Showing papers in "Berkeley Journal of International Law in 1991"

Comments on Switzerland's Insider Trading, Money Laundering, and Banking Secrecy Laws

Abstract: The new Insider Bill of Switzerland' (\"Insider Bill\" or \"Bill\") was drafted in May of 1985. It entered into force on July 1, 1988, and was accepted by our Parliament basically in the form in which it was proposed. Until today, about two years later, the Swiss authorities have had only two cases interpreting the Bill. However, various international insider trading actions have arisen and have been dealt with under the auspices of our Insider Bill. Moreover, while we have had only two Swiss cases dealing with the Bill, experts have not failed to think and write about it. It is thus important that I discuss the Swiss legislator's will and expose to this international audience the basis of our two year-old Insider Bill. I discuss the Swiss Bill not merely because I am Swiss. The real reasons are that (1) the Swiss Bill has become a model for European legislation-you will find the same definitions, you will find the same scope in the Council of Europe's Convention; and (2) our Swiss law is very often applied because many U.S. cases involve Swiss banks, and then Swiss law will apply. (Fortunately we can apply it because we now have a law). This does not mean that Swiss banks are less serious than other banks about insider trading, but about

International Commerce through a Foreign Subsidiary: Navigating the Anti-Haven Tax Shoals of the Internal Revenue Code

Abstract: Traditionally, one of the advantages of doing business abroad through a foreign subsidiary has been the possibility of using tax havens to minimize foreign income taxes and, at the same time, defer the offshore profits for U.S. income tax purposes. As long as the foreign earnings that accumulated in the tax haven were not remitted to the United States, the U.S. tax bill was delayed. There are several Internal Revenue Code provisions, however, that curb or, in some cases, totally eliminate deferral benefits sought in this manner. Among these are the formidable Subpart F rules for controlled foreign corporations and the passive foreign investment company provisions. Nonetheless, with careful tax planning, foreign subsidiaries that engage in certain types of offshore business activities, notably manufacturing, can still navigate around these anti-haven tax shoals and enjoy substantial deferral benefits. Other foreign subsidiaries, in contrast to traditional wisdom, may set their course directly toward these anti-haven tax shoals in order to secure significant foreign tax credits. Due to the reduced corporate rates introduced by the Tax Reform Act of 1986, most U.S. multinational companies today find themselves in excess tax credit positions.' Accordingly, any foreign taxes they pay above the U.S. statutory rate of 34% are not allowed as a credit against their U.S. tax liability, a fact that directly reduces the company's bottom line, unless it can utilize these "excess" credits during the statutory carryover period. In many cases, companies can capture tax advantages by shifting some overseas operations from high-tax jurisdictions to low-tax jurisdictions. Shifting operations

Japan and Korea: Contrasts and Comparisons in Regulatory Policies of Cooperative Growth Economics

Abstract: The economic development and regulatory policies of Japan and the Republic of Korea (\"Korea\") have provided the United States and its business firms with a number of complex political and commercial challenges in recent years. The economic success attained by Japan and Korea is impressive and well-publicized. Moreover, the two countries share several common ideological traits, and each appears to have adopted a unique set of policies to facilitate the export of goods and services by their domestic firms into the United States, as well as into export markets where American products have been losing, their historical competitiveness. This article explores certain aspects of Japanese and Korean regulatory policies that have contributed to the rapid economic growth in both nations since the 1950s. The economic growth in each nation since the end of their respective post-war periods has been staggering. Japan's gross national product (\"GNP\") rose, on average, at a rate of 10.5% per annum from 1950-73, 3.3% per annum from 1973-78,' and 4.1% per annum from 1978-87.2 Further, the Japanese economy grew at its fastest annual rate in fifteen years in 1988, with real GNP increasing by 5.7% as opposed to 4.5% in 1987. 3 As a result,

Unsatisfactory Response to the International Problem of Thin Capitalization: Can Regulations Save the Earnings Stripping Provision, An

Abstract: The Internal Revenue Code (the \"Code\") contains a bias toward financing a corporation with debt instead of equity. The Code subjects corporate distributions on equity to double taxation. The Code first taxes the corporation for the net income it earns.1 It then taxes the equity-holder for receipt of a dividend from the corporation.2 On the other hand, the Code imposes a tax on corporate distributions to debtholders only once. The debtholder pays tax on the inteiest income he receives, but the corporation may deduct the payment as an interest expense. 3 For this reason, an equityholder has the incentive to characterize additional contributions to a corporation as debt in order to minimize its tax burden.4 This tax incentive creates a problem as corporations are encouraged to finance their capital structure with excessive debt. Corporations with a