America’s unreported economy: measuring the size, growth and determinants of income tax evasion in the U.S.

This study empirically investigates the extent of noncompliance with the tax code and examines the determinants of federal income tax evasion in the U.S. Employing a refined version of Feige’s (Staff Papers, International Monetary Fund 33(4):768–881, 1986, 1989) General Currency Ratio (GCR) model to estimate a time series of unreported income as our measure of tax evasion, we find that 18–23% of total reportable income may not properly be reported to the IRS. This gives rise to a 2009 “tax gap” in the range of $390–$390–540 billion. As regards the determinants of tax noncompliance, we find that federal income tax evasion is an increasing function of the average effective federal income tax rate, the unemployment rate, the nominal interest rate, and per capita real GDP, and a decreasing function of the IRS audit rate. Despite important refinements of the traditional currency ratio approach for estimating the aggregate size and growth of unreported economies, we conclude that the sensitivity of the results to different benchmarks, imperfect data sources and alternative specifying assumptions precludes obtaining results of sufficient accuracy and reliability to serve as effective policy guides.     

New estimates of U.S. currency abroad,the domestic money supply and the unreported economy

Despite financial innovations that have created important new substitutes for cash usage, per capita holdings of U.S. currency amount to $2950. Yet American households and businesses admit to holding only 15% of the currency stock, leaving the whereabouts of 85% unknown. Some fraction of this unaccounted for currency is held abroad (the dollarization hypothesis) and some is held domestically undeclared, as a store of value and a medium of exchange for transactions involving the production and distribution of illegal goods and services, and for transactions earning income that is not reported to the IRS (the unreported economy hypothesis). We find that the percentage of U.S. currency currently held overseas is between 30 and 37% rather than the widely cited figure of 65%. This finding is based on the official Federal Reserve/Bureau of Economic Analysis data which is a proxy measure of the New York Federal Reserve’s (NYB) “confidential” data on wholesale currency shipments abroad. We recommend that the NYB data be aggregated so as to circumvent confidentiality concerns, and be made readily available to all researchers in order to shed greater light on the questions of how much U.S. currency is abroad and on the particular location of overseas U.S. dollars. The newly revised official estimates of overseas currency holdings are employed to determine the Federal Reserve’s seigniorage earnings from 1964–2010, which have provided a $2950. Yet American households and businesses admit to holding only 15% of the currency stock, leaving the whereabouts of 85% unknown. Some fraction of this unaccounted for currency is held abroad (the dollarization hypothesis) and some is held domestically undeclared, as a store of value and a medium of exchange for transactions involving the production and distribution of illegal goods and services, and for transactions earning income that is not reported to the IRS (the unreported economy hypothesis). We find that the percentage of U.S. currency currently held overseas is between 30 and 37% rather than the widely cited figure of 65%. This finding is based on the official Federal Reserve/Bureau of Economic Analysis data which is a proxy measure of the New York Federal Reserve’s (NYB) “confidential” data on wholesale currency shipments abroad. We recommend that the NYB data be aggregated so as to circumvent confidentiality concerns, and be made readily available to all researchers in order to shed greater light on the questions of how much U.S. currency is abroad and on the particular location of overseas U.S. dollars. The newly revised official estimates of overseas currency holdings are employed to determine the Federal Reserve’s seigniorage earnings from 1964–2010, which have provided a 287 billion windfall for U.S. taxpayers. Overseas currency stock data are also used to derive estimates of the domestically held stock of currency as well as narrow and broad measures of domestic monetary aggregates. These domestic monetary aggregates are believed to be better predictors of future economic activity than traditional monetary aggregates and are tested to determine their ability to predict fluctuations in real output and prices. Domestic cash holdings are finally used to estimate the size of the U.S. unreported economy as measured by the amount of income that is not properly reported to the IRS. By 2010, we estimate that legal and illegal source unreported income” is $1.9–$1.9–2.4 trillion, implying a “tax gap” in the range of $400–$400–540 billion. Currently, we estimate that 18–23% of total reportable income is not properly reported to the IRS.     

Equating U.S. Tax Treatment of Dividends and Capital Gains for Foreign Portfolio Investors

The U.S. tax law equates the tax rate on dividends and long‐term capital gains on stock owned by U.S. citizens and residents. However, the taxation of these two types of rewards in the hands of foreign portfolio investors remains dramatically different from each other, with the capital gain being fully exempt. Several reasons support this article's proposal to no longer exempt these gains. Extending finance theory and prior normative tax research, this article argues that foreigners’ portfolio dividends and capital gains should be taxed in the same manner because they are economically equivalent and emanate from the same source. Three recent empirical developments also support repeal of the foreigner's exemption. First, there is now extensive use by U.S. corporations of stock repurchases—which are taxed to selling shareholders as capital gain—as a form of corporate payout that was in the past primarily accomplished through dividends. Second, foreign ownership of U.S. stocks has continued to increase, with an estimated one‐third of these stocks owned by foreigners. Third, the modern tax compliance environment—including aspects of the Foreign Account Tax Compliance Act that apply to foreigners—reduces past congressional and academic concerns about enforcing the taxation of foreigners’ portfolio gains.     

DEVELOPING AND IMPLEMENTING A CYBERLAW COURSE

"Business spending on the Internet marketing and sales and services will increase to more than $300 billion in year 2002. Internet commerce or the purchase of goods and services over the Internet, will near $250 billion by that year."     

"The More Things Change…": Business Litigation and Governance in the American Automobile Industry

Business litigation is a relatively neglected area of corporate governance, particularly given its enormous rise in the United States over the past generation. As a preliminary effort to engage this issue, we examine dispute avoidance and resolution in the automotive sector since the early 1970s-focusing on relationships between auto manufacturers and their suppliers and dealers. We generally presume intercorporate litigation to be a "last resort" in business practice, chosen only on the breakdown of less costly means of dispute avoidance or resolution; we take such breakdown typically to be caused by shifts in the terms of competition among firms (e. g., increased competition, instability, uncertainty); and we expect that, over time, the costs of litigation will motivate efforts to construct new structures of nonlitigious dispute resolution. In the case of the U. S. auto industry, we find disruptive shifts in the terms of competition and increased recourse to litigation. Throughout, however, this litigation effect is mitigated by the dominance of major manufacturers over their suppliers and dealers. Over time, it is further dampened by industry development of mechanisms for arbitration or other nonlitigious dispute resolution.     

Simple rules and the Political Economy of Income Taxation: the strengths of a uniform expense rule

European Journal of Law and Economics - The complexity of the U.S. income tax system emerged in part from the differentiated fiscal treatment of specific investments and various sorts of business...     

美国企业犯罪的审前转处协议研究

美国针对企业犯罪建立了特殊的审前转处程序,办案检察官可以与涉罪企业签署暂缓起诉协议和不起诉协议,如果企业能够在考察期限内完成协议下的义务,则不会被审判和定罪。在美国经济危机时期,该制度较好地为企业的生存和社会公共利益的维护提供了保障。该制度以美国司法部内部的政策性文件为依据,赋予了办案检察官较大的自由裁量权,法院基本无权干预。美国理论界的争论主要围绕三对冲突关系:社会公共利益维护与企业“大到不用判刑”特权的冲突、检察官的转处裁量权与程序正义的冲突、司法部内部行为与立法/司法管辖权的冲突。在我国面临企业犯罪处理困境的当下,该制度及其相关理论能够为我国“司法行政部门帮扶企业”政策的践行提供经验借鉴。     

美国企业并购中涉税影响的评介

合理的企业并购战略既重新配置经济中存量资源,促进经济发展,还是企业经营迈向成功的契机。随着我国海内外并购活动的日趋活跃,税收已经成为影响企业并购形式、交易成本等方面的重要因素,但并未引起国内学者的重视。本文主要依据美国《国内税收法典》、《1986年税收改革法案》,简要综述国外学者对美国企业并购中涉税问题的研究成果,阐明税收因素对美国企业并购的重要影响,为我国企业并购提供借鉴,也为国内并购交易的税收法规研究提供新的思路。     

The “state-led-economy” issue in the BIT negotiations and its policy implications for China

The state-led-economy provisions in the U.S. model BIT, which was released in April 2012, aims to impose strict regulations on the SOEs and exert great influence on state-led economy model. China and the U.S. are now in the midst of negotiating a BIT, and the U.S. government insists on negotiating on the basis of its 2012 model BIT. If China is to accept the 2012 U.S. model for the proposed BIT between the two nations, unprecedented international obligations will be placed in the field of international investment. In this context, in order to provide a reference for the BIT negotiation, the author will analyze, from the perspective of normative jurisprudence, which economic activities are included in the scope of state-led economy provisions, whether China should accept the clauses and the possible impact of accepting it. China’s economy has indivisible relationship with State-owned enterprises (SOEs). At present, most of these SOEs have clustered in those sectors that play crucial roles in the national economy such as energy, telecommunication and finances. Despite several rounds of reform on the SOEs aiming at a separation of governmental functions from corporate management, and a modern market-oriented governance structure, Chinese SOEs remain monopolies or de facto monopolies with exclusive access to many important industries relevant to national economy and people’s livelihood. Further, SOEs can enjoy a lot of privileges in their operation, some even have certain regulatory authority which is supposed to be exercised by the government. This kind of economic model is called State-led economy. The 2012 U.S. model for bilateral investment treaties (BIT) is characterized by the inclusion of the state-led economy provisions, which means that there are more restrictive regulations governing SOEs and their special treatment, and countervailing their competition implication in the host country and their home country. Apart from creating a fair and impartial environment for the investors, this international investment regime, represented by 2012 U.S. BIT model, is in some way, intended to alter the host country’s economic governance regime. In accordance with the decision of the 5th round of the U.S.–China Strategic and Economic Dialogue, both parties are dedicated to proceeding the BIT negotiations (The 5th Round of the U.S.–China Strategic and Economic Dialogue: broad consensus achieved and positive progress made, People’s Daily, p 3, 2013). The U.S. government has insisted that they would base its 2012 model as a blueprint of BIT text negotiation. Seemingly to illustrate, the 6th round of the U.S.–China Strategic and Economic Dialogue has reached a consensus that an earlier launch of negotiation on the negative list will be expected in 2015 (The 6th Round of the U.S.–China Strategic and Economic Dialogue: broad consensus achieved and positive progress made, People’s Daily, p 3, 2014; Ministry of Commerce of the People’s Republic of China, The 14th Round of the U.S.–China Investment Treaty Negotiation is Held in Washington, D.C., 2014). If China is to accept the new BIT model, it will bring China a bundle of increasing obligations under this system and an unprecedented impact on China’s mode for economic development. As a contracting party, China will have to carry out a comprehensively economic reform to comply with the disciplines specified in the BIT. It is also understandable that the incorporation of the state-led economy provision in the China–U.S. BIT will in turn accelerate the domestic economic reforms. In this context, research on the issue of state-led economy in the BIT negotiation will be of significance to China’s dealing with the core issue in the BIT, China’s fulfillment of treaty obligations and its promotion of domestic economic reform via BIT negotiations. In order to provide a reference for the BIT negotiation, the author will identify from the perspective of normative jurisprudence, the economic activities that fall within the scope of state-led economy provisions, project the possible impact of state-led economy provisions and how China should handle negotiation surrounding the state-led economy issue.

     

试论“超越法律”的企业社会责任

"超越法律"的企业社会责任,是企业负担的那些超出法律强制性义务规定且符合社会价值和期望的责任,确认这种责任的法律规范实为"软法",它主要通过责任目标内化于企业的商业行为和治理结构之中,以实现企业的"自我管制";通过保护利益相关者的实质性和程序性权利,提高利益相关者的谈判抗衡力量以实现市场的自发对抗;并以声誉机制和非政府组织的作用作为责任的实施机制的补充。     

房地产交易:如何从营业税纳入到增值税

2012年1月1日,我国正式启动了增值税试点改革。期望在2015年之前,将营业税全部纳入到增值税。房地产交易在现行税制下征收营业税,未来将纳入到增值税。房地产交易的增值税处理是增值税改革中最大的难题之一。国际实践显示,房地产交易要纳入增值税处理,仍然存在诸多困难,因而就房地产增值税处理问题进行理论探讨,在中国显得非常迫切。     

论基于确立“新型产业结构”的税法修正

产业结构失衡已成为我国经济可持续发展的最大障碍之一,建立“新型产业结构”刻不容缓.税法在产业结构调整中具有很好的引导作用.但现行税法与“新型产业结构”的形成有一定的冲突,有必要在以下几个方面进行修正:扩大增值税征收范围、抵扣范围以及确定合理的扣除率;改变消费税的征税范围和计税依据;进一步改进企业所得税间接优惠方式和亏损转结的规定;扩大资源税征收范围和改变计税方式.     

DOES THE BUSINESS JUDGMENT RULE HELP PROMOTE CORPORATE SOCIAL RESPONSIBILITY?

The business judgment rule (BJR) is a U.S. corporate law concept that has gained international recognition. It has been moulded, particularly in the definition of the Delaware courts, to protect the managerial business discretion, in other words to protect directors’ decisions from judicial review. Corporate social responsibility (CSR) questions the relationship between corporation with a business purpose and society. More and more attention is drawn to the various impacts of corporate decisions on society, asking for the necessity for directors to take these impacts into consideration when making business decisions. At the centre of CSR and the BJR are the fiduciary duties of the directors — the duty of diligence and the duty of care — and the question as to if the directors have breached their duties and if they have fulfilled them in a CSR compatible manner. This paper discusses how the BJR helps promoting CSR by discussing the advantages and disadvantages (real or apparent) of the BJR with respect to CSR.     

Voluntary Greenhouse Gas Reporting—Not an Option for Much Longer

Based on the worldwide movement toward climate change, voluntary reporting of greenhouse gases is something every business—large and small—should consider doing now. Reporting makes sound business sense and will become mandatory in the US within the next few years. It provides a competitive advantage, baseline protection, input to new regulations, and preparation for emissions trading.

This article suggests that corporate officers have a fiduciary duty to voluntarily report. Not reporting could cost their companies money, unnecessary time catching up, reputation damage, and potential lawsuits from shareholders who believe that the corporate officers knew or should have known to investigate the issue and react.     

后Bilski时代电子商务商业方法专利之因应与挑战

美国法院早期以商业方法属于数学演绎方法为由,将商业方法排除在专利保护之外.受此影响,商业方法在美国一直被认为不应授予专利.后来法院提出如果抽象的商业方法与运用这种方法后发生了某种物理转换或者有形的装置相联系,则应承认其具有可专利性.1998年更是表明只要该项发明能导出“实用、具体、有形之结果”者,仍不失其可专利性,否认了商业方法在美国《专利法》中存在例外.虽然联邦巡回上诉法院在In re Bilski案中,提出美国《专利法》第101条规定的方法发明须符合“机器或转换测试法”,试图限缩商业方法专利的范围,但联邦最高法院在 Bilski v.Kappos案中否认其为审查商业方法专利唯一的判断标准.在迄今为止仍存较大争议的背景下,如果既无技术贡献,亦无技术特征,更未与其实现所必须的计算机设备或计算程序相结合,而仅系解决商业经营的程序、步骤或者流程者,商业方法即应为人类智力活动的规则或方法,属于思想的范畴,而不属于专利权的保护客体.     

Tax compliance: An investigation using individual taxpayer compliance measurement program (TCMP) data

In this paper, we analyze the tax compliance behavior of U.S. taxpayers by using a 1979 data set that combines information from a random sample of individual tax returns, each of which has been thoroughly audited, IRS administrative records, and sociodemographic data from the Census. We find evidence that both audits and tax code provisions affect compliance. However, the effects are significant for only low-and high-income groups. Interestingly, work on the underground economy also suggests that it is these two groups that are least compliant. Our results for audits suggest that the ripple or general deterrent effect of audits may be substantially larger than the direct revenue yield of audits for high-income taxpayers. Our results for allowable subtractions from income imply that the 1986 Tax Reform Act changes that lowered allowable subtractions may have procompliance effects.     

Corporations in Court: Big Business Litigation in U. S. Federal Courts, 1971–1991

This article provides an overview of federal litigation involving the largest 2,000 U. S. corporations over the period 1971–91. Reporting from a unique data set of the authors'construction, it finds that althugh the aggregate volume of business litigation grew during the 1970s and early 1980s, it has actually been declining in recent years in all major categories of cases; business-related litigation is heavily concentrated, with an extremely limited number of business "mega-litigants" accounting for most of the activity; this concentration is particularly evident in tort, with the result that the tort trend line outside the concentration is actually flat or declining; a good deal of the growth in litigation outside the tort area can be attributed to business itself; and big business wins overwhelmingly, as plaintiff and defendant, in cases that involve it. The general applicability of these findings is limited by the data's restriction to federal court litigation and the structure of the Integrated Federal Court Data Base from which the authors'data set was constructed. This granted, the report is by far the most comprehensive treatment of U. S. big business litigation to date, and its findings are strikingly at odds with the premises of much current policy discussion.     

Redistributing the energy tax burden in the Philippines

This paper uses an aggregate modelling approach to assess the impacts of a redistribution of the taxes and duties that currently exist on crude oil and refined petroleum products on the Philippine economy. The approach used in the analysis consists of a general equilibrium model composed of fourteen producing sectors, fifteen consuming sectors, three household categories classified by income and a government. The effects of replacing the taxes and duties on crude oil and refined petroleum products with a more broad based tax on manufacturing and service sectors output on prices and quantities are examined. The results are revealing. For example, the consequences of redistributing the tax burden away from petroleum products to the manufacturing and service sectors of the Philippine economy will be an increase in output by all producing sectors of about 3.5 percent or about 2.4 hundred billion Philippine pesos, a rise in the consumption of goods and services by about 6.1 percent or 1.6 hundred billion Philippine pesos, a rise in total utility by 6.9 or 1.9 hundred billion Philippine pesos, and virtually no change in tax revenue for the government. When subjected to a sensitivity analysis, the results are reasonably robust with regard to the assumption of the values of the substitution elasticities. That is, while the model's equilibrium values do vary in response to different assumptions of the values of these elasticities, the fluctuations are not so enormous to suggest that the model is unrealistically sensitive to these parameters.     

Science, values and politics: an insider’s reflections on corporate crime research

Diverse social and political forces have long shaped research on corporate crime and its social control in the U.S., and they have responded to this work in plural and contradictory ways. These forces range from the abstract and institutional to the local and personal. In this essay, I reflect on my three decades of research experience in this arena in an examination of these forces and their implications for research and public policy. More overtly than other forms of criminological research, the study of corporate lawbreaking has conjoined issues of values and politics with issues of science. This feature of the work has made consistently problematic such foundational questions as how to define the subject of inquiry, how to study it, and how to communicate about it. While this volatility has contributed to the ongoing marginalization of this research stream in both academic criminology and regulatory policy, it has also created a certain intellectual dynamism that should attract future generations of investigators to these questions, and to greater cross-disciplinary efforts to address them. Such developments may even pave the way to greater consideration of such research by policy-makers, should socioeconomic conditions in the U.S. and around the world raise the public salience of corporate wrongdoing. ‘Why do you want to study corporate managers? We know how they think.’ ‘…a book entitled Corporate Crime automatically puts us on guard to defend the corporations…such a book should never have been written in the first place.’