3 Chi J Intl L 317
Daniel Shaviro

Globalization, worldwide capital mobility, increasing interdependency, and threats to national sovereignty have shaped the trends in areas such as international income taxation, affecting strategic interactions between countries. This article adds a unique dimension to the United States’ policy debate on cross-border tax arbitrage by focusing on the consequences these strategic interactions have with respect to two key norms: national welfare and worldwide welfare. Cross-border arbitrage is defined as a method of achieving better tax results by investing in more than one jurisdiction to take advantage of inconsistencies between different jurisdictions’ tax rules. The article provides examples of how dual resident companies achieve tax benefits through cross-border arbitrage. It points out that cross-border tax arbitrages’ involvement of preferential worldwide tax treatment is a major point of concern. The article explores two approaches in response to this concern; unilateral action by the United States and multilateral action. A full inquiry into the tax treatment by other countries may reveal factors that influence American investments and bring up strategic interaction issues between countries, thereby affecting national welfare. It finds that harmonizing income tax bases and having a multilateral tax organization with the purpose of coordinating international cooperation may be viable solutions and concludes that unilateral action by the United States may help move others in this direction.