1.
International Tax Law between efficiency, equity and development aid Short presentation EATLP Conference Istanbul 2014 Matthias Valta
Institute for Finance and Tax Law, Dr. Matthias Valta

2. Basic principles of taxation
Overview
Basic principles of taxation
Legal theory / legal philosophy / economics
Reception of John Rawls’ Theory of Justice
Theory on tax/state competition and development
First concretion within system of source vs. residence taxation
Second concretion within distribution norms of DTCs
Institute für Finance and Tax law, Dr. Matthias Valta

3. 1. Basic principles: equity
Tax justification:
Global benefit principle: taxes as consideration for the states overall infrastructure and service package
Democratic aspect:
No taxation without representation
No representation without taxation
 Fiscal autonomy: different tax rates in source/residence country should affect overall burden
Institute für Finance and Tax law, Dr. Matthias Valta

4. 1. Basic principles: efficiency
Benefit neutrality:
State of Residence R
30 % tax burden A B
High level of infrastructure & state services
30 % tax burden
Low level of infrastructure & state services
20 % tax burden
Institute für Finance and Tax law, Dr. Matthias Valta

5. 1. Basic principles: Conclusio
Every country, whose infrastructure has been used to generate income, should have a share of taxation
The shares should be autonomous to each other, so that the tax burden in each country affects the overall tax burden
 Democratic accountability and feedback
 Allows for benefit neutrality, esp. important for developing countries
Institute für Finance and Tax law, Dr. Matthias Valta

6. 2. The system of source vs. residence
Detailed territorial attribution through source taxation
Taxation of worldwide income in the state of residence as typical source
In principle: Taxing rights should be shared between source state and state of Residence
Source state taxation might be omitted for compliance costs, especially in symmetric relations with similar tax- infrastructure ratio
Institute für Finance and Tax law, Dr. Matthias Valta

7. 2. The system of source vs. residence
Method
Vertical
equity
Horizontal equity
Efficiency
Distribution
Autonomy
Production
Credit +
(source limited) -̶
Credit w/ tax sparing (matching )
(+)
Exemption
Division of tax base
Deduction from tax base
Institute für Finance and Tax law, Dr. Matthias Valta

8. 3. Distribution norms in DTCs
Comparison of DTC models, empirical survey of DTC policy, partially also comparison of national law.
Analysis under global benefits principle:
Does distribution match contributions of the states infrastructures to the income creation?
Triangular cases: do some attributions to residence states also take care of third source states interests?
Tresholds to source taxation: efficient (net) taxation
Relevance to treaty interpretation (e.g. PE definition, TP)
Balance of payments analysis
Institute für Finance and Tax law, Dr. Matthias Valta

9. Source country / Importer
3. Distribution in DTCs
Source country / Importer US DE JP BR CN IN MA TH VE
Residence c. / Exporter 12 6S
120S 6
183
3/6 3
183S 9 8S
Distributive rules on
construction sites Art. 5 (3)
3-12: months
120/183: days
S = Supervisory activities included
Institute für Finance and Tax law, Dr. Matthias Valta

10. Source country / Importer
3. Distribution in DTCs
Source country / Importer US DE JP BR CN IN MA TH VE
Residence c. / Exporter 12 6S
120S 6
183
3/6 3
183S 9 8S
Distributive rules on
construction sites Art. 5 (3)
3-12: months
120/183: days
S = Supervisory activities included
Institute für Finance and Tax law, Dr. Matthias Valta

11. Source country / Importer
3. Distribution in DTCs
Source country / Importer US DE JP BR CN IN MA TH VE
Residence c. / Exporter 12 6S
120S 6
183
3/6 3
183S 9 8S
Distributive rules on
construction sites Art. 5 (3)
3-12: months
120/183: days
S = Supervisory activities included
Institute für Finance and Tax law, Dr. Matthias Valta

12. Source country / Importer
3. Distribution in DTCs
Source country / Importer US DE JP BR CN IN MA TH VE
Residence c. / Exporter 12 6S
120S 6
183
3/6 3
183S 9 8S
Distributive rules on
construction sites Art. 5 (3)
3-12: months
120/183: days
S = Supervisory activities included
Institute für Finance and Tax law, Dr. Matthias Valta

13. Source country / Importer
3. Distribution in DTCs
Source country / Importer US DE JP BR CN IN
Residence c. / Exporter 12 6S
120S 6
183S
Importer US DE JP BR CN IN
Exporter
237
295
337 71 79
468
165
307 48 38
191 87 81 7
251
116 82 77
Distributive rules on construction sites Art. 5 (3)
Balance of payments data
UN services trade base
Institute für Finance and Tax law, Dr. Matthias Valta

14. Source country / Importer
3. Distribution in DTCs
Source country / Importer US DE JP BR CN IN
Residence c. / Exporter 12 6S
120S 6
183S
Importer US DE JP BR CN IN
Exporter
237
295
337 71 79
468
165
307 48 38
191 87 81 7
251
116 82 77
Distributive rules on construction sites Art. 5 (3)
Balance of payments data
UN services trade base
Institute für Finance and Tax law, Dr. Matthias Valta

15. Source country / Importer
3. Distribution in DTCs
Source country / Importer US DE JP BR CN IN
Residence c. / Exporter 12 6S
120S 6
183S
Importer US DE JP BR CN IN
Exporter
209
291
259 57 52
342 85
318 42 43
238 60 65 10
188
125 48
Distributive rules on construction sites Art. 5 (3)
Balance of payments data
UN services trade base
Institute für Finance and Tax law, Dr. Matthias Valta

16. Heidelberg University Institute for Finance and Tax Law
Dr. Matthias Valta
Heidelberg University
Institute for Finance and Tax Law
valta (at) uni-heidelberg.de