Part 1 - AL-Tax

Chapter 1international tax policy innovation has often originated in the USA. However, theEuropean Union now plays a leading role in tax harmonization. The EuropeanUnion is a laboratory for the emerging insights into balancing international taxcompetition and cooperation. This second part of the book focuses on specific EUresponses to international taxation within an environment of customs unions.Never before has there been such effective avenues for tax policy coordination.This is creating both an opportunity for the European Union to live up to itsbilling, and a laboratory for other countries to observe and emulate.We begin by treating a challenge more prevalent as globalization becomes moresignificant – the need for securitization in global transactions. In ‘Taxable AssetSales in Securitization’, Professor Paul Ali points out that various national policieson securitization more or less accomplish the various goals of corporations.These goals include raising of funds, improvement of their balance sheets, andbetter management of capital requirements. Professor Ali describes the method ofsecuritization increasingly used to meet these requirements.With the juxtaposition of greater global competition and greater cooperationwithin the EU, the tension between these two forces provide for an interestingstudy. As an example, Professors Markus Brem and Thomas Tucha make twoimportant contributions to the book. These authors are concerned with the emergenceof Advance Pricing Agreements (APAs) that allow reduced uncertainty ininternational tax planning. The innovations of APAs are a positive example ofproactive policymaking designed to improve international commerce by improvingthe ability of a firm to tax plan. The authors point out that there are a varietyof potential factors to be considered in international APAs, and discuss theimportance of these factors on solutions chosen to meet idiosyncratic nationalneeds.The authors follow the discussion up with a discussion of the ‘arm’s length analysis’convention on transfer pricing, currently being considered by the Model TaxConvention group of the Organization for Economic Cooperation and Development(OECD). The authors describe a framework for the comparison of alternative APAand transfer pricing regimes, based on the notion of subtleties between risk insurable(or insured) and uncertainty as managed by related parties or entrepreneurs.In doing so, they authors help us better understand the best approaches to transferpricing under the ‘arm’s length’ methodology.To close our discussion of innovations in international taxation, we include achapter by Professor Gaëtan Nicodème entitled ‘Corporate Tax Competition andCoordination in the European Union’. In that paper, Professor Nicodème adds tothe transfer pricing mix the notion of thin capitalization, and presents some7