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Several IRS and Treasury Department initiatives for reforming the United States' system of international taxation are reviewed.

Issues discussed at the 56th International Fiscal Association Congress are examined. Many of these issues centered around the larger issues of how the form of transactions, determined by the taxpayers, in tax law, should relate to the substance, the actual purpose of the transaction.

Issues related to comments made by US officials at a meeting of the International Fiscal Association on Feb 22 and 23, 2001, in Orlando, FL, are examined. Topics include plans to improve the IRS auditing and competent authority process, the IRS 2001 business plan, efforts to eliminate harmful international tax competition, and the replacement of the US foreign sales corporation tax regime with the Extraterritorial Income Exclusion Act of 2000.

Issues related to the research tax credit are examined, focusing on comments made at a February 2001 conference sponsored by the Tax Council Policy Institute. Topics include rising projected costs of making the credit permanent and controversy regarding standards under which the credit can be used.

Issues related to the US repeal of the foreign sales tax regime under pressure from the World Trade Organization (WTO) are examined, focusing on comments by a US official that the repeal does not mean the US is adopting a policy of territoriality. Topics include specifics of the "ET (extraterritorial) Exclusion Act" pertaining to tax subsidies to which the WTO objected and forthcoming regulatory guidance for US taxpayers.

Issues related to the importance of harmonization of tax policy among the world's countries in the new information-based economy are examined, focusing on issues discussed at a December 2000 meeting of the George Washington University Internatioanl Tax Institute. Topics include the possibility that such harmonization may reduce tax rates, IRS plans to make its pilot prefiling agreement (PFA) program permanent, the relationship between the PFA program and freedom of information, and developments in US tax treaties.

Issues related to the Organization for Economic Cooperation and Development's tax policy regarding electronic commerce are examined, focusing on its efforts to gather consensus among member and non-member countries and on a recent meeting Mumbai, India. Topics include 26 electronic commerce transactions identified for tax purposes, downloading of digital products, and the difference between electronic products and services.

Issues related to the July 2000 meeting of the Inter-American Center of Tax Administration in Wash DC are examined, focusing on the impact technology has on tax administration and the need to prevent tax havens from eroding the tax base of countries.

Issues related to the international aspects of harmful tax practices are examined, focusing on a report issued by the Organization for Economic Cooperation and Development. Topics include a list of noncooperative tax havens and a list of harmful tax practices of OECD member states.

Issues related to taxation international trade are examined, focusing on topics discussed at the January 2000 ABA Tax Section Meeting in San Diego, CA. Topics include litigation issues for National Westminster PLC regarding interest deductions; criticisms of the foreign sales corporation tax policy; a report on the confidentiality of advance pricing agreements; litigation over cross-border transactions for Compaq Computer; and US tax treaties with Chile, Venezuela, Luxembourg, and Japan.

Issues discussed at the December 1999 12th Annual Institute on Current Issues in International Taxation are examined. Topics include tax arbitrage, inconsistencies in international tax systems, IRS plans to adapt to globalization, advance pricing agreements, inability for treaties to prevent double taxation, subpart F, litigation regarding the foreign sales corporation tax regime, and electronic commerce.

Participants at the ABA Tax Section meeting in August 1999, in Atlanta, GA, discussed the implications of regulations regarding foreign qualified intermediaries (QIs) and the July Court of Federal Claims decision in National Westminster Bank v. United States. Foreign QIs must obtain waivers of nondisclosure law from US payees under IRC section 1441. The Court of Federal Claims decision concerned deductible interest for foreign banks, under IRC section 882, in the US but may have implications for foreign manufacturers of goods who sell products in the US. Taxable income of such foreign manufacturers is subject to IRC section 863(b).

The United States and Canada reformed the tax systems in their countries in 1998 and 1999 and both announced plans to create oversight boards for their respective agencies, the IRS and Revenue Canada. Qualifications and duties of US board members are more specific than Canadian members. Boards in both countries aim to redress public grievances. The US board is meant to protect individual taxpayer rights and the Canadian Board is meant to give more power to provincial governments.