so optimistic, general, broad, or vague that they are considered immaterial as a matter of law and, thus, shielded from liability. The courts’ underlying assumption is that investors disregard puffery statements and do not rely on them when making investment decisions.