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Mini presenTations by tax scholars

During this term we will meet fortnightly. For this week’s meeting we will be able to hear about tax research across the academic spectrum and from around the world. For information on upcoming and past meetings click on our “UPCOMING MEETINGS” tab.

We have five mini-presentations:

  • Professor of Law Neil Buchanan, from the University of Florida, will be explaining how he chooses topics for scholarly writing, how theoretical research advances the conversation and how to deal with economics in tax analysis.

  • Philip Baker QC, tax barrister and a visiting Professor, will be discussing the practising lawyer’s approach to academic tax law and the role of practicing lawyers who also engage in academic work, as well outlining his own journey into tax academia and some of his current research plans.

  • Dr Amir Pichhadze, from the University of Oxford, will be bringing his international academic experience to bear on the subject of tax law teaching and research.

  • Christina Allen, lecturer in law at Edith Cowan University in Perth, Australia, will be using her forthcoming tax project about definitions of wealth and income to illustrate the challenges of framing and narrowing a research question.

  • Gabriel Nwodo, a Nigerian law graduate, will be articulating why he is returning to academic study, as a newly arrived LLM postgraduate student at the University of Cambridge.

As usual, there will be the opportunity for discussion and asking questions.

The one-hour meeting will be start at 5:00pm British Summer Time. If you would like a calendar invitation sent to you via Teams/Outlook, please email gevm2@cam.ac.uk . Otherwise, the link for the meeting is here:

https://teams.microsoft.com/l/meetup-join/19%3ameeting_MDRmNzY0NjctMTc5NS00OTA4LWE4ZWYtYTU5ZTI4MThmYTcw%40thread.v2/0?context=%7b%22Tid%22%3a%2249a50445-bdfa-4b79-ade3-547b4f3986e9%22%2c%22Oid%22%3a%22cce22f0f-bf2a-4e51-beb7-cf129dbab444%22%7d

We look forward to seeing you at the meeting.

Best wishes,

May Hen-Smith and Guy Mulley

Co-convenors, Cambridge Tax Discussion Group

Does the Internal Market Bill alter the tax devolution settlement?

Does the Internal Market Bill alter the tax devolution settlement?

The Internal Market Bill was introduced to the House of Commons of the UK on 9 September 2020 with the intention of ensuring “free trade in goods and services between the four nations” and “to prevent new barriers to intra-UK trade from emerging”.[1]

A great deal of attention has been paid to the alleged inconsistency of clauses 42, 43 and 45 with the UK’s international legal obligations and in particular the Northern Ireland Protocol to the EU-UK Withdrawal Agreement.[2]  This blogpost addresses a narrower but still important question, which is whether the Bill alters the devolution of taxation between the UK and the devolved administrations in Scotland, Wales and Northern Ireland.

The internal markets in goods and services

At first sight, this seems extremely unlikely.  Paragraph 9 of Schedule 1 provides that:

The United Kingdom market access principles do not apply to (and sections 2(3) and 5(3) do not affect the operation of) any legislation so far as it imposes, or relates to the imposition of, any tax, rate, duty or similar charge.[3]

This seems to preclude any argument that a devolved tax rule or decision might impede the internal market.  Those hoping to replicate the success of claimants before the CJEU who have argued that the tax rules of member states have discriminated against them, in contravention of the fundamental freedoms of the EU,[4] are likely to remain disappointed.

This picture changes, but only in detail, when we look at the definition of “market access principles” in clause 1 of the Bill.  Clause 1 provides that:

(2) The United Kingdom market access principles are—

(a) the mutual recognition principle for goods (see sections 2 to 4), and

(b) the non-discrimination principle for goods (see sections 5 to 9).[5]

This confirms that the above exclusion of tax only applies to Part I of the Bill dealing with the internal market in goods.  Does it follow that a taxpayer might have greater success in arguing that a tax rule or decision discriminates against them and hence impedes the internal market in services, covered in Part II of the Bill?  In a word, no.  Part 3 of Schedule 2 provides that clause 17, which governs mutual recognition of authorisation requirements for the provision of services, does not apply to:

Any authorisation requirement in connection with taxation

Likewise, Part 2 of Schedule provides that clauses 18 and 19, which govern non-discrimination in relation to regulatory requirements for the provision of services, do not apply to:

Any regulatory requirement in connection with taxation

So, tax also appears to be effectively excluded from the provisions of the Bill dealing with the internal market in services.  The important thing to notice, though, is that the exclusions of tax in Schedules 1 and 2 only relate to specific provisions in the Act, and indeed there is no general exclusion of tax from the Bill as a whole.

Distortive or harmful subsidies

This becomes significant when we look at clause 48 of the Bill, which intervenes in the highly charged question of which of the powers being repatriated from the EU should be assigned to the central UK institutions and which powers should instead be assigned to the devolved administrations in Scotland, Wales and Northern Ireland.  Clause 48 confirms that the regulation of State Aid, or in other terminology ‘distortive or harmful subsidies’, will be treated as a matter reserved to the UK.

Whether or not the reservation of these matters to the UK is appropriate in general is irrelevant to the present blogpost, though I note that the UK is likely to need some degree of subsidy control in order to comply with its obligations under WTO law.  My concern here is to ask whether this clause has the potential to upset either the existing distribution of devolved tax powers[6] or the trajectory of tax devolution.  As the following paragraphs explain, my answer to this is “yes”, with the proviso that clause 48 does not itself regulate tax subsidies (or any other type of subsidy) but merely reserves to Westminster the right to do so.  In reaching this conclusion I consider, first, whether a tax rule or decision can in principle be seen as a distortive or harmful subsidy; second, what the Bill says on the matter; third, whether tax is excluded from the operation of clause 48; and fourth, whether there is any special protection for existing arrangements.

On the first question, aside from the provisions of the Bill, we are likely to conclude that a tax relief provided in a discriminatory or otherwise improper manner can certainly be described as a distortive or harmful subsidy.  We have all heard of “pork barrel” politics whereby governments provide questionable tax benefits because of family connections or in return for promises to vote for a given political party.  Under EU law, too, it is beyond doubt that tax treatments can be held to constitute illegal state aid, even if the recent litigation around the Republic of Ireland’s treatment of Apple has highlighted the uncertainties in difficult cases.[7]

On the second question, the scope of the reservation in clause 48 is expressed as follows:

Regulation of the provision of subsidies which are or may be distortive or harmful by a public authority to persons supplying goods or services in the course of a business.

The definition of “subsidy” further down in clause 48 does not either include or exclude tax explicitly, but paragraph 168 of the government’s earlier White Paper on the internal market suggests that it was intended to be included:

A subsidy is, broadly speaking, support in any form (financial or in kind) from any level of government – central, regional or local – which gives an advantage to a business that it could not obtain otherwise. This advantage could be in any form, including a grant, a tax break, a loan or guarantee on favourable terms or use of facilities below market price.[8]

There is a strong prima facie argument, therefore, that a “tax break” can in principle count as a distortive or harmful subsidy and that the power to regulate such subsidies will fall to the UK under the reservation in clause 48 even in relation to fully and partly devolved taxes.

The third question is whether the Bill excludes tax from the operation of clause 48.  The answer to this is that there is no evidence of such an exclusion.  As explained above, the exclusions in Schedules 1 and 2 only apply to specified clauses of the Bill and clause 48 is not amongst them.

The fourth question, and perhaps the most worrying of all to devolved administrations, is whether the UK could make use of the reserved powers under clause 48 not only to influence the future trajectory of tax devolution, but to argue that existing “tax breaks” provided by the devolved administrations are distortive or harmful subsides that are now within the competence of the UK to remove.  There are a number of “grandfathering” provisions preserving existing arrangements even when they would otherwise contravene the Bill, but there are no such provisions in relation to clause 48 (though perhaps understandably given that the Bill leaves detailed regulation of subsidies to a future occasion).  Equally, there is no guarantee of a de minimis level of subsidy that will automatically be left alone, which raises the possibility that subsidies that were too small to attract the attention of EU state aid law may be vulnerable to attack under the powers reserved to the UK by clause 48.

It must be emphasised that we know very little about the likely scope, approach and even existence of the subsidy regime that the UK may implement under the powers reserved by clause 48.  There may also an opportunity for the devolved administrations to give or withhold legislative consent once such a regime is proposed and is impact on tax devolution becomes clearer.  Hence, my claim here is not that clause 48 represents a direct or immediate attack on the tax competences of the devolved administrations.  It is instead that the clause provides a wide gateway for the UK to argue in the future that “tax breaks” provided by the devolved administrations represent harmful subsidies and that they can be removed by the UK notwithstanding that they otherwise fall within devolved competence.

The consequences for devolution

As an EU member state, the UK and its constituent parts have long been subject to EU state aid law and are likely to remain subject to WTO rules on subsidies.  Indeed, the Scottish administration has for several years been involved in negotiations on the EU state aid status of a favourable tax regime for air travel in the Highlands and Islands.[9]  The application of subsidy control to tax measures is not novel.  It is also understandable that the UK might wish to exert such control after the Brexit transaction period, not least to guarantee compliance with its obligations under WTO law and under the terms of any relevant trade agreements.  From this perspective there is a clear rationale for the reservation of subsidy control in clause 48 as well as the apparent inclusion of taxation.

This said, devolved administrations could be forgiven for a degree of alarm at the blanket nature of the reservation in clause 48; the lack of detail on the extent or scope of the UK’s post-Brexit subsidy control regime; the uncertainty about the interaction of this regime with tax devolution; and the lack of clarity on grandfathering and de minimis arrangements.  To the question “can we now provide a tax break without being vulnerable to this new reserved power” my answer is “who knows?”.  This seems rather an unfortunate side-effect of a Bill that is not primarily about tax, and the devolved administrations would do well to seek urgent clarification.

Many thanks to the colleagues who have reviewed this post and provided helpful suggestions.  Any remaining inaccuracies are mine alone.


[1] https://commonslibrary.parliament.uk/research-briefings/cbp-9003/

[2] https://publiclawforeveryone.com/2020/09/09/the-internal-market-bill-a-perfect-constitutional-storm/; https://ukconstitutionallaw.org/2020/09/09/kenneth-armstrong-can-the-uk-breach-the-withdrawal-agreement-and-get-away-with-it-the-united-kingdom-internal-market-bill/; cf. https://www.spectator.co.uk/article/whatever-its-political-wisdom-introducing-the-internal-markets-bill-is-not-unconstitutional.

[3] Emphasis added.

[4] See generally Christiana HJI Panayi, European Union Corporate Tax Law (Cambridge, CUP, 2013) Ch 4.

[5] Emphasis added.

[6] These differ between Scotland, Wales and Northern Ireland but include full devolution of some property and environmental taxes and limited income tax powers: see in more detail Dominic de Cogan, Tax Law, State-building and the Constitution (Oxford, Hart, 2020) Ch 2.

[7] https://www.taxjournal.com/articles/the-state-aid-ruling-on-apple.

[8] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/901225/uk-internal-market-white-paper.pdf (emphasis added).

[9] https://www.gov.scot/binaries/content/documents/govscot/publications/minutes/2018/07/adt-highlands-and-islands-working-group-minutes-june-2018/documents/background-on-state-aid-issues/background-on-state-aid-issues/govscot%3Adocument/Background%2Bon%2Bstate%2Baid%2Bissues.pdf.

Dominic de Cogan is a Senior Lecturer in Tax Law at the Faculty of Law, University of Cambridge, and a Fellow of Christ’s College, Cambridge.  He is one of the Directors of the Tax Research Network and he is a member of the Tax Law Review Committee of the IFS.  In addition to Tax, Dominic teaches on the Administrative Law, Equity and Law of Succession courses, and he has recently published the book Tax Law, State-Building and the Constitution with Hart Publishing.

“Where’s the Money Coming From? How Tax and Spending Debates frame Electoral Politics” By Peter Sloman

Please join us online this week to engage with Dr. Peter Sloman of POLIS, University of Cambridge on Thursday September 17th, from 17:00-18:00 (BST) ONLINE (e-mail hmh46@cam.ac.uk or gevm2@cam.ac.uk for link).

Peter will be discussing the following topic: “Where’s the Money Coming From? How Tax and Spending Debates frame Electoral Politics”

Abstract: Tax and spending are central to democratic politics in the UK and elsewhere, but political scientists have paid surprisingly little attention to the practice of manifesto costings or the ways in which fiscal promises shape voting behaviour. This paper explores how British parties have used manifesto costings to frame prospective choices for voters since the 1950s, and develops a theoretical framework for understanding why warnings about ‘tax bombshells’ and ‘black holes’ in parties’ spending plans seem to be so powerful in Westminster democracies such as the UK. Whereas retrospective evaluations of economic performance can be difficult for governments to control, forward-looking fiscal debates are structurally weighed towards incumbent parties. Other constitutional structures may have very different implications for the role of public opinion in the tax policy-making process.

Peter Sloman is University Senior Lecturer in British Politics at POLIS and a Fellow of Churchill College. Before joining POLIS in 2015 he spent ten years in Oxford, where he was a student at Queen’s and a junior research fellow at New College.

Peter’s research focusses on political ideas, public policy, and electoral politics in modern Britain. His first book, The Liberal Party and the Economy, 1929-1964 (Oxford, 2015) explored how British Liberals engaged with economic thought in the era of John Maynard Keynes and William Beveridge. His second book, Transfer State (Oxford, 2019), examines how changing attitudes to work and social welfare have shaped the development of Universal Credit and the campaign for a universal basic income.

“Taxing Capital Appreciation for Fairer Taxation, Constitutions and a Comprehensive Tax Base” by Professor Henry Ordower

The Cambridge Tax Discussion Group is a PhD student run meeting group with weekly discussions of wide-ranging tax-related topics. We have been meeting weekly during term-time since 2015 and hope to continue with engaging topics that are tax or tangentially tax-related topics! We are friendly, open to all and interdisciplinary. We sincerely hope you will join us on our next online meeting which will be on Thursday 2 July at 17:00 (British Summer Time). See our “Meetings” page for updated talks, links and previous topics covered.

This week’s talk can also be found on talks.cam along with an assortment of university-wide talks: http://www.talks.cam.ac.uk/talk/index/149806

This week, Professor Henry Ordower, from Saint Louis University, will be discussing tax fairness in an international context, under the title: “Taxing Capital Appreciation for Fairer Taxation, Constitutions and a Comprehensive Tax Base”. Further details are below.

We look forward to seeing you on Thursday.

May Hen-Smith and Guy Mulley Co-convenors, Cambridge Tax Discussion Group

ABSTRACT

The presentation will start with a brief exploration of the realization question in the pending constitutional challenge to the peculiar US transition tax (IRC 965) and then contextualize the historical issue of realization and income and the comprehensive tax base. I will consider some of the justifications for a realization requirement and preferential treatment of capital gain and contrast them with some economic drawbacks to a realization-based system. The presentation will move to mark to market (with its trade-offs to overcome objections), the gradual abandonment of realization in the US and conclude by considering distributional fairness under a realization-based

BIOGRAPHY

2017 Marketing ShootHenry Ordower is Professor of Law at the Center for International and Comparative Law at Saint Louis University. His recent research has focussed on issues of tax distribution and the growing disparity of wealth between individuals. In addition to his academic research and teaching, he runs a tax consulting practice and he provides expert testimony in complex tax litigation matters. An avid traveller and linguist, Professor Ordower has visited more than 100 countries.

“The new politics of global tax governance: What the past tells us about the future of international taxation” by Rasmus Christensen

 

This week we have an exciting talk by Rasmus Christensen on the politics of tax governance. We sincerely hope you will join us online on Thursday, 18th of June at 15:00-16:00 (British Summer Time). See our “Meetings” page for updated talks, links and previous topics covered. Please e-mail May at hmh46@cam.ac.uk or Guy at gevm2@cam.ac.uk for link asssistance.

This week’s talk can also be found on talks.cam along with an assortment of university-wide talks: http://www.talks.cam.ac.uk/talk/index/149563

“The new politics of global tax governance: What the past tells us about the future of international taxation”

Abstract

The past decade has revealed that systemic change is underway in the foundations of global tax politics, entangled with changes in global politics at large. States are more aggressive in cracking down on tax havens, and cooperating more effectively through multilateralism. Global power is shifting towards large emerging markets. Media attention and focus on inequality has fueled unprecedented discontent with international tax rules. And the digital economy is ripping historical alliances apart, creating new battles lines in global tax negotiations.

Description: Based on a recently published paper (with Martin Hearson), in this talk I set out how these global trends indicate a radical departure from the stable past of international tax, and how they are shaping ongoing discussions to change the system, at the OECD and beyond. As the international tax system stands at a historical crossroads, finding new balances – on inclusiveness, coherence, and legitimacy – will be key to developing a sustainable international tax system for the future.

Rasmus Corlin Christensen , maj 2017Rasmus Corlin Christensen is a political economist at Copenhagen Business School and a research associate at the International Centre for Tax and Development. His research focuses on processes of change in the politics and professional practice of international taxation. He has been recognized as an influential individual in the global tax world, being named to the International Tax Review´s “Global Tax 50” in 2017. You can find him at phdskat.org or @phdskat

“The Village Of Billionaires: An Examination Of The Paradox Of Relative Poverty” By Dr. Alexis Brassey and Professor Henry Ordower

The Cambridge Tax Discussion Group is a PhD student run meeting group with weekly discussions of wide-ranging tax-related topics. We have been meeting weekly during term-time since 2015 and hope to continue with engaging topics that are tax or tangentially tax-related topics! We are friendly, open to all and interdisciplinary. We sincerely hope you will join us on our next online meeting which will be on Thursday 11 June at 17:00 (British Summer Time). See our “Meetings” page for updated talks, links and previous topics covered.

This week’s talk can also be found on talks.cam along with an assortment of university-wide talks: http://www.talks.cam.ac.uk/talk/index/148804

This week, Dr Alexis Brassey, from the University of Cambridge, and Professor Henry Ordower, from Saint Louis University, will be discussing tax fairness in an international context, under the title “The Village Of Billionaires: An Examination Of The Paradox Of Relative Poverty”. Further details are below.

We look forward to seeing you on Thursday.

May Hen-Smith and Guy Mulley Co-convenors, Cambridge Tax Discussion Group

ABSTRACT

Tax justice and principles underpinning the international tax regime are in vogue. The idea that companies and individuals need to pay their “fair share”, not just in the domestic sense but also the international sense, is now a mainstream position. This paper explores the problems relating to what might constitute a “fair share” by setting out what is meant when this expression is used. A reasonable assumption is to consider taxation as the means by which the state funds public services and in some jurisdictions, contributes to greater equality within society. Those goals, however, give rise to competing claims. This is especially the case when considering international tax challenges, for example those faced by the OECD ’s 2019 work plan. This paper, in examining competing claims for tax revenues, considers the specic categories of relative as opposed to absolute poverty. If one accepts that taxation is to fund public services, the question arises, at least in international tax, which jurisdiction’s public services? If the motivation for raising tax is to tackle inequality, what has the greater claim, international inequality or national inequality? It is in answering these questions that we need to address the issue of which is more pressing, relative as opposed to absolute poverty? The contention in this paper is that there is a far stronger moral claim for tax to be redistributed on an international basis rather than on a nation basis. Further, this paper contends that purported moral claims which seek to address inequality within national borders are merely political demands made to further the economic interests of particular groups who themselves are amongst the most economically privileged, when viewed on an international spectrum. The article is designed for those progressive or communitarians who strongly advocate for redistribution within national boundaries. It is not designed to appeal to those of a libertarian perspective.

BIOGRAPHIES

alexis-2_cutout_do-not-save-copy-485x302Dr Alexis Brassey is a Solicitor and a Visiting Fellow of the Centre for Tax Law at the University of Cambridge. He holds an MA in Philosophy, an LLM in Corporate Law and a PhD in Psychology, as well as a PhD in Law. His research in Tax Law encompasses tax avoidance, constitutional law, tax fairness and jurisprudence. He has also worked in investment banking.

2017 Marketing ShootHenry Ordower is Professor of Law at the Center for International and Comparative Law at Saint Louis University. His recent research has focussed on issues of tax distribution and the growing disparity of wealth between individuals. In addition to his academic research and teaching, he runs a tax consulting practice and he provides expert testimony in complex tax litigation matters. An avid traveller and linguist, Professor Ordower has visited more than 100 countries.

“How Pillar 1 redraws the global tax base map: a look at the march towards consensus” By Allison Christians

This week we are leading with another excellent topic with leading tax expert, Professor Allison Christians, on the OECD’s Base Erosion and Profit Shifting, Pillar 1 project. This term, the Cambridge Tax Discussion Group will be going digital due to University closures. The online talk which is open to all, will take place Thursday June 4th at 9:00 EDT (2pm BST). E-mail hmh46@cam.ac.uk or gevm2@cam.ac.uk for link or find additional information on Cam Talks here: http://www.talks.cam.ac.uk/talk/index/148267

AC+May+2020

Abstract: The OECD continues its mandate to reallocate the global profits of certain digital economy firms for tax purposes. Combining the OECD’s own impact analysis with independent research, it is now possible to draw a very rough sketch of how Pillar 1 would accomplish this, and therefore to see how firms and nations are likely to fare under the OECD Secretariat’s preferred approach. Even so, it is not clear that there will be enough time for all Inclusive Framework members to move from rough sketch to policy certainty in time to make decisions about whether the Secretariat’s approach constitutes a mutually beneficial consensus. In this presentation I will walk through the technical specs of Pillar 1 with an example to demonstrate its policy implication

Refer to paper here

Biography

Allison Christians is the H. Heward Stikeman Chair in the Law of Taxation at the McGill University Faculty of Law where she teaches and writes on national, comparative, and international tax law and policy. She focuses especially on the relationship between taxation and economic development, the role of government and non-government institutions and actors in the creation of tax policy norms, and the intersection of taxation and human rights. She has written numerous scholarly articles, essays, and book chapters, as well as essays, columns, and articles in professional journals and has been named one of the “Global Tax 50” most influential individuals in international taxation. Recent research focuses on evolving international norms of tax cooperation and competition; the relationship between tax and sustainable development; the impact of technology on tax policy, and evolving conceptions of rights in taxation. Professor Christians also engages on topics of tax law and policy via her website http://www.allisonchristians.com and on twitter @profchristians.

“What Does the Incoherence of the Efficiency Concept Mean for Law?” By Neil Buchanan

This term, the Cambridge Tax Discussion Group will be going digital due to University closures. We have an exciting talk by professor Neil Buchanan which will take place Thursday May 28th at 12:00 EDT (5pm BST).

To attend, please e-mail May (hmh46@cam.ac.uk) or Guy (gevm2@cam.ac.uk) to obtain the link to our discussion group for tomorrow or to be added to our weekly mailing list. All are welcome!

Buchanan_Neil_500x500
Abstract

Despite its ubiquity in economics and legal theory, the notion of economic efficiency is incoherent and thus does not provide an objective guide to policy or analysis.  I am in the early stages of planning a book project in which I will write the lead chapter explaining why the efficiency concept is misunderstood and thus misused, and in the remaining chapters other scholars will explain how their fields of law should change once we stop treating efficiency as a meaningful concept.  In this talk, I will explain in brief why efficiency has no fixed meaning and then explore with all of you what the other chapters of my planned book might cover (and who might write those chapters).  Interested participants who want to read something in advance can focus on Parts II and V of this forthcoming article.

Professor Neil H. Buchanan is the James J. Freeland Eminent Scholar Chair in Taxation and UF Law’s Director of Global Scholarly Initiatives.  He frequently lectures and serves as a visiting scholar at universities around the world, most recently at Cambridge University and the University of Vienna, among others.  He is nationally and internationally known for his groundbreaking work on intergenerational justice, retirement security, constitutional issues in government budgeting, and a fundamental critique of orthodox economic theory. Professor Buchanan graduated from Vassar College and received his J.D. from the University of Michigan, A.M. and Ph.D. degrees in Economics from Harvard University, and a Ph.D. in Laws from Monash University in Australia.  He clerked on the United States Court of Appeals for the 10th Circuit.  Professor Buchanan teaches both J.D. and LL.M. students at UF Levin College of Law.

 

 

For further information, please go to:https://www.law.ufl.edu/faculty/neil-buchanan

The Amsterdam Compensation case of the taxation of returning Holocaust survivors by Cornel Marian

Our final presentation of the term was led by Cornel Marian, visiting researcher at the Lauterpacht Centre for International Law. Below is a brief description of the presentation for those of you who could not attend. 

Pic Announcement.jpgCornel Marian is a senior legal counsel, based in Stockholm (Sweden). His focus is on general corporate matters and disputes, including compliance and taxation matters. He is currently completing his PhD at the University of Frankfurt after obtaining his law degrees in the United States (J.D.) and Sweden (juristexamen)

“The Amsterdam Compensation case of the taxation of returning Holocaust survivors”

The Amsterdam compensation case follows the story of the 217 unveiled letters from returning Holocaust survivors who pleaded with the city to waive the delinquent payments arising from the time they were held in concentration camps. In 1947, the City of Amsterdam sought the input from the enforcement of authorities and a separate committee that both recommended the enforcement of the delinquent fees as it would create a faulty precedent. The final decision enforced these fees and was never appealed. The formal decision (Municipality Decision No. 518) addressed the issue in terms of the occupation of territory during the rule of a foreign power, which did not negate the obligation for the lessee to pay its dues on the property. The presentation discussed the findings, including the discrepancy of the nature of the fees and how they were commonly reported as ‘taxes’ in the media. Finally, the presentation addressed the silver lining of this entire story. In 2017, the city conducted a detailed report that prompted the compensation of ca. 10 MEUR to the surviving victims.

DSC_0737

 

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A Portrait of Alibaba – By Fa-Alpha Chen

Last week, Fa-Alpha Chen a PhD student reading law at the University of Cambridge, presented an overview of Alibaba. Below is a briefing of some of his discussion:

A Portrait of Alibaba – By Fa-Alpha Chen

This topic will give a brief introduction of Alibaba in the dimensions of corporate governance and IP.

  1. The business units of Alibaba

Most people understand Alibaba as a platform involving E-commerce. However, Alibaba has already expanded its business in quite broad fields, covering digital finance (Alipay), cloud computing and big data (Alibaba Cloud), culture and entertainment (Youku, UC),Travel (Navi: Autonavi; Bicycle sharing: Hellobike),item delivery (Cainiao), etc.

Some of the business units were incubated from E-commerce, e.g. Alipay and Alibaba Cloud, while some were the outcome of acquisition of other companies, e.g. Youku and Autonavi, both of which were previously US-listed companies before going private to be private subsidiaries of Alibaba.

  1. Alibaba Partnership

Even though Alibaba adopts the one-share-one-vote principle, the real controller of this company is not the largest shareholder. Instead, the Alibaba Partners as a whole is the actual controller.

When going public on NYSE, Alibaba (Stock Symbol: BABA) designed a unique framework above the board, namely, Alibaba Partnership, which in fact decides the operation of Alibaba. This partnership enjoys two special rights: one is the exclusive right to nominate directors, while the other relates to the allocation of bonus.

According to the articles of association, even though the director nominees should be appointed at the general meeting of shareholders, in case these nominees are denied by the general meeting of shareholders or leave the board after election regardless of the reason, Alibaba Partnership enjoys the right to appoint an interim director who serves until the following annual general meeting of shareholders. There is no limitation of such an appointment in terms of frequency, which means that as long as the nominees chosen by Alibaba Partnership are not elected by the general meeting of shareholders, this Partnership could appoint interim directors constantly. Such a stipulation results in an effect that Alibaba Partnership has the actual power to nominate directors, even though in the name of nominees or interim directors. Furthermore, pursuant to the articles, whenever the directors nominated (including the interim directors appointed) by Alibaba Partnership take up less than a majority of the total directors on board, Alibaba Partnership is empowered to appoint additional directors to the board at its sole discretion without any additional shareholder approval to ensure that the directors nominated or appointed by Alibaba Partnership could comprise a simple majority of the board. According to BABA’s recent annual report, there are eleven directors on the board currently, of which five are Alibaba Partnership nominees. Consequently, this Partnership is entitled to appoint two additional directors to increase its nominees to seven, occupying a simple majority of the thirteen directors in total.

Alibaba Partnership also determines the allocation of corporate bonus. The allocation of bonus,prima facie, is decided by the compensation committee according to its articles of association. However, the compensation committee is established by the board of directors. Since Alibaba Partnership controls at least a simple majority of the directors as discussed above, it determines the de facto allocation of bonus.

Several other stipulations in the articles of association make Alibaba Partnership unbreakable. Firstly, the election of partners is the own business of this Partnership. The number of partners is dynamic and new partners are elected annually. The election of new partners requires the approval of at least 75% of all the partners without the participation of shareholders. Secondly, Alibaba Partnership’s nomination rights and related provisions of the articles of association cannot be changed unless upon 95% of voting rights. Due to the agreement between Alibaba Partnership and the largest two shareholders of BABA named Softbank and Yahoo which hold approximately 30% and 15% of shares respectively, as well as the fact that the co-founders Jack Ma and Joseph C. Tsai jointly hold about 8% of the total shares, it is impossible for outsiders to collect 95% of voting rights to abolish this Partnership per seas well as its exclusive directors nomination right. Lastly, there is a bottom clause that where any change of control, merger or sale of BABA, Alibaba Partnership should not be transferred or otherwise delegated or given a proxy to any third-party with respect to the right to nominate directors.

  1. IP Related Facet

Each year, Alibaba spends a lot of money to import movies, TV drama, music from overseas producers, e.g. Sherlock 4 from BBC. Since it relates to cross-border IP licence, the relevant protection via litigation against infringement is, in practice, a difficult problem in China.

Firstly, who has the right to initiate litigation? IP license could be conducted on either an exclusive or non-exclusive basis. The right to initiate and deal with litigation is another right other than Intellectual Property Rights. In order for Alibaba to file litigation, it should get relevant authorisation from overseas producers. The litigation could be filed in Alibaba’s own name or on behalf of both itself and the foreign producer, depending on the contract terms.

Secondly, all the documents (e.g. Letter of Authorisation) should be legalised through notarisation, e.g. A notary issues a certificate to certify that the Letter of Authorisation  between BBC and Alibaba is signed on his face and the signature is true. According to the Articles of Association of BBC, the person who signed the Letter of Authorisation has the right to do so. The Ministry of Justice needs to certify that the notary is qualified. Chinese authority needs to certify the certificate issued by the Ministry of Justice of the UK. All the documents need to be translated in Chinese by a qualified translator.

Lastly, the litigation will be quite time-consuming, and it is normal for such a litigation to last for 2-3 years to receive a final ruling from the court. Moreover, the compensation for the plaintiff is very low.