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The OECD Principles state "Corporate governance requirements and practices are typically influenced by an array of legal domains, such as company law, securities regulation, accounting and auditing standards, insolvency law, contract law, labor law and tax law. Under these circumstances, there is a risk that the variety of legal influences may cause unintentional overlaps and even conflicts, which may frustrate the ability to pursue key corporate governance objectives. It is important that policy-makers are aware of this risk and take measures to limit it."1 [ABSTRACT FROM AUTHOR]

Tax advisors have been figuring out ways to reduce taxpayers' tax liability forever. In Ancient Rome, farmers of small farms would obtain relief from taxes by transferring their lands to the nearest military chief or large landowner and rid themselves of tax obligations. The peasant farmer was better off. Tied to the land anyway, he could live in the same house, farm the same land, and use the same animals. Only the tax picture had changed; the Roman tax man would now have to deal with the small farmer's master, who had the wherewithal to handle the Roman tax man.1 [ABSTRACT FROM AUTHOR]

Very early in his eminently clear and thought provoking paper, the author notes that tax practitioners are largely self-governing in the U.S.; a system which has served the U.S. well. Similar remarks have been made in the U.K. by Her Majesty's Revenue & Customs and government Ministers. Although international experience varies between regulated environments such as that in Germany and wholly unregulated states such as The Netherlands it is fair to say that the generally accepted parameters of professional behavior and the quality of tax education is determined in every case by the profession itself. There are therefore limits as to what can be achieved through regulation and the ultimate prize is to win the hearts and minds of the overwhelming majority of tax practitioners. [ABSTRACT FROM AUTHOR]

For a full understanding, Circular 230 has to be viewed in the context of the U.S. civil penalties system and its good faith exemption. Because this is where the problems that Circular 230 attempts to address with its advice standards arose. [ABSTRACT FROM AUTHOR]

Practitioners1 who appear before the Internal Revenue Service (IRS) are subject to the practice standards published in Treasury Department Circular 230.2 These standards cover "matters connected with a presentation to the Internal Revenue Service ... relating to a taxpayer's rights, privileges, or liabilities under laws or regulations administered by the Internal Revenue Service."3 The Circular 230 standards apply to a broad range of practitioner conduct, including matters such as practitioner due diligence, conflicts of interest, fees, and the provision of tax advice. Circular 230 also contains sanction provisions that apply when the practice standards are violated and procedural rules governing disciplinary proceedings. The rules set forth in Circular 230 are administered and enforced by the Director of the Office of Professional Responsibility. [ABSTRACT FROM AUTHOR]

Professor Shaviro's excellent and thought-provoking paper points, in my view, to a clear conclusion for other countries contemplating introducing a scheme of tax shelter disclosures. The conclusion is that the U.S. scheme has grown exceptionally out of circumstances in that country, and that it would be unwise, if not unlawful in some countries, to try to replant that scheme outside the United States. Put more strongly: tax shelter disclosure is an unwelcome export from the United States, and should be sent back where it came from as quickly as possible. [ABSTRACT FROM AUTHOR]

Historians and sociologists frequently debate American exceptionalism, or the "view that America can be understood only by appreciating its singular origins and evolution."1 In some areas, ranging from the death penalty2 to the Bush Administration's embrace of torture and preemptive war, American exceptionalism has been emergent in recent years rather than a historical constant. In other areas, if the U.S. initially looks different from other economically advanced countries, it may simply have traveled down a common pathway first, without actually being exceptional at all. [ABSTRACT FROM AUTHOR]

Schön opened the discussion by stressing the fact that the problematic cases of corporate social responsibility were not cases in which the company showing corporate social responsibility benefits from positive reputation effects or other effects affecting positively its long-term profitability. The problematic cases were the ones in which there was no consideration accruing to the company in return for its display of corporate social responsibility. Other commentators agreed and one pointed out that the expression should not offer managers an excuse to do things which they wanted to do anyway but could otherwise not justify. Schön continued by enumerating three possibilities of dealing with these cases. Firstly, one could assume an obligation of the board to minimize tax. Secondly, one could assume that the board is not bound to be a "happy taxpayer" who refrains from minimizing tax but that it may act this way. Thirdly, one could assume that the ethical argument not to engage in the minimization of tax is so strong that the board is quasi-legally obliged to refrain from it. One participant asked whether the obligation to maximize taxes should not be added as the fourth alternative. He explained that by posing this provocative question he wanted to emphasize the difficulty of drawing the line between legitimate and unwanted aggressive tax planning. Another participant suggested replacing the expression "happy taxpayer" which was used during one of the presentations with "responsible taxpayer" which he considered to be more appropriate. [ABSTRACT FROM AUTHOR]

Is the board responsible for tax? This question might have caused interesting discussions among board members a few years ago. Statements such as "It's a CFO issue" and "tax is under control" might quite possibly have been among the responses. Taxation gives rise to complex, multi-faceted problems in every country in the world, that can only be dealt with by tax specialists. This argument used to be met with some sympathy, especially by members of the public who were familiar with the complexities of filing their own income tax returns every year. But the question remained: how can an issue that might encourage a corporate reorganization or influence the payment of dividends to shareholders, or which might affect a merger or take-over, possibly stay out of the boardroom? [ABSTRACT FROM AUTHOR]

Professor Avi-Yonah addresses two questions: "First, from the perspective of the corporation, should the corporation cooperate and pay the corporate tax, or should it engage in ‘strategic' tax behavior designed to minimize or eliminate its corporate tax burden? Second, from the perspective of the state, should the state use the corporate tax just to raise revenue, or should it also try to use it as a regulatory tool to steer corporate behavior in directions that it deems beneficial to society?" This comment is only directed towards the first question — which really is an important and highly topical question in global commercial environment.1 [ABSTRACT FROM AUTHOR]

Should corporations pay tax? [ABSTRACT FROM AUTHOR]

Commenting on the British and the American system of corporate governance is a challenging task from a German perspective. As Prof. Bank and Prof. Cheffins outlined, the United Kingdom's as well as the United States' economies are dominated by public companies with a broad shareholder structure. However, the patterns of ownership and control vary around the world. Germany, for instance, can be seen as one of the countries where a different system emerged; even though the starting positions had substantial similarities within the 19th century [ABSTRACT FROM AUTHOR]

This paper, by Steven Bank and Brian Cheffins, brings out the impact tax has on pattern of corporate ownership and control. It shows that taxes played an important role in the development of ownership in Britain and in the United States. [ABSTRACT FROM AUTHOR]

While generally the impact tax has on patterns of corporate ownership and control has received little attention, this paper argues that tax is potentially an important determinant of ownership patterns in large companies. The paper focuses mainly on historical developments in Britain, where an "outsider/arm's-length" system of corporate governance began to take shape in the years leading up to World War I and became fully entrenched by the end of the 1970s. Taxes imposed on corporate profits, taxation of managerial and investment income and inheritance taxes do much to explain why during this period blockholders sought to exit and why there was sufficient demand for shares among investors to permit ownership to separate from control. The paper also discusses developments in the United States and argues that tax helped to foster the separation of ownership and control that reportedly occurred in larger American companies after World War I. [ABSTRACT FROM AUTHOR]

Without doubt, taxation is one of the most powerful motivational forces in corporate life. Tax consequences are important determinants of capital structure, dividend payments and the arrangement of groups of companies, amongst many other things. In view of this, it seems quite surprising that codes of "good" corporate governance promulgated in many European countries during the past years typically do not mention taxation explicitly. [ABSTRACT FROM AUTHOR]

In the last years, economic areas have constantly moved together. As a consequence, companies, especially the big players in the markets, have headed towards using the international capital markets and to get access to stock exchanges in different jurisdictions. As a prerequisite, the prevailing international accounting standards, be it IFRS and/or U.S. GAAP, have to be followed. On the other side, as tax legislation is still "local" and not harmonized, the companies always have to look for getting best tax environment they can for carrying on their businesses. The following article tries to summarize shortly the influence of internationalization on taxation and accounting in general and with regard to transparency of tax effects in the international accounts in particular. As a consequence of more transparency, it is important to be aware of possibilities and boundaries of existing influences on the tax rate as well and to clearly define a framework for tax planning, which not only is in line with legal requirements, but as well with ethical standards, as each individual company cannot afford loosing its good reputation. [ABSTRACT FROM AUTHOR]

In the USA there have been calls for greater conformity between the rules producing tax accounts and those used for financial reporting purposes. A number of benefits are claimed for this so-called "book-tax conformity", including reduced compliance costs and better opportunities for monitoring. In Europe, the debate around use of the financial accounts for tax purposes has arisen from a different conceptual starting point as well as differences in surrounding circumstances. Linkage between tax and financial accounts is common in Europe, although it takes varying forms. This does not result in complete book-tax conformity, however, and recent developments in accounting may be increasing divergence rather than reducing it. Despite the strong arguments in favor of conformity, there are also good reasons for some divergences, meaning that the most likely outcome in any system, whatever the starting point, is partial convergence. The problem with a hybrid outcome of this kind is that, at the point of divergence, there can be conceptual confusion and difficulties in integrating and managing two conceptually very different rule systems. Clarity of the relationship between the rules and improved accounting disclosure requirements might be more important than convergence, and might be achieved with less distortion to either tax or financial accounting. The current U.K. position is used to illustrate these points. [ABSTRACT FROM AUTHOR]

The commentator opening the first round of discussion of the morning session stated that the optimistic statements by Owens and Hartnett on a cooperation between taxpayers and administrations sounded appealing but that conditions in the United States might be less favorable to such an approach. The larger size of the country might render reputational sanctions for overly aggressive tax planning less efficient, and the lower budget of the IRS in relation to its duties allowed for fewer audits — so he assumed. Furthermore, differences in cultures might have an influence. Owens acknowledged that the fact of the U.S. being the economic center of the developed countries and innovation leader might have some impacts on tax behavior. With regards to the resources of tax administrations he emphasized that comparisons over the past five years showed that many tax administrations had to some degree shifted their resources from audit to service activities. He maintained that both good service and effective enforcement were prerequisites for good compliance and that the quality of administrative resources was at least as important as the mere quantity. Hartnett added that administrations today also focused to a greater extent on managing the risk of avoidance, thus creating higher risks of detection for aggressive tax shelters and causing more difficulties if such shelters fail. [ABSTRACT FROM AUTHOR]

The analysis of the basic legal framework where the interaction of tax and corporate governance takes place has to commence with the question of whether there exists any difference between the economic perspective presented in the preceding contribution by Mihir Desai and Dhammika Dharmapala1 and the legal perspective which is the topic of this chapter. In the old days, the distinction has been quite clear: the legal analysis would look at the law as it stands, the statutory and judge-made rules in the field of taxation, company law and financial markets from a normative standpoint, while the economic analysis would focus on the effects of such rules in mathematical models and the real world, trying to describe their impact on efficiency and distribution. Over the years, this distinction has become considerably blurred. Legal scholars employ the tools of economic analysis of law, capital market theory and information economics in corporate affairs2 as well as the findings of public finance and public choice in tax matters3 to discuss the current state of their field while economists use their theoretical and empirical findings in order to bring forward normative recommendations for legislation in different areas of the law.4 Lawyers still feel on their own when they engage in the interpretation and application of existing rules, but they have realized that they have to share the task of public policy recommendations with their economic brethren. It makes no sense any more to separate the theoretical, empirical and normative aspects of tax and corporate governance in this respect. [ABSTRACT FROM AUTHOR]

How do the tax system and corporate governance arrangements interact? This chapter begins by reviewing an emerging literature that explores how agency problems create such interactions and provides evidence on their importance. This literature has neglected how taxation can interact with the various mechanisms that have arisen to ameliorate the corporate governance problem, such as concentrated ownership, accounting and information systems, high-powered incentives, financing choices, payout policy, and the market for corporate control. The remainder of the chapter outlines potentially fruitful areas for future research into how these mechanisms may respond to the tax system. [ABSTRACT FROM AUTHOR]

Increasingly, the OECD and its member governments have recognized the synergy between macroeconomic and structural policies in achieving fundamental policy goals. Corporate governance is one key element in improving economic efficiency and growth as well as enhancing investor confidence. Corporate governance involves a set of relationships between a company's management, its board, its shareholders and other stakeholders. [ABSTRACT FROM AUTHOR]

When thirty five national tax Commissioners from member countries of the OECD's Forum on Tax Administration met in September 2006, two things were on their minds: Organizational reforms to develop more effective tax administration, andCountering non-compliance in an international context. And in relation to the second of these the Commissioners focused principally on: Improved use of risk management;Encouraging top management and audit committees of large enterprises to take a greater interest in, and personal responsibility for, tax strategies;Improving transfer pricing guidelines and ensuring their consistent application;Examining the role of tax intermediaries — law and accounting firms, financial institutions, etc — in relation to non-compliance and the promotion of unacceptable tax minimization arrangements; andExpanding the OECD's 2004 Corporate Governance guidelines to give greater attention to the linkage between tax and good governance. Not surprisingly, these were also the themes discussed most when the Commissioners of the four countries which set up the Joint International Tax Shelter Information Centre (JITSIC) met in Canberra, Australia just recently. The Commissioners meeting there felt that JITSIC had been very effective in its first two years but an increased focus on risk management, better international exchange of information and further engagement with corporates to make tax a keystone of corporate responsibility statements were seen as essential steps to ensuring improved compliance. [ABSTRACT FROM AUTHOR]

The first part of the discussion focused on the actual features of the U.S. tax shelter disclosure rules. In terms of context it was noted that the attorney-client-privilege only applied to communication intended as confidential, which by nature is not the case for shelter protection memos. In the United States shelter protection opinions do not generally protect against penalties but merely constitute an aspect that has to be taken into account. One participant noted that there had been big cases in which opinions did not provide protection against penalties. [ABSTRACT FROM AUTHOR]

The U.S. income and corporate tax system is procedurally based on self-assessment — as far as I can see: from its beginning in 1913. The taxpayers are obliged to compute and assess the owed tax against themselves. Their responsibility covers not only the tax-relevant facts, but also the application of law. Tax procedure including tax collection seems to be extensively socialized, like an act of self-regulation by society. [ABSTRACT FROM AUTHOR]

The first speaker referred, firstly, to the aspect of book-tax conformity and defended this idea by pointing to the following aspects: the link to the tax books could have a positive effect for the results of the financial accounts as well, because it reduces arbitrariness with respect to tax-profit. He pointed to the different levels of arbitrariness in countries without conformity (such as the U.S.) and with conformity (such as in Europe). Secondly he supported the comment of Baumgärtel with respect to contingency reserves: a serious step-by-step report in the financial accounts on contingency reserves would mean a dramatic change in reporting standards and should be discussed. [ABSTRACT FROM AUTHOR]