Joan C. Arnold Quoted in Best Lawyers Business Edition Article, 'Mind Over Matter, but Always, Substance Over Form'
Joan C. Arnold, a partner with Pepper Hamilton, was quoted in the Winter 2015 Best Lawyers Business Edition article, "Mind Over Matter, but Always, Substance Over Form."
To begin with, "By definition, there is no such thing as international tax," says Joan C. Arnold, partner at Pepper Hamilton, Philadelphia. "There is just the taxation of each government around the world." Right out of the gate, it becomes obvious that there are particular challenges to working strictly in theory.
The global economy has also buttressed executives' abilities to ditch the bricks and mortar. "The mobile nature of executives and the mobile nature of functions have put a lot of stress on our historic tax concepts," Arnold says.
Public opinion and events have ripple effects, too, such as "the banking crisis in 2008-2009...[when] taxpayers became more attuned to and concerned with the issue of corporations being able to minimize their taxes," Liebman says. And the negative spotlight influenced other countries, including "a lot of the developing countries trying to understand how they get their piece of the economic pie," Arnold says.
"U.S. companies that operate outside of the U.S. have every incentive to structure their transactions in the way that Starbucks and others have done," Arnold says. BEPS's purpose is to build a dam, to plug the holes.
Plus, an indirect result from BEPS is the European Union adopting the spontaneous exchange of tax rulings. "For example," Arnold said, "in the Starbucks case, the Dutch ruling, if it were going to be obtained now, would
also be spontaneously delivered to the Swiss tax authorities. The two tax authorities could piece together better what the taxpayer is attempting to do, which is a very big change." Arnold emphasized her biggest trepidation
is about how new reporting obligations affect privacy.
Despite the law playing catch-up and the global and digital economies becoming synonymous, current legal attitudes are not sounding alarm bells—so far, there doesn't seem to be cause for creating an entirely new system.
"One need not overstate this case. Technological advances, from e-mails to texting, do not always require a change in tax law," said Liebman. Arnold adds that when OECD asked itself this question in BEPS, the ultimate answer
was no.
Content contributed by attorneys of Troutman Sanders LLP and Pepper Hamilton LLP prior to April 1, 2020, is included here, together with content contributed by attorneys of Troutman Pepper (the combined entity) after the merger date.