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GLOBALIZATION AND ITS TAX DISCONTENTS:
TAX POLICY AND INTERNATIONAL INVESTMENTS
This page intentionally left blank
Globalization and Its Tax
Discontents
Tax Policy and International
Investments
ESSAYS IN HONOUR OF ALEX EASSON
Edited by Arthur J. Cockfield
UNIVERSITY OF TORONTO PRESS

Toronto Buffalo London
© University of Toronto Press Incorporated 2010
Toronto Buffalo London
www.utppublishing.com
Printed in Canada
ISBN 978-0-8020-9976-1
Printed on acid-free, 100% post-consumer recycled paper with

vegetable-based inks.
Library and Archives Canada Cataloguing in Publication
Globalization and its tax discontents : tax policies and international

investments : essays in honour of Alex Easson / edited by
Arthur J. Cockfield.
Includes bibliographical references and index.
ISBN 978-0-8020-9976-1
1. Investments, Foreign – Taxation – law and legislation. 2. International
business enterprises – Taxation – law and legislation. 3. Double taxation –
Treaties. 4. Income Tax – Foreign income. 5. Law and globalization.
6. Fiscal policy. I. Cockfield, Arthur J.
K4475.G76 2010 343.04 C2010-902200-9
This book has been published with the help of a grant from the Canadian
Federation for the Humanities and Social Sciences, through the Aid to
Scholarly Publications Program, using funds provided by the Social Sciences
and Humanities Research Council of Canada.
University of Toronto Press acknowledges the financial assistance to its

publishing program of the Canada Council for the Arts and the Ontario
Arts Council.
University of Toronto Press acknowledges the financial support for its

publishing activities of the Government of Canada through the Canada Book
Fund.
Contents
Preface xiii
PART I: DESIGNING TAX RULES FOR FOREIGN DIRECT

INVESTMENT
1 Introduction: The Last Battleground of Globalization 3

arthur j. cockfield
1.0 The Battle for International Investments 3

2.0 The Increasing Sensitivity of Cross-border Investment to
Tax 5
3.0 The Need for Diverse Scholarly Tools to Address Policy
Concerns 7
4.0 Outline of the Book 9
4.1 Designing Tax Rules for FDI 9
4.2 The Impact of Globalization 10
4.3 The Impact of Tax Treaties 12
4.4 Taxing Cross-border Services and Service Providers 13
2 Taxing Foreign Direct Investment in a Non-cooperative Setting:

Contributions by Alex Easson 18
arthur j. cockfield
1.0 Introduction 18
2.0 Policy Implications of a Non-cooperative Setting 19
2.1 Evaluating Tax Reform Proposals Given Existing Political
Constraints 19
vi Contents
2.2 How Should Rules Promote Neutral Tax Treatment of

Cross-border Investments? 20
3.0 Designing Tax Incentives in a Non-cooperative Setting 23
3.1 Tax Incentives and FDI: Theoretical and Pragmatic
Considerations 23
3.2 Targeting and Designing Tax Incentives 25
4.0 Collective Action Responses 28
4.1 External Constraints on Tax Incentives 28
4.2 Evaluating the Collective Action Responses 29
5.0 Conclusion 30
3 China’s Tax Incentive Regime for Foreign Direct Investment:

An Eassonian Analysis 35
andrew halkyard and ren linghui
1.0 Introduction 35
2.0 China’s Tax Incentives Prior to 2008 37
2.1 The Origin of China’s Tax Incentive Regime: From the Early
1980s to 1991 37
2.2 Tax Incentive for FDI under the FEITL from 1991 to 2007 38
3.0 The Tax Incentives Regime in the 2008 EIT Law 40
3.1 The Law’s Major Changes 40
3.2 The Effects of Changes to the Tax Incentive Regime on FDI
in China 43
3.3 Will the New Regime Help China to Attract and Retain the
FDI It Wants? 44
3.3.1 The Use of Tax Holidays 44
3.3.2 A Reduced Enterprise Income Tax Rate 47
3.3.3 Accelerated Depreciation 47
3.3.4 Reinvestment Incentives 48
3.3.5 Favourable Deduction Rules 48
3.4 Summary 49
4.0 Conclusions 49
4 Outbound Direct Investment and the Sourcing of Interest

Expense for Deductibility Purposes 60
tim edgar
1.0 Introduction 60
2.0 Behavioural Margins Implicated by an Unrestricted Interest-
Expense Deduction 62
Contents vii
3.0 National Welfare, Ownership Neutrality, and Interest

Deductibility 64
4.0 The ‘Middle Ground’ Appeal of a Thin-Capitalization-
Deductibility Restriction 69
5.0 Conclusion 75
5 Assessing the Foreign Direct Investment Response to Tax Reform

and Tax Planning 84
w. steven clark
1.0 Introduction 84
2.0 The Basic Approach to Assessing the FDI Response to Tax
Reform 87
3.0 Cross-border Financing Developments 91
4.0 Cross-border AETR/METR Analysis: A Focus on Tax-Planning
Effects 93
4.1 Base Case Results 94
4.2 Thin Capitalization of High-Taxed Subsidiaries 96
4.3 Double-Dip Financing 98
4.4 A Hybrid-Instrument Financing Structure 100
4.5 A Triangular Financing Structure 101
4.6 A Hybrid-Entity Financing Structure 104
5.0 Factoring Tax Planning into Assessments of the FDI Response to
Tax Reform 106
PART II: THE IMPACT OF GLOBALIZATION
6 Improving Inter-nation Equity through Territorial Taxation and

Tax Sparing 117
jinyan li
1.0 Introduction 117

2.0 Inter-nation Equity 118
2.1 The Concept 118
2.2 Tax Entitlement and the Allocation of the International Tax
Base 119
2.3 Inter-nation Redistribution 121
3.0 Why Should Equity Be Taken Seriously Now? 121
3.1 Important Policy Criteria 122
3.2 Equity as a Benchmark for Reducing International Tax
Inequities 123
viii Contents
3.3 An Opportune Time 124

4.0 Tax Reforms towards Inter-nation Equity 125
4.1 The Role of High-Income Countries 125
4.2 Territorial Taxation of Business Income 126
4.3 Tax Sparing as a Mechanism of International
Redistribution 128
5.0 Conclusions 129
7 Harmonizing Corporate Income Taxes in the United States

and the European Union: Legislative, Judicial, Soft-Law, and
Cooperative Approaches 138
charles e. mclure, jr

2.0 Corporate Tax Harmonization in the EU 139
2.1 Potential Means of Harmonization 139
2.2 Prospects for Enhanced Cooperation 141
2.2.1 Business Support 141
2.2.2 Revenue and Other Effects 142
2.2.3 The Dynamics of Enhanced Cooperation 144
3.0 Corporate Tax Harmonization in the United States 144
3.1 Substantive Issues 145
3.2 Means of Coordination 146
4.0 Summary Comparison and Commentary 147
8 Missing Women: Gender-Impact Analysis and International

Taxation 153
kathleen lahey
1.0 Finding Women in International and Tax Law 153

2.0 The Gender Impact of Overseas Development and Aid
Programs 154
2.1 Gender-Based Analysis in Development Programs 155
2.2 Gender-Based Analysis in Private and Voluntary
Development 156
3.0 Domestic Taxation of Outward FDI 157
3.1 Domestic Tax Benefits for Outward FDI 158
3.2 The Gender Impact of Taxation of Outward FDI 162
4.0 Developing-Country Taxation of Inward FDI 163
4.1 Developing-Country Tax Benefits for Inward FDI 163
Contents ix
4.2 The Gender Impact of Tax Benefits for Inward FDI 164
5.0 Conclusions 165
9 Globalization and the Hong Kong Revenue Regime 171

richard cullen and antonietta wong

2.0 The Evolution of Hong Kong’s Political Structure 172
2.1 Colonial Power within the British Empire 172
2.2 The Crown Colony of Hong Kong 173
2.3 The Governance Structure of the HKSAR 174
3.0 Revenue Regime Development in Hong Kong 174
3.1 The Initial Phase 174
3.2 Overview of the Current Revenue Regime 175
3.3 The Fiscal Firewall 178
4.0 Conclusion 178
PART III: TAX TREATIES
10 Canada’s Evolving Tax Treaty Policy toward Low-Income

Countries 189
kim brooks
1.0 The Importance of Tax Treaty Design for Low-Income

Countries 189
2.0 Alex Easson’s Assessment of Canada’s Tax Treaty Policies to
1988 192
3.0 Canada’s Tax Treaty Policy toward Low-Income Countries
since 1988 195
3.1 Expanding the Scope for Source Taxation of Business
Income 195
3.1.1 Lowering the Threshold for a Permanent
Establishment 195
3.1.2 Expanding the Profit Allocated to Entities with a
Permanent Establishment 199
3.1.3 Allowing for the Taxation of Technical Fees 200
3.1.4 Allowing for Taxation on the Alienation of Real
Property 200
3.2 Permitting Higher Withholding Tax Rates for Passive
Income 201
x Contents
3.2.1 Interest Income 201

3.2.2 Royalties 202
3.2.3 Dividends 203
3.3 Preserving the Tax Incentives of Low-Income
Countries 205
4.0 Future Directions in Canada’s Tax Treaty Policy toward Low-
Income Countries 206
11 Tax Treaties and the Taxation of Non-residents’ Capital

Gains 212
richard krever

2.0 Why Land? 214
3.0 Gains and Capital Gains 217
3.1 Sale of Real Estate Inventory 218
3.2 Capital Gains that Are Not Business Profits of an
Enterprise 221
4.0 Real Property 223
5.0 Interposed Entities 226
5.1 Looking through Tiers 227
5.2 Forms of Interposed Entities and Interest 228
5.3 Measuring Gains on the Disposal of an Interest in an
Interposed Entity 230
6.0 Applying Pre-capital Gains Treaties 231
7.0 Looking Forward 233
12 Tax Treaty Templates 239

victor thuronyi

2.0 Problems with the Current Tax Treaty Network 239
2.1 Difficulty of Amendment 240
2.2 The Role of Commentary 240
2.3 Verbiage 240
3.0 A Possible Solution 241
3.1 Restatement 241
3.1.1 The General Approach 241
3.1.2 An Example 243
3.1.3 Participation 248
3.1.4 Language 249
Contents xi
3.2 Future Amendments 249

3.3 Interpretation 250
3.4 Participation in Interpretation and Amendment 251
4.0 Conclusion 251
PART IV: TAXING CROSS-BORDER SERVICES AND SERVICE

PROVIDERS
13 Tax Discrimination and Trade in Services: Should the Non-

discrimination Article in the OECD Model Treaty Provide the
Missing Link between Tax and Trade Agreements? 257
catherine brown
1.0 Overview 257

1.1 Why Did This Happen? 257
2.0 Trade Agreements 259
2.1 The GATS 259
2.2 Most-Favoured-Nation Treatment 260
2.3 National Treatment 260
3.0 The Non-discrimination Article in the OECD Model 262
4.0 The Interaction of Tax and Trade Agreements: The Bottom
Line 264
4.1 Legitimate Expectations 264
4.2 Differing Levels of Protection 264
4.3 Does the Matter Fall within the Scope of a Tax
Treaty? 265
4.4 The Exception from the National Treatment Obligation in
Article XIV(d) of the GATS 265
4.5 Other Direct Tax Measures that Might Violate the National
Treatment Obligation 266
4.6 Circumventing Non-discrimination Obligations 267
5.0 Proposed Solution: Expand the Non-discrimination
Article 267
5.1 Which Economic Actors? 268
5.2 What Is the Appropriate Standard of Treatment? 269
5.2.1 The GATS Standard 269
5.2.2 Fair and Equitable Treatment 269
5.2.3 The Treaty Establishing the European
Community 270
5.2.4 A New Tax Treaty Standard 270
5.3 Dispute Resolution 271
xii Contents
5.4 Grandfathering Provisions 271

6.0 Other Reasons Not to Expand the Non-discrimination
Article 272
7.0 Conclusions 272
14 The New Services Permanent Establishment Rule in the

Canada-United States Tax Treaty 280
brian j. arnold
2.0 The Services PE Rules in the United Nations and OECD Model
Conventions 281
3.0 Article V(9) of the Fifth Protocol 283
3.1 General Comments 283
3.2 The Relationship between the Services PE rule and the
Construction Site PE Provision 285
3.3 The Two Aspects of Article V(9) 286
3.3.1 Services Performed by a Single Individual:
Article V(9)(a) 287
3.3.2 The Gross Revenue Test in Article V(9)(a) 290
3.3.3 Services Generally: Article V(9)(b) 293
4.0 Conclusion 298
15 Consumption Taxation of Cross-border Trade in Services in an

Age of Globalization 305
walter hellerstein
2.0 Taxation of Goods 307
3.0 Taxation of Services 308
3.1 The Problem 308
3.2 Approaches to the Problem 309
3.2.1 OECD E-Commerce Initiatives 309
3.2.2 The OECD’s International VAT/GST Guidelines 312
3.2.3 The EU’s Response to Increased Cross-border Trade
in Services 316
4.0 Conclusion 318
Contributors 329
Index 331
Preface
I am privileged to have known the late Alex Easson, both as his student
and, later, as his colleague. In the early 1990s, I took two courses with
Professor Easson: Business Associations and Tax Policy. For the latter,
a seminar course, I wrote a paper on policy responses to tax haven de-
velopments, and I recall that Professor Easson provided extensive and
insightful comments on my work, on which I subsequently relied when
I pursued graduate studies in international tax law. After I joined the
Faculty of Law at Queen’s University in 2001, Professor Easson (then
retired) was kind enough to continue to help me with my research and
to invite me to his home, where I first met his wife Trudie. I will always
remember his cheerful demeanour and his obvious passion and devo-
tion to the life of a scholar.
This book draws from essays given at a symposium held in honour
of Professor Easson at Queen’s Law on 29 February 2008. The sympo-
sium brought together a range of experts on the topic of tax policy and
international investments, which served as Professor Easson’s main re-
search focus. During the symposium itself, at the reception at the Agnes
Etherington Art Centre, and at a dinner at the University Club, which
Professor Easson frequented to share a drink with his mates, we re-
membered with fondness his life and achievements.
We are grateful for the financial support for these events provided by
the Faculty of Law, KPMG LLP, and an anonymous private donor. I am
also very appreciative of the organizational and other assistance offered
by my symposium co-chair Gabe Hayos. I would like to thank, in addi-
tion to the chapter contributors, those who helped out as panel chairs or
paper commentators at the symposium: Mary Anne Bueschkens, David
Duff, David Kerzner, Lori McMillan, Mark Meredith, Brian Mustard,
xiv Preface
Martha O’Brien, Dan Thornton, and Geoff Turner. Several law student
volunteers proved crucial to the success of the events: Tim Fish, Kim
McGarrity, Shannon Nelson, and Kevin Refah.
I also wish to thank Adam Freedman and Shannon Nelson for their
assistance with the preparation of this book. Finally, I am grateful for
the editorial assistance of Jennifer DiDomenico at the University of To-
ronto Press and for the helpful input provided by four anonymous ref-
erees selected by the Press.
This book is dedicated to Trudie Easson.
AJC
April 2009
Kingston, Ontario
PART I
Designing Tax Rules for Foreign Direct

Investment
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1 Introduction: The Last Battleground of
Globalization
arthur j. cockfield
1.0 The Battle for International Investments
The topic of globalization and tax is an ancient one. Writings in the area
date back at least 2,500 years to the work of Herodotus, the ancient Greek
scholar who coined the term ‘history.’1 In The Histories, Herodotus tells
us of an era when ancient peoples came increasingly in contact with one
another through cross-border trade and investment as well as warfare.
He was writing during the so-called Greek Enlightenment, a time of
relative peace and prosperity for the Greeks who, a generation before,
had successfully defended their lands against invasion by the Persians.
Intensely interested in foreign developments, the Greeks reviewed the
tax systems within the great Persian and Egyptian empires to see what
lessons they could learn: for instance, Herodotus tells us that, in 594 BC,
Solon the Athenian copied the Ancient Egyptian practice of forcing citi-
zens to declare how much wealth they had for tax purposes.2
In an era of enhanced global economic interdependence, modern gov-
ernments, like those of the ancients, increasingly study the tax policies
in place elsewhere. In contemporary terms, they are seeking to ensure
their tax rules governing the treatment of cross-border investments are
‘competitive’ with those of foreign tax regimes, a much friendlier bat-
tle than the real ones of earlier eras. In recent years, governments in
the United States, the United Kingdom, Germany, Italy, Australia, New
Zealand, Sweden, and elsewhere have discussed reforming their tax
systems so that they encourage (or at least do not inhibit) international
investments.3 In 2007, the Canadian minister of finance appointed an
Advisory Panel on Canada’s System of International Taxation to ‘im-
prove the fairness, economic efficiency and competitiveness of Cana-
4 Arthur J. Cockfield
da’s international tax regime.’4 In December 2008, the Advisory Panel

published a report recommending that Canada exempt from taxation
all foreign-source active business income.5
This book draws from papers prepared for a symposium on ‘Glo-
balization and the Impact of Tax on International Investments,’ held
at Queen’s University, Kingston, Ontario, on 29 February 2008. The
symposium was held in honour of the late Alex Easson (1936–2007), a
scholar who devoted a significant portion of his professional life to the
study of international tax.
Easson was born in Bradford, England, in 1936. Like Herodotus, he
lived in an era of relative peace and affluence that followed a period of
devastating warfare, though perhaps Easson’s life was touched more
directly by war: during his childhood, the Luftwaffe were bombing his
country. After graduating from Oxford University’s Exeter College and
the London School of Economics, Easson first taught at the University
of Southampton. In 1974 he moved to the Faculty of Law at Queen’s
University – a permanent appointment followed in 1976 – where he
remained until his retirement in 2000.
Over the course of his productive career, Easson published more than
twelve books and more than fifty articles and chapters. The breadth of
his scholarship is evident in his willingness to tackle non-tax areas such
as business associations law and family law.6 Even within tax law, he
wrote in diverse areas: he published the first tax law casebook in the
United Kingdom in 1973 (subsequent editions continue to be published
by different authors),7 and his publications include discourses on space
taxation,8 family law tax issues,9 and the different ways that govern-
ments determine the source of income for tax purposes.10
Within his main research focus on tax policy and international in-
vestments, Easson reviewed how globalization – the tying together of
nations through economic and other activities – was driving interna-
tional tax policy developments. He noted that, from the perspective of
the taxation of international investments, the main relevant features of
globalization are:11
• the increasing activity of multinational companies;

• the internationalization of the way in which these companies organ-
ize their business;
• the increasing number of countries that act as both importers and
exporters of investment capital;
• the increasing complexity of cross-border transactions; and
Introduction 5
• the shrinking of geographical constraints to international business

activities as a result of the information and communication technol-
ogy revolution.
Easson bore more direct witness to the globalization process through

his travels to more than forty countries, often accompanied by his wife
Trudie, during his work as an international tax consultant for the Or-
ganisation for Economic Co-operation and Development (OECD), the
International Monetary Fund, the Australian Agency for International
Development, and the World Bank, among others. In particular, he
studied how tax reform could improve the plight of individuals in the
poorer countries, and he helped to design new tax laws for places such
as Bosnia, Mauritius, St Kitts, St Lucia, and Sierra Leone.
To Easson, tax could play a significant role in helping those who had
yet to benefit from globalization. Countries mired in war and terrible
poverty represent a paradox of globalization: economic development
has pulled much of the world out of poverty, yet a significant part of
humanity remains untouched by these developments.12 In addition,
economic interdependency has so deepened that developments such as
the recent global financial crisis now flow with ease across the borders
of both the developed and developing world.
2.0 The Increasing Sensitivity of Cross-border Investment to Tax
What factors have contributed to this deepening of global economic

linkages? In recent decades, the increase in international trade and
investment – direct investment into and out of Canada increased by
roughly five hundred per cent between 1986 and 2007 – likely has been
encouraged by the falling of tariff and non-tariff barriers.13 However,
countries have refused to negotiate binding multilateral tax agree-
ments, so that tax remains one of the last barriers to the integration
of global capital markets.14 As a result, investment decision-making is
becoming increasingly sensitive to national tax differences. The essays
in this book explore how globalization has highlighted a number of
international tax policy challenges. For example,15
• the current international tax regime permits countries to maintain

different tax rules, which encourages multinational firms to shift the
location of their investments and operations to countries that im-
pose relatively lower (or nil) tax burdens;16
• multinational firms shift more and more paper profits through so-
phisticated tax-planning strategies to investments in countries that
impose relatively lower (or nil) tax burdens, which often reduces
taxes collected in relatively high-tax countries;17 and
• it is becoming progressively more difficult to determine which
country should assess the appropriate tax liability (along with en-
joying the resulting tax revenues) on globally integrated products
and services derived through cross-border investments.18
For a sense of the policy challenges, consider the tax issues surround-
ing one such globally integrated product: the 2007 international block-
buster film 300, loosely based on Herodotus’s account in The Histories of
the Battle of Thermopylae (circa 480 BC), where King Leonidas led his
300 Spartan warriors, as well as other Greek troops, against a Persian
army of overwhelming numbers.19 The film highlights the complexities
of taxing modern, globally integrated products. It was produced by a
major U.S. film studio, but almost entirely filmed on digital video in a
green-screened warehouse outside Montreal. A Montreal special effects
company subsequently added digital effects, so that the movie appears
to have been filmed in an exterior setting. To date, the movie has earned
worldwide revenues of more than US$500 million.
As to the first tax concern, about the impact of tax on investment lo-
cation, 300 was filmed and edited in Montreal in large part due to film
and video production tax credits offered by the Canadian and Quebec
governments.20 Does it matter that Canada attracted this international
investment in part as a result of tax incentives? Do such tax incentives
distort cross-border investment decision-making in an unproductive
manner, as some argue?21 The Canadian government justifies these
incentives in part as a way to encourage film works that protect and
enhance Canadian culture. Should Canada be prohibited from attract-
ing investments through its tax regime by some international tax or-
ganization?22
In terms of the second international tax concern, about the use of tax
planning to shift income to reduce global tax liabilities, it is difficult to
assess whether such planning played a role in the financing or opera-
tions of 300. A typical movie industry tax-planning strategy involves
shifting studio overhead costs to profitable movies (such as 300) since
they can be deducted against gross revenues to reduce taxable profits.
In this way, studios protect their investments against the fact that many
movies lose money – the box office winners subsidize the losers. The
Introduction 7
problem is that, although Canadian and U.S. tax laws (as well their
bilateral tax treaty) generally do not permit tax losses in a corporation
in one country to be offset against profits in the other, they allow two
related corporations in the same country to undertake this loss offset-
ting.23 These rules encourage multinational firms to engage in sophisti-
cated tax planning to ensure their investments remain viable. They can
achieve additional tax savings by shifting their profits to a jurisdiction
(such as a tax haven) with low or nil taxes. In the case of 300, because
the U.S. studio sold the film rights to distributors around the world, it
might have been possible to shift some of the profits from these sales, as
well as any resulting tax revenues, away from countries with relatively
high taxes, such as Canada and the United States.
As for the third tax concern, about ensuring that governments collect
an appropriate share of tax revenues from the profits of multination-
al firms, assuming that 300 generated taxable profits, which country
should enjoy a greater share of the tax revenues? The matter is com-
plicated because 300 is, in tax parlance, a unique, intangible asset that
will continue to enjoy streams of cross-border royalty income from the
sales of rights to use the asset. Most of the film’s initial creative input
occurred in the United States: it was adopted from the work of a U.S.
writer, and the director and several screenwriters were also American.
Should this fact entitle the U.S. government to tax a greater share of the
global profits from sales to movie distributors, as well as subsequent
royalties? Does the fact that most of the actual filming and editing of the
movie took place in Canada warrant greater taxation by the Canadian
government? Did Canada, through its film and video production tax
credit, voluntarily give up its right to tax the film’s profits in exchange
for other benefits, such as fostering and maintaining a skilled work-
force in Canada?
The tax policy issues that arise from this scenario are vexing indeed.
And this is just one of seemingly countless examples – automobiles,
cell phones, software, toys, call centres, to name a handful – of globally
integrated products and services to which these conundrums apply.
3.0 The Need for Diverse Scholarly Tools to Address Policy

Concerns
How should international tax reform efforts address the challenges of

globalization? On the one hand, globalization encourages flows of cross-
border investments; on the other hand, it constrains policy options as
countries find they can no longer ‘go it alone’ and develop international
tax policy positions as they see fit.24 Because tax is interwoven with the
fabric of society, as Solon the Athenian realized long ago, these policy
decisions are of critical importance in determining each country’s vi-
sion of a just society. Governments have already ceded policy control
over many other areas, such as international trade; now they are strug-
gling to determine the appropriate policy responses that will let them
maintain democratic control over their tax systems while recognizing
that globalization makes this control increasingly illusory.25
International tax reform is thus one of the last policy battlegrounds of
globalization. Indeed, like some unruly beast, international tax policy
refuses to be tamed by traditional international law principles.26 De-
velopments considered passé in other areas of public international law
seem almost radical when considered for implementation within the
international tax regime. For instance, governments have only recently
begun seriously to contemplate cross-border tax law mechanisms such
as binding arbitration for certain international tax disputes, the recipro-
cal enforcement of cross-border tax debts, or even the distant possibil-
ity of a multilateral tax treaty – tax law ‘innovations’ that have been in
place in some shape or form for more than a half-century in interna-
tional trade.
And so it goes with respect to the taxation of international invest-
ments: the tax law and treaty rules that govern the taxation of these
investments remain much the same today as the ones advocated by
League of Nations’ experts almost a hundred years ago.27 Because of
the politically charged nature and glacial pace of international tax re-
form, some long-time tax observers maintain, as Alex Easson did, that
international tax policy analysis should try to integrate current think-
ing about economic theory with an understanding of the broader re-
alities that dictate whether tax reform measures will succeed. To these
observers, the main policy challenge is to develop effective internation-
al tax rules and processes within what is essentially a non-cooperative
government setting.
This perspective helps to illuminate the main theme the chapters in
this book reveal, which is that, to promote optimal international tax
policy outcomes with respect to taxing international investments in a
non-cooperative setting, scholars need to account for economic inter-
ests as well as relevant political, social, historical, and other interests.
The book’s contributors consider tax policy concerns from different
angles, including international tax economics, gender theory, historical
perspectives, and international relations theory. The diversity of these
Introduction 9
approaches shows the potential for international tax analysis to tease

out the complexities and constraints that might be frustrating the at-
tainment of the best possible policy outcomes.
4.0 Outline of the Book
The book is divided into four parts that strive to identify the ways in-
ternational tax policy can confront the reality of taxing enhanced cross-
border investment flows in a non-cooperative government setting. Part
I examines in a general way the role that tax laws and policies play in
inhibiting or encouraging foreign direct investment (FDI) – that is, en-
trepreneurial investments that involve the creation of new businesses
in foreign markets. Part II examines how, in an environment in which
economies increasingly are intertwined, tax laws and international tax
agreements help to decide which countries and individuals win and
lose on revenues associated with taxing international investments. Part
III focuses on the important role that bilateral tax treaties (along with
their negotiation) play in determining rules for taxing international
investments, and how the status quo might be harming the interests
of developing countries. Part IV considers the taxation of cross-border
services and service providers in recognition of the fact that globali-
zation is driving many economies to focus on services as a relatively
larger portion of overall economic activity. The interaction among dif-
ferent national income and consumption tax systems is hence playing
a greater role in influencing the provision of cross-border services as
well as the allocation of cross-border investments in service industries.
4.1 Designing Tax Rules for FDI
By looking to the works of Alex Easson, in Chapter 2 (‘Taxing Foreign

Direct Investment in a Non-cooperative Setting: Contributions by Alex
Easson’) I review the main policy issues implicated by the taxation of
FDI. The chapter also helps to set up the main theme developed in this
book, as many of Professor Easson’s writings emphasize the need to
integrate economic concerns with broader policy concerns so that in-
ternational tax policy developments can respond effectively to a non-
cooperative government setting.
In Chapter 3 (‘China’s Tax Incentive Regime for Foreign Investors:
An Eassonian Perspective’), Andrew Halkyard and Ren Linghui con-
sider Chinese attempts in recent decades to attract international in-
vestment through tax policy, including the introduction of tax laws in
2008 that depart from the traditional approach. These efforts remain
controversial, however, as China continues to use tax as a policy tool
to favour investments by foreigners over those by locals. A review of
past Chinese practices reveals a drawback of the current international
regime: as long as there is no global tax institution to bind participating
countries to international tax rules, governments can deploy tax incen-
tives (such as the Canadian film and production tax credits) as they see
fit, which could distort cross-border investment decision-making in a
manner that is economically inefficient, leading to overall reductions in
global wealth (and corresponding reduced standards of living).
In recent years, some governments have changed their tax systems
to exempt from tax all foreign-source active business income. This
development has led to the paying of increased academic and policy
attention to tax rules that permit interest deductions to fund foreign
investments and operations that are exempt from residence-country
tax. These interest deductions for exempt foreign-source income, in
fact, are responsible for one of the biggest holes in the global fiscal
web, since they reduce taxable profits and revenues in countries that
maintain relatively high taxes. Thus, in Chapter 4 (‘Outbound Direct
Investment and the Sourcing of Interest Expenses for Deductibility
Purposes’), Tim Edgar explores how governments are changing their
tax laws to prevent excessive interest deductions to finance foreign op-
erations and investments, and considers recent Canadian reforms in
this area.
To evaluate the ongoing battle for international investments, policy
analysts sometimes refer to studies of the marginal effective tax rate
(METR) and the average effective tax rate (AETR) that try to measure
the influence of tax on cross-border investment decision-making. Chap-
ter 5 (‘Assessing the Foreign Direct Investment Response to Tax Reform
and Tax Planning’), by W. Steven Clark, describes the assumptions
that traditional METR/AETR studies can incorporate in estimating
the impact on cross-border investment decisions of tax reform and tax
planning, which such studies typically ignore but which can influence
significantly the amount of taxes owed on an international investment.
Here, Clark contributes to our understanding of the potential and lim-
its of METR/AETR studies for international tax policy analysis.
4.2 The Impact of Globalization
In an era of global production of (often) highly integrated goods and

services, it is becoming difficult to slice up the international tax pie so
Introduction 11
that countries can tax an appropriate share of international transac-

tions. In Chapter 6 (‘Improving Inter-nation Equity through Territorial
Taxation and Tax Sparing’), Jinyan Li reviews theoretical perspectives
on the issue of inter-nation equity to see whether existing tax rules pro-
mote a fair division of revenues among nations, with an emphasis on
policy concerns relating to developing countries as well as challenges
presented by the lack of collective government action in the interna-
tional tax sphere. In her view, the trend toward exemption (or territo-
rial) tax systems offers an opportunity to enhance the fair sharing of tax
revenues among nations
There is increasing recognition that processes that preserve a gov-
ernment’s sovereign control over its tax system to the greatest extent
possible might be the only effective way to promote helpful reform. For
instance, the European Union has been debating the need to harmonize
its national corporate income tax systems for more than a half-century
with little progress thus far, its member countries having refused to
pass unanimously, as required by the EC Treaty, binding agreements
that would compel harmonization. In Chapter 7 (‘Harmonizing Corpo-
rate Income Taxes in the United States and the European Union: Leg-
islative, Judicial, Soft-Law, and Cooperative Approaches’), Charles E.
McLure, Jr scrutinizes U.S. and EU efforts to develop mechanisms that
would lead to greater unity among these systems without the need to
adopt the same tax rates. In Europe, in particular, certain international
tax reform processes might be best understood as ‘soft law’ processes
or the promotion of informal and non-binding agreements among na-
tions. Nevertheless, McClure argues that ‘enhanced cooperation’ by as
few as nine EU countries is likely the only way to harmonize the EU
corporate income tax bases.
In Chapter 8 (‘Missing Women: Gender-Impact Analysis and Inter-
national Taxation’), Kathleen Lahey discusses how enhanced globaliza-
tion is influencing the way multinational corporations hire and invest
in employees, leading to certain disadvantages for women. Lahey de-
ploys a gender impact analysis to inform our understanding of how
international tax rules can promote or harm the interests of women,
and she shows how non-traditional analytical tools can shed insight on
previously neglected policy concerns. She concludes that, although a
lack of tax data currently inhibits gender-based analysis, this approach
nevertheless should be accorded more emphasis in the study of inter-
national tax policy.
Globalization does not necessarily encourage all countries to arrive
at the same policy stance. The history, geography, and political cir-
cumstances of individual states (or regions within countries) continue

to encourage diverse outcomes. In Chapter 9 (‘Globalization and the
Hong Kong Revenue Law System’), Richard Cullen and Antonietta
Wong review the historical developments – including the deeper roots
of globalization in the British Empire – that promoted enhanced eco-
nomic integration and influenced over a century’s worth of tax law de-
velopments in Hong Kong. They also discuss why Hong Kong’s tax
policy continues to differ from that of many similarly situated govern-
ments. They conclude that a non-cooperative setting gives at least some
countries the opportunity to develop tax systems that, in the long run,
might promote more efficient and fairer outcomes for their citizens and
residents. Cullen and Wong also explain that many governments are
reluctant to engage in binding multilateral processes as they fear that
closer tax ties could restrict potentially innovative reforms and harm
important national interests.
4.3 The Impact of Tax Treaties
Another area of policy concern is the nature of tax treaties – the most
important of which is the OECD model treaty – that were initially de-
veloped, and subsequently revised, by countries that generally were
wealthy net exporters, rather than importers, of capital and that thus
favour their interests at the expense of those of capital-importing, often
poorer countries. In Chapter 10 (‘Canada’s Evolving Tax Treaty Policy
toward Low-Income Countries’), Kimberley Brooks reviews how tax
treaty policy often harms the interests of poorer countries, and discuss-
es Canada’s uneven record with respect to addressing this issue. She
shows how resistance to solutions involving collective action can harm
economically vulnerable countries that do not have the resources to im-
plement or police bilateral tax treaties to protect their own interests.
In Chapter 11 (‘Tax Treaties and the Taxation of Non-residents’ Capi-
tal Gains’), Rick Krever sets out the case for countries to adopt devia-
tions from the OECD and United Nation model treaties to take better
account of the fact that, under globalization, foreign investors increas-
ingly use sophisticated strategies to ensure they do not pay tax on the
sale of real estate assets. He discusses how negotiators, especially those
from developing countries, need to ensure that treaties protect the
source country’s right to tax any gains related to these sales. He notes
that, in treaty negotiations, experienced countries with greater exper-
tise tend to protect themselves better than those that are less endowed
Introduction 13
with such attributes. His discussion of the treatment of capital gains in

double tax treaties provides a graphic illustration of this phenomenon.
As mentioned, international tax law differs from most other areas of
public international law in that it typically does not involve the use of
binding multilateral agreements; instead, the income tax rules that gov-
ern international investments generally can be found in the more than
two thousand bilateral tax treaties that have sprung up over the past
century. The situation might seem bleak, but most of the provisions
of these treaties are based on those in the model treaties of the OECD
and the United Nations. In Chapter 12 (‘Tax Treaty Templates’), Vic-
tor Thuronyi discusses how the current approach could be improved
through the adoption of a central tax treaty template to promote more
consistency among the provisions of these treaties and to facilitate the
adoption of new provisions by participating countries. The template
would serve as another example of possible ways to encourage helpful
tax reform processes given the reality of a non-cooperative setting.
4.4 Taxing Cross-border Services and Service Providers
Why should aspects of international tax policy differ so dramatically

from international trade policy? In Chapter 13 (‘Tax Discrimination and
Trade in Services: Should the Non-discrimination Article in the OECD
Model Treaty Provide the Missing Link between Tax and Trade Agree-
ments?’), Catherine Brown queries why traditional international tax
policy permits governments to discriminate in favour of domestic in-
vestment in services industries, which discourages cross-border invest-
ments in these industries. In her view, the OECD model treaty should
be amended to inhibit such discriminatory treatment.
Even in the era of globalization, the relationship between Canada
and the United States is characterized by their high degree of economic
integration, and the two countries’ trade flows are the largest in history.
In 2007, the Canada-United States tax treaty was modified to reflect
these heightened investment and trade ties. In Chapter 14 (‘The New
Services Permanent Establishment Rule in the Canada-United States
Tax Treaty’), Brian Arnold reviews how Canadian and U.S. tax treaty
policy is evolving to take into consideration heightened investments in
cross-border services industries and provision, and considers the likeli-
hood that this new approach could be adopted in the treaty networks
of other developed countries that seek to cooperate more effectively in
taxing cross-border services providers.
Although tax scholars often focus on cross-border income tax issues,

cross-border consumption taxation has been rising to a greater extent
than have income taxes over the past several decades. Of the OECD’s
thirty members, only the United States does not now deploy some kind
of national value-added tax or goods and services tax. In Chapter 15
(‘Consumption Taxation of Cross-border Trade in Services in an Age of
Globalization’), Walter Hellerstein reviews the changing legal environ-
ment for taxing cross-border services, another policy area undergoing
significant reform in both the OECD and the EU, which serve as exam-
ples of ways that different cooperative processes can address cross-bor-
der tax issues. He concludes that the troublesome policy challenges in
this area will command the attention of those concerned with tax policy
and tax administration for some time to come. One could echo a similar
sentiment about the many thorny tax policy challenges the contributors
to this volume discuss.
Notes
1 Robert B. Strassler, ed., The Landmark Herodotus, The Histories, trans. by

Andrea L. Purvis (New York: Pantheon Books, 2007).
2 Ibid. at 201, 250. Under this early form of self-assessment, citizens could be
punished by death if they failed accurately to assess their wealth (or if they
revealed that ‘his livelihood was not a just and honest one’). In a sentiment
that presumably would be shared only by the coldest-hearted modern tax
authority, Herodotus declared that this was ‘an admirable law, and may it
always remain in force.’
3 Arthur J. Cockfield, Examining Policy Options for the Taxation of Outbound
Direct Investment (Ottawa: Advisory Panel on Canada’s System of Interna-
tional Taxation, Sept. 2008) at 22–35.
4 Canada, Advisory Panel on Canada’s System of International Taxation,
Consultation Paper (Ottawa: Department of Finance, April 2008) at 1.
5 Canada, Advisory Panel on Canada’s System of International Taxation,
Final Report (Ottawa: Department of Finance, December 2008) at 19.
6 See A.J. Easson, ‘Gifts in Consideration of Marriage’ (1971) 121 New L.J.
1018; A.J. Easson and D.A. Soberman, ‘Pre-Incorporation Contracts: Com-
mon Law Confusion and Statutory Complexity’ (1992) 17 Queen’s L.J.
414; and J.E. Smyth, D.A. Soberman, and A.J. Easson, The Law and Business
Administration in Canada, 11th ed. (Toronto: Prentice Hall, 2007). The latter
publication, co-authored with former Queen’s Law Dean Dan Soberman,
Introduction 15
continues to be widely adopted by law and business school students at

Canadian universities.
7 A.J. Easson, Cases and Materials in Revenue Law (London: Sweet and Max-
well, 1973); see also David Salter and Joan Sharpe, Easson: Cases and Materi-
als on Revenue Law (London: Routledge, 2004).
8 Alex Easson, ‘Space Taxation in Canada’ in William Lee Andrews III, ed.,
The Taxation of Space Commerce (The Hague: Kluwer Law International,
2001) at 97.
9 A.J. Easson, ‘Estate Duty Aspects of the Matrimonial Property Question’
(1971) 356 British Tax Rev.
10 Alex Easson, ‘Common Law Approaches to the Determination of the
Source of Income: Pragmatism over Principle’ (2006) 60 Bulletin for Int’l
Fiscal Documentation 495.
11 A.J. Easson, Taxation of Foreign Direct Investment: An Introduction (London:
Kluwer Law International, 1999) at 156–7.
12 For example, as documented by UNESCO, while economic development
has enhanced the wealth of citizens of many countries, glaring economic
disparities remain: more than 10 million children under age five die each
year from preventable causes, roughly 145 million children in developing
countries suffer from malnutrition, and more people – mainly females –
live in a state of chattel slavery today than ever before. See Aaron Schwa-
bach and Arthur J. Cockfield, ‘The Role of International Law and Institutions’
in Knowledge Base for Sustainable Development: An Insight into the Encyclo-
pedia of Life Support Systems, vol. III (Oxford: UNESCO Publishing-Eolss
Publishers, 2002) at 611, 618, 623.
13 See Statistics Canada, The Daily (6 May 2008), indicating that foreign direct
holdings in Canada reached roughly C$500 billion in 2006, an increase of
14.4 per cent from the previous year.
14 See Vito Tanzi, Taxation in an Integrating World (Washington, DC: Brookings
Institution, 1995) at 140 (indicating it may be time to develop a world tax
institution); Richard Bird, ‘Shaping a New International Tax Order’ (1988)
Bulletin for the Int’l Bureau of Fiscal Documentation at 292, 293 (calling for
heightened cooperative reforms efforts to address the present ‘patchwork
structure that makes little sense in terms of its purported objectives’).
15 For a discussion of these challenges, see Alex Easson, Tax Incentives for
Foreign Direct Investment (The Hague: Kluwer Law International, 2004) at
52–5.
16 While there is an ongoing debate on the impact of tax on FDI location
decisions, empirical studies increasingly suggest that these investment
decisions are influenced by tax. The different national tax regimes likely
distort cross-border investment decision-making in a manner that is not

considered economically efficient, discouraging international investments
and reducing global welfare; see Chapters 2 to 5, and 13 in this volume.
17 Studies increasingly show that the substitution of intra-group equity and
debt financing, as well as the location of external debt, occurs in situations
of perfect (or near-perfect) substitutability; see Chapters 4 and 5 in this
volume.
18 A related concern is the ‘fair’ sharing of tax revenues among governments
from taxing these globally integrated products and services; see Chapters 6
to 15 in this volume.
19 The movie enjoys an interesting pop culture pedigree. In 1962, a Holly-
wood movie called The 300 Spartans was seen by a young Frank Miller,
who eventually went on to reproduce aspects of the film in his graphic
novel 300. The recent film was based on this book, with Miller acting as a
consultant and executive producer. See Frank Miller and Lynn Varley, 300
(Milwaukie, OR: Dark Horse Books, 1998).
20 ‘“We went to Montreal especially for the fantastic tax incentive that is of-
fered by Quebec to filmmakers – that’s not only a production incentive,
it’s also a visual effects incentive,” said 300 producer Jeffrey Silver. “Com-
pared with other Canadian provinces, Quebec offers an extra 20 per cent
labour-based visual effects tax credit for foreign producers”’ (quoted in
Melora Koepke, ‘Montreal proves a worthy opponent: While T.O.’s film
industry ails, Quebec’s advantages have a special effect,’ Toronto Star,
7 March 2007). The Canadian and provincial tax credits are available to
domestic as well as foreign film producers.
21 See, for example, Chapters 2, 3, 6, 7, and 13 in this volume.
22 This has occurred in other limited areas, such as the OECD’s Harmful Tax
Competition project, which prohibits the use of tax incentives for interna-
tional investments in financial and other services, and the EU’s non-bind-
ing Business Code of Conduct; see Chapters 2 and 7 in this volume.
23 In Canada, tax laws generally prohibit one corporation’s losses to be offset
against a related corporation’s profits. The Canadian tax authorities, how-
ever, have allowed certain tax planning strategies that enable loss offset-
ting to take place; see Canada Revenue Agency, Income Tax Technical News
30 (21 May 2004). Under U.S. tax law, corporate loss offsetting is generally
permissible (when ownership equals or exceeds 80 per cent of common
shares).
24 For example, in the United Kingdom, which traditionally has deployed
a residence-based tax system, government policy papers have proposed
changing to exemption tax systems. See United Kingdom, HM Treasury
Introduction 17
and HM Revenue and Customs, ‘Taxation of the Foreign Profits of Com-

panies: A Discussion Document’ (London: HM Treasury, 2007). In contrast,
in 2009, the recently elected U.S. administration proposed to strengthen its
residence-based tax system.
25 I explored these themes in earlier work; see Arthur J. Cockfield, NAFTA
Tax Law and Policy: Resolving the Clash between Economic and Sovereignty
Concerns (Toronto: University of Toronto Press, 2005) at 4 (discussing how
the views of the economic historian Karl Polanyi can help us to under-
stand the tension inherent in globalization with respect to international tax
developments).
26 Traditional international law mechanisms arguably apply to international
tax matters in limited circumstances; see Reuven S. Avi-Yonah, Internation-
al Tax as International Law (New York; Cambridge University Press, 2007)
at 2 (claiming that parts of international tax law are binding as customary
international law even in the absence of treaties).
27 See Professor Bruins et al., Report on Double Taxation Submitted to the Fi-
nancial Committee (Geneva: League of Nations, 1923) (discussing different
alternatives to the taxation of cross-border business profits and recom-
mending exclusive residence-based taxation); and Technical Experts to
the Financial Committee of the League of Nations, Double Taxation and Tax
Evasion: Report and Resolutions (Geneva: League of Nations, 1925) (advocat-
ing the residence-based taxation of business profits along with foreign tax
credits for taxes paid to source countries). The League of Nations rejected
the views of the earlier report in favour of those of the second, preferring
to support a regime in bilateral tax treaties that had been in place since the
nineteenth century.
2 Taxing Foreign Direct Investment in a
Non-cooperative Setting: Contributions
by Alex Easson
arthur j. cockfield
1.0 Introduction
Alex Easson’s scholarly contributions to the ongoing debate about the

effect of tax law and policy on foreign direct investment (FDI) appear
in a wide variety of articles, chapters, and books.1 A theme running
through many of these works is that, to discern optimal policy with
respect to taxing FDI in a non-cooperative setting, tax law scholars
should integrate into their policy analysis both the underlying eco-
nomic theories and the relevant political, historical, cultural, or other
realities. Accordingly, in this chapter, I develop the main theme of this
volume and introduce a number of issues that are explored in greater
depth in subsequent chapters.
In the next section, I review how economic theory (which often em-
phasizes the need for international tax rules that promote global welfare
maximization) must be tempered by the reality of a lack of collective
action by governments (and their corresponding emphasis on national
welfare maximization). Given a non-cooperative setting, I then discuss
how governments can design optimal tax incentives for FDI, and as-
sess the so far limited cooperative efforts to constrain certain interna-
tional tax incentives, including the recent emphasis on tax information
exchange agreements as a way to counter tax evasion and aggressive
tax avoidance. I conclude by noting that Easson’s ‘hopeful pessimism’
accepts the futility of discerning the most theoretically pure tax solu-
tion in favour of developing pragmatic rules, policies, and processes to
constrain the more harmful effects caused by the interaction of differ-
ent national tax systems. This approach seeks to encourage cooperative
solutions within a fundamentally uncooperative game.
Taxing Foreign Direct Investment 19
2.0 Policy Implications of a Non-cooperative Setting
2.1 Evaluating Tax Reform Proposals Given Existing Political Constraints
Easson began to explore the role that tax plays with respect to cross-
border investments in the context of regional economic integration in
Europe: at the time, his views were characterized as ‘trail-blazing’ and
‘probably the most comprehensive guide’ to the subject.2 Through this
research, Easson came to appreciate the need to tailor tax laws to the
political preferences of the different EU Member States while striving to
reduce tax as a barrier to the efficient working of the internal market. In
1981, for instance, Easson noted that ‘[g]overnments guard their fiscal
sovereignty jealously, surrendering it only when they have to … Never-
theless, the eventual objectives of the [European] Community must be
kept in mind to ensure that such progress as is possible is not inconsist-
ent with these goals.’3
Over time, Easson refined his views on the need to factor in exist-
ing political realities when developing policy prescriptions, in part to
ensure that such efforts had a reasonable chance of success.4 Are tradi-
tional international tax policy principles, such as the need to promote
inter-nation equity, still the way to divide the international income tax
pie? Alas, Easson was not confident that, while a helpful concept in
many ways, inter-nation equity would offer a way out. Despite dec-
ades of attention to the concept, Easson noted, no real consensus ex-
isted on what is a fair division of the international income tax base,
in part because of the difficulties associated with deciding what is
the true ‘source’ of particular types of income (see Chapter 6 in this
volume).
With respect to international tax reform processes, Easson noted that
theoretical considerations concerning the ‘fair’ division of the inter-
national income tax base between two countries are frequently down-
played in favour of efforts to develop bilateral tax treaties to resolve
‘competing tax grabs by national tax administrators [rather] than a
principled attempt to allocate the tax base appropriately.’5 As a result,
‘[n]otions of inter-nation equity generally fail to provide much in the
way of specific guidance.’6
Instead, Easson developed his own evaluative criteria that focused
to a greater extent on the political feasibility of implementing reform
projects. In his view, international tax reform processes should strive to
meet the following conditions:7
• the reform efforts should not involve too great a change in total tax
yield;
• the efforts should not require major re-negotiation of existing tax
treaties;
• the efforts should not be excessively complex to draft or difficult to
apply; and
• the efforts should be capable of being implemented unilaterally.
According to Easson, the ‘fatal flaw’ in many reform proposals is that

the country that first implements the reform loses out to its neighbours
and competitors; thus, adoption has to be universal and simultaneous
for the reform to work. ‘By contrast, realistic reform measures are those
which a country, or a relatively small group of countries, might adopt
alone, without being dependent upon other countries taking similar ac-
tion.’8 Easson’s views on optimal international tax policy were clearly
tempered by his understanding of the actual practice of tax legislators
and tax authorities. He envisioned ‘contextual’ tax solutions that draw
from a pragmatic understanding of the ways that countries develop,
implement, and enforce their laws to tax international investments.9 In
his view, the proposals must also take account of efficiency considera-
tions, a topic to which we now turn.
2.2 How Should Rules Promote Neutral Tax Treatment of Cross-border

Investments?
Easson accepted the need to promote neutral tax rules that reduce the tax
distortion of cross-border economic activity. Because tax influences the
returns that firms and investors derive, tax burdens can distort decision-
making in an economically unproductive manner if decisions are made
for tax reasons, not out of economic rationales. These distortions could
reduce domestic and global wealth and, ultimately, standards of living.
In the traditional view, a tax system should not distort the choice be-
tween investment at home or abroad, following the principle of capital-
export neutrality (CEN). Alternatively (or in addition), a tax system
should not distort the choice facing savers to invest at home or abroad,
following the principle of capital-import neutrality (CIN), which could
be promoted by the exclusive source taxation of cross-border income.
CEN is the principle many international tax experts – in particular, tax
economists – espouse, in part because firms are thought to be more
sensitive to tax differences, so such differences distort firms’ economic
activities to a greater extent than those of investors and savers. In other
words, CEN is more likely to promote global welfare (that is, income)
maximization (for a more detailed discussion of these concepts, see
Chapters 4 and 6 in this volume).
CEN is promoted by residence-based income tax rules that strive to
tax the worldwide income of tax residents but, as Easson and others
recognized, in practice, it is difficult to achieve.10 For instance, countries
provide foreign tax credits only to the extent that the source country
does not impose a higher tax rate than the residence country; no country
provides tax refunds for the payment of higher foreign taxes. Moreover,
all countries permit deferral of the taxation of foreign-source income
earned in foreign subsidiaries until and unless these subsidiaries dis-
tribute profits back to their parent corporations based in residence
countries; CEN would require the accrual taxation of these foreign
earnings, even if no profit repatriation took place.
There is also the practical reality that foreign-source income is often
difficult to tax – particularly in light of taxpayers’ adoption of avoid-
ance and evasion strategies – and, thus, to the extent that source-based
taxation is inhibited, the income will remain untaxed by the residence
country. Easson worried that an emphasis on residence-based taxation
of business profits earned through FDI would lead to the phenomenon
of ‘double non-taxation’ due to difficulties associated with taxing inter-
national mobile capital: ‘In reality, the choice may be between source-
country taxation and no taxation at all.’11
More problematic, in Easson’s view, were the difficulties associated
with obtaining CEN for tax-exempt investors, which form a significant
part of the investment community in many OECD countries. For ex-
ample, Easson noted that, in most of these countries, the majority of
shares of listed companies are held by tax-exempt entities such as pen-
sion funds or by financial institutions that might be subject to a special
taxation regime.12 Because tax-exempt investors are not subject to tax
by the home country, CEN would require a host country also to exempt
such investors, which governments understandably refuse to do since
the foreign investor’s tax-exempt status was the result of a foreign gov-
ernment’s policy objective that might differ significantly from that of
the home country. The tax-exempt investor thus has a greater incentive
to invest domestically, thus inhibiting CEN.
Moreover, Easson worried whether tax rules that followed CEN
would unduly discourage outward FDI:
[W]hat is important is not to be at a disadvantage vis-à-vis competitors.

The principal objective of both capital export neutrality and capital import
neutrality is to promote the free movement of capital, undistorted by con-

siderations of taxation. If the enterprises of one country are disadvantaged
in the markets of other countries due to differences in their total tax bur-
den, then capital mobility is impeded. If the competitive disadvantage is
such that enterprises of a particular country are effectively excluded from
other markets, then consideration of capital export neutrality becomes ir-
relevant. That is to say, the fact that the residence-country tax rules are
neutral as between investing at home or abroad is unimportant if those
same rules have the effect of making outward foreign investment uncom-
petitive. … All of which points to the conclusion that the more appropriate
goal in the case of direct investment is capital import neutrality.13
For these reasons, to promote CIN, Easson supported the exemption

(or territorial) method of taxation for taxing FDI, especially where the
host and home countries have comparable tax rates (for example, the
Canadian ‘exempt surplus’ tax regime achieves this result) instead of
residence-based taxation of foreign business income along with a for-
eign tax credit for foreign taxes paid (the system in place under U.S. tax
law).14 Consistent with this view, some governments are now adopting
or broadening systems that exempt from taxation all foreign-source ac-
tive business income (see also Chapter 4 in this volume).
As mentioned, Easson also accepted that tax laws should encourage
tax neutrality to the greatest extent possible. In addition to the general
source-based taxation of FDI, he suggested that the withholding tax on
cross-border dividends should be abolished when the dividends are
paid to foreign parent companies (as has occurred for European busi-
nesses under the Parent/Subsidiary Directive15). More controversially,
Easson suggested that, to encourage further tax neutrality, source coun-
tries should deny deductions for non-arm’s-length payments of cross-
border interest, rents, and royalties (the revenue increase associated
with these deduction denials would offset, in Easson’s view, any rev-
enue losses associated with the ending of withholding taxes on cross-
border dividends).
Easson recognized that a tax system that tried to promote CEN and/
or CIN would run up against a major problem posed by existing cross-
border tax allocation rules and practices. Multinational firms enjoy re-
turns on their cross-border investments in many different forms – for
example, as branch profits, dividends, interest, rents, royalties, and
capital gains – each of which attracts different tax treatment under the
traditional rules of most bilateral tax treaties (and as advocated by the
OECD model treaty; see Chapters 10, 11, and 12 in this volume).16 In
particular, the significant difference in tax treatment of dividends and
interest distorts financing decisions and provides an incentive for the
use of aggressive tax-avoidance plans that lead to further distortions of
economic activity. The elimination of withholding taxes on dividends
combined with the denial of deductions for non-arm’s-length pay-
ments, in Easson’s view, would go a long way toward reducing these
tax distortions.
3.0 Designing Tax Incentives in a Non-cooperative Setting
3.1 Tax Incentives and FDI: Theoretical and Pragmatic Considerations
A major focus of Easson’s work was the potential impact on FDI of

special tax incentives, which he defined as ‘a special tax provision
granted to qualified investment projects that represents a statutorily fa-
vorable deviation from a corresponding provision applicable to invest-
ment projects in general.’17 From this definition, it is clear that Easson
meant to emphasize legal and non-arbitrary tax incentives for FDI, as
opposed to incentives such as informal tax holidays, which some tax
authorities negotiate with foreign investors.
Easson recognized that theorists and international bodies that advise
on tax matters almost universally dismiss tax incentives, a view whose
theoretical underpinnings he traced in several works.18 Tax incentives
are often portrayed as ‘bad’ because they distort investment decision-
making and, since the tax rules interfere with the workings of the mar-
ket, they promote efficiency losses. Moreover, tax incentives can distort
competition between domestic and foreign firms, potentially harming
local firms that do not receive the tax breaks.
A more pragmatic argument against these incentives is that they
likely do not work. At times, for instance, a tax incentive merely re-
wards a foreign company for engaging in an activity that would have
been conducted even in the absence of the incentive. In this situation,
the host country simply loses out on revenues it would otherwise have
collected. Moreover, because the cost of the incentive often exceeds the
value of its benefits, it produces a kind of ‘winner’s curse,’ a phrase
used to describe the plight of auction winners who, in an environment
of aggressive bidding, overestimate the value of the good.19
Similarly, tax competition via tax incentives can lead to a so-called
race to the bottom as countries respond to competition by offering ever-
larger tax breaks to the point where the reduction in tax revenues makes
it difficult to fund needed public goods and services. In addition, com-
petition that leads to lower tax burdens on mobile cross-border capital
might increase tax burdens on less-mobile factors of production, such
as workers, leading to an overall more regressive income tax system.
For these reasons, many theoreticians worry that unrestricted tax
competition could reduce national and/or global welfare (see section 4
of this chapter for a discussion of emerging collective action responses
to this policy concern). Due to countries’ historic reluctance to engage
in (binding) multilateral cooperative processes, Easson worried that
this competition ultimately would lead to a tax burden of zero on cross-
border capital (as predicted by many economic models). In fact, over
the course of his career, Easson witnessed an explosion in these tax in-
centives around the world. In 1996, for instance, 103 countries report-
edly offered tax incentives for FDI; a subsequent study showed that
30 to 40 new incentives were being introduced each year until 2002.20
Easson himself saw the growth of incentives in his case studies of the
tax systems of dozens of countries (see also Chapters 3, 5, and 9 in this
volume).21
Why do countries continue to adopt tax incentives despite the clear
theoretical opposition to doing so? Easson offered three main expla-
nations for this apparent puzzle.22 First, governments feel pressure to
offer incentives and maintain a tax-hospitable environment for foreign
investors because ‘everyone else does it.’ Second, policy-makers do not
follow the expert views because they remain unconvinced of many of
the purported problems associated with tax incentives. Government of-
ficials in certain countries have daily experience with foreign investors
who bargain hard to obtain special tax breaks for their investments.
These officials, who are responsible for promoting FDI, often try to take
credit for securing investments through the incentives they offer. Eas-
son recognized that an element of self-deception might surround the
belief in the effectiveness of tax incentives for FDI, but also that one
needs to understand the bureaucratic mindset to promote a fuller un-
derstanding of the reasons tax incentives remain popular with so many
governments.
Third, many governments perceive tax incentives as one of their few
options to attract foreign investors. Developing countries, in particular,
might not have the financial resources to offer grants and low-interest
loans to foreign firms. Moreover, in such countries, it is often costly
to improve infrastructure or politically infeasible to fight corruption
to make the environment more amenable for foreign firms. Easson ob-
served that ‘[b]y contrast, tax holidays can be introduced at the stroke
of a pen, and at no apparent cost.’23
While recognizing that some types of taxes can have more influence
than others over investment decision-making, Easson somewhat unu-
sually focused on the effect of tax administration on FDI flows.24 Eas-
son argued that, although it might not play a major part in the initial
decision to invest, a country’s tax administration can be decisive in the
choice of whether to re-invest or expand the initial investment. Once
the initial investment has taken place, investors learn over time wheth-
er the tax laws will be applied in an arbitrary or inconsistent manner
(they also learn whether their investments can attract special tax breaks
or pre-approvals through advance tax rulings). If the investment cli-
mate is hampered by tax uncertainty promoted by incompetent or cor-
rupt tax officials, investors might become reluctant to risk more capital.
Easson challenged the prevailing wisdom, however, when it came to
the use of special incentives versus general corporate income tax rate
reductions to attract FDI. The conventional story is that, to the extent
tax plays a role in investment decisions, it is the general features of
the host country’s tax system that are more important to potential in-
vestors than the special incentives. Easson noted that the only tax that
might have an effect on foreign investors is the actual tax they will be
required to pay, whether the rate is a ‘standard’ corporate income tax
rate or a ‘special’ rate for investments in, say, manufacturing (see Chap-
ter 5). From his survey of how different tax systems attract FDI and the
responses of investors to these efforts, Easson concluded that it mat-
tered little whether the tax incentive was offered through the standard
or special rate.
Easson reframed the debate by asking: given the existence of a rea-
sonable general tax system, do special incentives still have a role to play
in influencing cross-border investment flows?25 He noted, for instance,
an excessive revenue loss could result from a reduction in overall cor-
porate income tax rates to attract FDI (and mainly promote a windfall
benefit to all existing investors). Whether a special tax incentive is pre-
ferred is a ‘difficult question to answer’ that depends on the circum-
stances of the would-be host country and the types of investment it
hopes to attract (see Chapter 3).
3.2 Targeting and Designing Tax Incentives
In Easson’s view, the use of tax incentives to attract FDI will remain
an important aspect of the international tax policy positions of many
governments, particularly in countries with developing or transitional

economies.26 He emphasized that, once the decision has been made to
deploy incentives, perhaps the most important consideration is how to
design and implement the tax rules. In his view, not all tax incentives
are created equal, and he gave much thought to the questions policy-
makers should answer in designing an effective tax incentive (or, at
least, an incentive that will cause the least amount of harm).27
For instance, the incentive ought to be structured so as to target ef-
fectively the investors or investments that qualify for the preferential
tax treatment. In Easson’s view, a narrowly targeted incentive could
reduce its costs while bringing in the types of investment the host coun-
try wishes to attract. He accepted the view that certain types of FDI
(such as financial, research and development, or marketing centres)
are more likely than others to be influenced by tax considerations. To
avoid a scenario in which a tax incentive simply gives a break to inves-
tors who would have invested even in its absence, a properly designed
tax incentive should offer tax reductions to the desired marginal in-
vestments only. While it might be impossible to restrict investments
to those by firms who would not have otherwise invested, Easson be-
lieved that precise targeting of tax incentives could reduce the number
of free-riders.
Governments should take into account a host of other considerations
as well, Easson argued, in considering their use of targeted tax incen-
tives: Should they try to attract new investors or new investments by
foreign firms with existing operations? Should they try to attract in-
vestments only of a significant amount or in particular sectors? Should
they offer incentives to locate investments in a particular region?
Should they offer tax breaks that apply only once stipulated perform-
ance levels – such as a certain level of employment or exports – are
obtained?
A drawback of targeting, in Easson’s view, is that it might increase
tax distortions. Resources could be misallocated to the extent that the
tax incentive brings in particular desired forms of economic activity,
and competition between firms that enjoy the incentives and those that
do not might be distorted. In addition, targeted tax incentives could in-
crease the complexity of the tax law regime, leading to a corresponding
increase in compliance costs for firms and administrative costs for tax
authorities. Easson cautioned, moreover, against the use of a large va-
riety of targeted incentives, each in pursuit of different objectives that
might overlap or conflict, reducing their effectiveness.
Once the target investment or investor has been decided upon, a se-
ries of considerations needs to be factored into the design of a tax incen-
tive. Should the reform of tax laws focus on corporate income tax rates
alone or aspects of the tax base or both? Should a tax holiday be offered
instead? Easson was pessimistic that tax holidays could be effective (see
also Chapter 6 in this volume). He noted a number of disadvantages,
including the revenue losses associated with the holiday, the fact that
many foreign firms move their operations once the holiday expires, the
delaying of expenditures by firms until after the end of the holiday pe-
riod so that the expenses can be deducted from taxable profits, and the
formation of new companies – rather than the expansion of operations
– to take advantage of additional holidays. In his view, the tax holiday
is ‘an extremely crude instrument that is ill suited to achieve most of the
objectives for which it is granted.’28
Once the design features of a tax incentive have been put forward,
governments need to implement the incentive properly. Administrative
considerations include the need to promote automatic or discretion-
ary entitlement to the incentive and the possibility of advance rulings
on potential foreign investments. Additional administrative steps are
needed to monitor compliance to anticipate and prevent abuse of the
tax rules, including phenomena such as ‘round-tripping’ (where do-
mestic investment is disguised as foreign investment to take advantage
of the incentive) and ‘fly-by-night operations’ (where foreign investors
shift their investments to another country as soon as the tax incentive
expires).
Administrative considerations are of particular importance in devel-
oping countries, where poorly designed tax incentives can do the most
harm. Easson noted:
Tax laws are only as effective as their administration. It is especially impor-

tant to keep this in mind when designing tax policies for less developed
countries where, in practice, complex [corporate income tax] provisions
cannot be administered at all … It is more than possible that the failure of
tax incentive programmes in some countries has owed more to unsuitable
design and poor administration than to any inherent general defect in tax
incentives.29
For these reasons, Easson discussed how tax laws that provide for FDI
incentives in developing countries should possess three characteristics:
simplicity, predictability, and stability.30
4.0 Collective Action Responses
4.1 External Constraints on Tax Incentives
International tax law and policy differs from other areas of public in-
ternational law, such as trade, because countries generally have refused
to engage in traditional international law-making via multilateral co-
operation that could impose binding tax rules on the participants (see
also Chapters 7 and 12 in this volume). Indeed, over time, as they have
reduced their non-tax barriers to international trade and investment
through binding multilateral agreements, countries have become corre-
spondingly more keen to protect their tax sovereignty – one of the few
remaining measures over which they can exert near complete political
control. Another challenge arises from the fact that certain countries
currently benefit (or at least they perceive they are benefiting) from the
tax competition, and those that perceive net economic losses or other
detriments if competition were to be tamped down invariably will re-
sist these measures.
Nevertheless, since the 1990s, there have been ongoing reform ef-
forts to address these challenges through enhanced cooperation among
national governments.31 Easson generally supported efforts to impose
limited constraints on international tax laws but, as explored in the next
section, he also feared that the interests of developing countries could
be harmed to the extent that they were downplayed or ignored in the
reform process.
Most prominently, since 1998 the OECD’s tax competition project has
sought to curtail the use of income tax systems to attract a particular
type of FDI – namely, mobile financial and other services investments
(see Chapter 7 in this volume).32 First, the OECD tried to inhibit the de-
ployment of ‘preferential tax regimes’ by Member States and drafted a
list of tax measures in these countries that allegedly infringed its rules:
the OECD now claims that no Member States are now non-conforming.
More recently, the OECD has targeted the ‘harmful tax practices’ of
tax havens, drafting an initial ‘blacklist’ of thirty-five tax havens. Over
time, the OECD project has come to emphasize the need for tax system
transparency along with tax information exchanges between OECD
member countries and these tax havens; in 2002, the OECD created a
model cross-border tax information exchange agreement (TIEA) to be
used as the basis of negotiation for similar agreements between OECD
Member States and non-OECD states.
The European Union has also adopted limited constraints on FDI

competition through its Code of Conduct (see Chapter 7 in this vol-
ume). The Code is not a legally binding and enforceable agreement
but rather a set of principles agreed upon by the EU Member States.
The Code applies only to business taxation and sets out criteria for
determining whether a particular tax regime should be eliminated as
‘harmful.’ The World Trade Organization (WTO) also has had a limited
impact on the development of tax incentives to attract FDI.33 In 1999,
for instance, a dispute resolution panel held that the United States’ for-
eign sales corporation regime violated WTO rules on the use of tax in-
centives to promote exports. In addition, the WTO agreements provide
for the non-discriminatory tax treatment of goods and services that
emanate from foreign countries (see Chapter 13 in this volume).
4.2 Evaluating the Collective Action Responses
In a series of works, Easson traced the problems these reform efforts

pose for the interests of developing countries.34 In particular, he decried
the hypocrisy of the refusal of certain developed countries to abide by
policies and practices they were trying to thrust upon poorer countries.
In 1998, he presciently noted with respect to the OECD project that,
‘[o]nly the recommendations on exchange of information and bank
secrecy are likely to incur strong opposition and that is because they
relate also to the elimination of harmful practices within the member
countries themselves.’35 As of this writing, OECD members such as
Switzerland and Luxembourg continue to refuse to strike down their
banking secrecy laws or to engage in meaningful tax information shar-
ing with other countries (although political pressure by the EU and the
United States has resulted in limited information exchanges where tax
fraud has been alleged).
In Easson’s view, the OECD’s more recent emphasis on TIEAs might
not promote beneficial results, for several reasons. First, TIEAs between
developed and developing countries (especially tax havens) have not
been particularly successful in the past. Developing countries that do
not maintain income tax systems also do not keep records of income
returns and hence have little of use that can be shared with tax authori-
ties of developed countries. In addition, it remains to be seen whether
the OECD’s efforts to encourage tax regime transparency – for exam-
ple, through tax laws that identify the beneficial owners of tax haven
accounts – will support more meaningful tax information exchanges.
Easson also worried that, even if a developed and developing coun-

try did negotiate a TIEA, the latter could not fully implement and en-
force the agreement. A TIEA does not contain reciprocal benefits, as are
found in a full-blown tax treaty, and thus does not provide any real ben-
efits for the developing country or contain incentives to cooperate and
enforce its provisions.36 Easson feared, in other words, that many tax
havens have paid lip service to signing TIEAs without any real inten-
tion of abiding by or enforcing the provisions of such agreements. One
could rationalize their reluctance to implement TIEAs fully on the basis
that they were forced into these agreements by more powerful econo-
mies, some of which have refused to abide by the agreements them-
selves. In addition, targeted tax havens continue to view the initial lack
of consultation between them and the OECD as an affront to their sov-
ereignty.37 In Easson’s view, effective tax reform efforts with develop-
ing countries must include broad and ongoing consultation with the
governments of these countries.38
In his last book on tax and FDI, Easson concluded that recent ini-
tiatives to impose external constraints on tax incentives increasingly
should be taken into account in the design of tax incentives. He wrote,
‘What remains to be seen is whether those constraints may have the ef-
fect of reversing the trend toward more, bigger and better incentives.’39
Countries might simply alter their tax policies to conform with the new
rules while continuing efforts to attract FDI through tax inducements.
For instance, instead of offering a tax holiday to attract export-oriented
industries, more and more countries might simply exempt foreign-
source active business income from taxation (see Chapter 1 in this
volume). Similarly, to avoid charges of ‘ring-fencing,’ countries might
alter their legislation so that any tax breaks are granted to both foreign
and domestic investors, especially if these countries have few domestic
economic activities to fence off (see Chapter 3 in this volume). Others
might engage increasingly in ‘fair’ competition by lowering their gen-
eral corporate income tax rates. Another worry is that countries might
increase their offers of non-tax incentives such as direct grants or other
incentive packages, which generally remain untouched by reform ef-
forts even though ‘financial and fiscal incentives are to some extent in-
terchangeable and should be considered together.’40
5.0 Conclusion
Alex Easson’s many scholarly contributions in the area of tax and for-
eign direct investment make possible only a brief summary of some of
his main ideas, which necessarily cannot be an effective substitute for

Easson’s own writings. Perhaps, however, it can serve as an intriguing
appetizer that whets the reader’s appetite for the main course.
Over the course of his career, Easson dished up a variety of works
critically examining the law and policy issues surrounding the theory
and practice of taxing FDI. These works often sought to integrate cur-
rent economic thought with a pragmatic or contextual understanding of
the nature of international tax reform and the political and other trade-
offs associated with attempting to attract inward FDI via tax regimes.
He believed that, given the reality of a non-cooperative government
setting, governments would continue to use these regimes, including
the development of tax incentives, to attract FDI, at least for the foresee-
able future. As a result, he focused on the appropriate design features
that need to be built into tax laws. A properly designed tax incentive, he
argued, could reduce efficiency losses caused by the distortion of cross-
border economic activity and might be a more desirable policy option
than, say, broad corporate income tax rate reductions.
In his writings on tax and FDI, Easson often focused on the plight of
developing and transitional economies, where tax incentives for FDI
have proliferated in recent decades. By taking account of the economic,
political, cultural, and other factors of these countries, tax reform ef-
forts could be tailored to their specific needs and be better able to help
them attract much-needed international capital. Still, Easson worried
that, in the process of international tax reform, the interests of these
countries too often are downplayed in favour of the interests of wealth-
ier economies. Despite these misgivings, in what appears to be a widely
shared sentiment among veterans of the international tax policy scene,
Easson remained a hopeful pessimist: he felt, for instance, that the very
real barriers to effective tax reform with developing countries might be
overcome through enhanced consultation.
Notes
1 He summarized many of his views in two main works. See Alex Easson,
Tax Incentives for Foreign Direct Investment (The Hague: Kluwer Law Inter-
national, 2004); and idem, Taxation of Foreign Direct Investment: An Introduc-
tion (The Hague: Kluwer Law International, 1999).
2 See David Williams, ‘Book Review of Taxation in the European Community
by A.J. Easson’ (1994) 19 European L.R. 337. The two books were A.J. Eas-
son, Tax Law and Policy in the EEC (London: Sweet and Maxwell, 1980);
and idem, Taxation in the European Community (London: Athlone Press,

1993).
3 See Alex J. Easson, ‘Fiscal Policy’ in Dominik Lasok and Panayotis Sol-
datos, eds., The European Communities in Action (Brussels: Bruylant, 1981),
419 at 436–7; idem, ‘EEC Directives for the Harmonisation of Laws: Some
Problems of Validity, Implementation and Legal Effects’ (1981) Year Book
of European Law 1; idem, Tax Law and Policy in the EEC at 401; idem, ‘Fis-
cal Discrimination: New Perspectives on Article 95 of the EEC Treaty’
(1981) 18 Common Market L.R. 521; and idem, ‘The British Tax Reforms: A
Step towards Harmonization’ (1971) 8 Common Market L.R. 325.
4 For an accessible and thorough review of European reform efforts from
1957 onward, see Alex Easson, ‘Harmonization of Direct Taxation in the
European Community: From Neumark to Ruding’ (1992) 40 Can. Tax J.
600.
5 Alex Easson, ‘Company Tax Reform and the Inter-Nation Allocation of Tax
Jurisdiction’ in J.G. Head and R. Krever, eds., Company Tax Systems (Mel-
bourne: Australian Tax Research Foundation, 1997) at 285 (considering
the international allocation of corporate income tax revenues). See also A.
Easson, ‘Taxing International Income’ in R. Krever, ed., Tax Conversations: A
Guide to the Key Issues in the Tax Reform Debate (London: Kluwer Law Inter-
national, 1997) at 419 (discussing the existing international tax base alloca-
tion rules and the feasibility of reform alternatives).
6 See Easson, Taxation of Foreign Direct Investment: An Introduction at 35–6,
39–40; see also idem, ‘Taxing International Income’ at 429–30, 441–3.
7 See Easson, ‘Company Tax Reform’ at 318; see also idem, ‘A New Interna-
tional Tax Order: Responding to the Challenge’ (1991) 45 Bulletin for Int’l
Fiscal Documentation 465 (arguing that direct investment reform efforts
should focus on achieving CIN).
8 Easson, Taxation of Foreign Direct Investment: An Introduction at 179.
9 This view by Easson and other ‘Contextualists’ influenced my claim that
international tax analysts can be classified broadly into different categories
that emphasize certain modes of analysis that ultimately influence policy
prescriptions. See Arthur J. Cockfield, ‘Purism and Contextualism within
International Tax Law Analysis: How Traditional Analysis Fails Develop-
ing Countries’ (2007) 5 eJournal of Tax Res. 199.
10 Easson, ‘Company Tax Reform’ at 296.
11 Alex Easson, ‘Fiscal Degradation and the Inter-National Allocation of Tax
Jurisdiction’ (1996) 5 EC Tax Rev. 5 at 112–3.
12 Easson, ‘Company Tax Reform’ at 294–6.
13 Ibid. at 300.
14 Ibid. at 301. In contrast to the taxation of FDI, Easson suggested that for-
eign-source portfolio income should continue to be taxed on a residence-
based basis along with credits for foreign taxes paid to the source country.
15 See Council Directive of 23 July 1990 on the common system of taxation
applicable in the case of parent companies and subsidiaries of different
Member States (90/435/EEC).
16 Easson, ‘Company Tax Reform’ at 303.
17 Easson, Tax Incentives for Foreign Direct Investment at 3 [emphasis in origi-
nal].
18 Ibid. at 12–33.
19 Ibid. at 102.
20 Ibid. at 85.
21 See, for example, A.J. Easson, The Design of Tax Incentives for Direct Invest-
ment: Some Lessons from the ASEAN Countries (Toronto: Ontario Centre for
International Business, 1993); Alex Easson and David Holland, Taxation
and Foreign Direct Investment: The Experience of the Economies in Transition
(Paris: Organisation for Economic Co-operation and Development, 1995);
Alex Easson, ‘Duty-Free Zones and Special Economic Zones in Central and
Eastern Europe and the Former Soviet Union’ (1998) 16 Tax Notes Int’l 445
(examining the use of tax incentives, duty-free zones and special economic
zones to attract FDI); Howell H. Zee et al., Vietnam: An Assessment of the
Major Taxes (Washington, DC: International Monetary Fund, 2004) (assess-
ing five areas of Vietnam’s tax system, including corporate income tax and
investment tax incentives).
22 See Easson, Tax Incentives for Foreign Direct Investment at 85–7.
23 Ibid. at 86.
24 Ibid. at 59–60.
25 Ibid. at 81.
26 A.J. Easson, ‘Tax Competition and Investment Incentives’ (1997) 2 EC Tax
J. 63 (arguing that there is greater justification for the use of tax incentives
by less-developed countries, at least for a limited period, than by devel-
oped countries).
27 See, especially, Alex Easson, ‘Tax Incentives for Foreign Direct Investment,
Part I: Recent Trends and Countertrends’ (2001) 55 Bulletin for Int’l Fiscal
Documentation 266 (reviewing the types of investments that tax incentives
are designed to attract); idem, ‘Tax Incentives for Foreign Direct Invest-
ment, Part II: Design Considerations’ (2001) 55 Bulletin for Int’l Fiscal
Documentation 365 (analysing the inefficient and ineffective design char-
acteristics of various types of tax incentives).
28 For an evaluation of tax holidays, see Easson, Tax Incentives for Foreign
Direct Investment at 134–142 (concluding that tax holidays are among the
least effective and least efficient of all types of tax incentives).
29 A.J. Easson, ‘Tax Incentives for Foreign Direct Investment in Developing
Countries’ (1992) 9 Australian Tax Forum 435 (analysing the types of tax
incentives that are most likely to be successful in attracting FDI to devel-
oping countries).
30 Ibid. at 435–7.
31 For a general review of external constraints, see, for example, Easson, Tax
Incentives for Foreign Direct Investment at 199–229.
32 For discussion, see, for example, Easson, ‘Harmful Tax Competition: The
EU and OECD Responses Compared’ (1998) 3 EC Tax J. 1.
33 See Easson, Tax Incentives for foreign Direct Investment at 200–7.
34 A.J. Easson, ‘State Aid and the Primarolo List’ (2001) 5 EC Tax J. 111; idem,
‘Harmful Tax Competition: An Evaluation of the OECD Initiative’ (2004)
34 Tax Notes Int’l 1037 (concluding that the project is failing its original
objective to constrain preferential tax regimes).
35 Easson, ‘Harmful Tax Competition: The EU and OECD Responses Com-
pared’ at 13.
36 See Alex Easson, ‘Do We Still Need Tax Treaties?’ (2000) 54 Bulletin for Int’l
Fiscal Documentation 623.
37 See Easson, ‘Harmful Tax Competition: An Evaluation’ at 1062–3.
38 Ibid. at 1045.
39 See Easson, Tax Incentives for Foreign Direct Investment at 200.
40 Easson, ‘Tax Competition and Investment Incentives’ at 87.
3 China’s Tax Incentive Regime for
Foreign Direct Investment:
An Eassonian Analysis
andrew halkyard and ren linghui
1.0 Introduction
Tax incentives are commonly used as a policy tool to attract and re-
tain foreign direct investment (FDI). As a report by the Organisation for
Economic Co-operation and Development (OECD) puts it, tax incen-
tives are ‘measures designed to influence the size, location or industry
of an FDI investment project by affecting its relative cost or by alter-
ing the risks attached to it through inducements that are not available
to comparable domestic investors.’1 Alex Easson took a broader view,
which we adopt in this chapter, explaining that tax incentives confer
benefits on foreign investors in the form of tax expenditures that repre-
sent a statutorily favourable deviation from the normal benchmarks of
a country’s tax system.2 Compared to direct financial incentives, such
as loan schemes, grants, and subsidies,3 tax or fiscal incentives are a
more realistic policy tool for developing countries with which to attract
FDI, because there is no immediate need for governments to find cash
to fund relevant new investment projects (see also Chapter 2 in this
volume).4
China was neither an exception nor a laggard in granting tax incen-
tives to promote FDI. Its tax incentive regime took full shape in 1991
with the enactment of the Income Tax Law of the People’s Republic of China
Concerning Enterprises with Foreign Investment and Foreign Enterprises
(hereafter referred to as FEITL).5 Most of the usual forms of tax incen-
tives can be found in this law and its Implementing Rules.6 Some of
the more important included tax holidays and reduced rates for enter-
prises engaged in production; tax refunds for reinvesting profits; accel-
erated depreciation; and a virtual smorgasbord of ‘tax breaks’ for many
Exploring the Variety of Random
Documents with Different Content
P. 189, l. 13: comparer.—Ms. B 3: comprer.
P. 189, l. 16: l’Aigle.—Ms. B 3: l’Agle.
P. 189, l. 24: en uns biaus plains.—Ms. B 3: en ung beau plain.
P. 190, l. 2: trop.—Ms. B 3: très.
P. 190, l. 24: Carbeniaus.—Ms. B 3: Carbonneau.
P. 190, l. 25: de Segure.—Ms. B 3: de Seure.
P. 190, l. 25: Foudrigais.—Ms. B 4: Soudrigans. Fº 168.
P. 190, l. 26: de Spargne.—Ms. B 3: d’Espaigne. Fº 181 vº.
P. 190, l. 26: Fallemont.—Ms. B 4: Sallemont. Fº 168.
P. 190, l. 28: Radigos.—Ms. B 4: Rodiges.
P. 191, l. 18: très.—Ms. B 3: dès. Fº 181 vº.
§ 368. P. 191, l. 24: Li rois.—Ms. d’Amiens: Quant li roys de

Franche vei que nuls n’en aroit et qu’il fuioient devant lui, si laissa le
cache et s’en vint mettre le siège devant le ville et le chité d’Ewruez.
A Ewrues a ville, chité et castiel, qui pour le tens se tenoit dou roy de
Navarre. Et en estoit chappittainne ungs chevaliers de Navare, qui
s’appelloit messires Jehans Carbeniaux, apers hommes d’armes
durement. Si assega li roys de France enssi Ewruez et y fist
pluisseurs grans assaux et fors, et constraindi moult chiaux de le
ville.
En ce tamps que li siègez se tenoit devant Ewruez, chevauchoit
en le Basse Normendie, environ Pontourson, messires Robers
Canollez, qui jà estoit mout renoumméz, et tenoit grant route et tiroit
à venir deviers le duch de Lancastre pour renforchier leur armée, et
avoit bien trois cens combatans englès, allemans et gascons, qui li
aidoient à gueriier. Quant il entendi que li dus de Lancastre estoit
retrès, et messires Phelippes de Navare, si se retraist ossi et s’en
vint asegier, entre Bretaingne et Normendie, un castiel que on
appelloit Danfronth.
Li roys Jehans de Franche, qui se tenoit devant Ewruez, fist tant
que cil de le ville d’Ewruez li ouvrirent leurs portez, et entrèrent ses
gens dedens, mès pour ce n’eurent il mies le chité ne le castiel; car
les gens d’armes navarois se retraissent layens et se deffendirent
mieux que devaut, et s’i tinrent depuis moult longement, tant qu’il
coummenchièrent moult à afoiblir de pourveances. Quant il virent
qu’il ne seroient reconforté de nul costé, et que li roys de France ne
se partiroit point de là, si les aroit, si coummenchièrent à tretiier
deviers les marescaux. Et se portèrent tretiet enssi que il se
partiroient, cil qui partir se voroient, le leur devant yaux, et non plus
ne autrement, et se trairoient quel part qu’il voroient. Li roys de
Franche, qui là se tenoit à grant frait, leur acorda, car encorrez y
avoit fuisson de castiaux à prendre, dont se partirent messires
Jehans Carbeniaux et li Navarroix, et se traissent tout dedens le fort
castiel de Bretoeil. Et li roys de Franche fist prendre le possession
de Ewrues par ses marescaux. Fº 102.
P. 191, l. 27: devant.—Mss. B 3, 4: devers. Fº 181 vº.
P. 191, l. 27: d’Evrues.—Mss. B 4, 5: d’Ewrues. Fº 168.
P. 192, l. 2: le poursieute.—Ms. B 3: la poursuite.
P. 192, l. 6: avant.—Mss. B 3, 4: devant.
P. 192, l. 10: assés.—Le ms. B 3 ajoute: de nouvelle.
P. 192, l. 15: apressé.—Ms. B 3: oppressez.—Ms. B 4: appressés.
Fº 168.
P. 192, l. 18: le.—Ms. B 4: les.
P. 192, l. 18: si.... prist.—Ms. B 3: conseillé de les prendre à
mercy.
P. 193, l. 1: apressé.—Ms. B 3: oppressez. Fº 182.
P. 193, l. 8: Carbiniel.—Mss. B 3, 4: de Carbonnel.
P. 193, l. 9: Guillaume de Gauville.—Ms. B 6: Et trop bien le garda
et le deffendy messire Carbeniaus, et ossy messire Pière de
Sakenville, qui y sourvint à tout quarante lanches. Encores estoit le
duc de Lenclastre, messire Phelippe de Navare et messires
Godefrois de Harcourt, en Normendie; et gerrioient le pais vers
Pontoise et devers Bretaigne, et y firent en ce tamps moult de
damaige. D’aultre part, avoit une grant guerre sur le pais de
Bretaigne, entre Auvergne et Limosin, qui se commença à monter,
que on appelloit Robert Canolle, et gerrioit et rançonnoit durement le
pais. Fº 528.
P. 193, l. 9: Gauville.—Ms. B 3: Graville. Fº 182.
P. 193, l. 9: sist.—Ms. B 3: demoura.
P. 193, l. 14: sauvement traire.—Ms. B 3: aller à sauveté.
P. 193, l. 26: reut.—Ms. B 3: reeut.
P. 193, l. 28: Gauville.—Ms. B 3: Graville.
§ 369. P. 193, l. 30: Apriès.—Ms. d’Amiens: Et puis alla (le roi

Jean) par devant le castiel de Routtez; se n’y furent que six jours
quant il se rendirent. Et de là endroit li roys de Franche et ses gens
vinrent devant le fort castiel de Bretuel; si le assegièrent de tous
costéz, car on le poet bien faire pour tant qu’il siet à plainne terre. Si
y fist li roys de France amener des grans enghiens de le chité de
Roem, et les fist lever devant le forterèche. Et jettoient chil enghien
jour et nuit au dit castiel et moult le grevèrent, mèz cil qui dedens
estoient, se tinrent comme vaillans gens.
Dou dit castiel de Bretuel estoit souverains et cappittainnes, de
par le roy de Navarre, uns très bons escuiers navarois qui s’appelloit
Sansses Lopins. Chilz tint, deffendi et garda la fortrèce contre lez
Franchois plus de sept sepmainnez. En ce terme et priès chacun
jour y avoit pluisseurs assaux et moult d’escarmuches et des grans
appertisses d’armes faittes. Et furent tout empli li fossé de environ le
fortrèce, de bos et de velourdez que on y fist par les villains dou
pays amenner et chariier rés à rés de la terre. Et quant on eut cela
fait, on fist lever et carpenter ung grant escaufaut et amener à roez
jusquez as murs dou dit castel; et avoit dedens deux cens qui se
vinrent combattre main à main à chiaux de dens. Là veoit on tout le
jour grans appertisses d’armes. Finablement, chil de dens trouvèrent
voie et enghien, par quoy chilz escauffaux fu tous desrous; et y eut
perdu de chiaux de dedens pluisseurs bonnes gens d’armez, dont
che fu dammaigez. Si les laissa on ester de cel assaut, et lez
constraindi on d’autrez enghiens qui jettoient pierres et mangonniaux
nuit et jour à le dite fortrèce. Fº 102.
P. 194, l. 1: par devant.—Ms. B 3: par devers.
P. 194, l. 2: siège.—Ms. B 6: Dou dit castiel de Bretuel estoit
souverain capitaine de par le roy de Navare ung très bon escuiers
navarois, qui s’apelloit Sanses Lopins. Chil deffendy et garda le
fortresse plus de douze sepmaines. Fº 525.
P. 194, l. 4: plentiveus.—Ms. B 3: plantureux. Fº 182.—Ms. B 4:
plentureux. Fº 168 vº.
P. 194, l. 11: livrées.—Mss. B 3, 4: livres.
P. 194, l. 12: homs.—Ms. B 3: vassal et homme subget.
P. 194, l. 14: dan.—Ms. B 3: damp.
P. 194, l. 15: Chastille.—Mss. B 3, 4: Castille.
P. 194, l. 17: saus.—Ms. B 3: saultz.—Ms. B 4: sauls.
P. 194, l. 20: soutillier.—Ms. B 3: subtilizer.
P. 194, l. 23: yaus.—Ms. B 3: à leurs adversaires.
P. 194, l. 28: berfroit.—Ms. B 3: beufroit.—Ms. B 4: bierefroit.—Ms.
B 5: beffroy. Fº 372 vº.
P. 195, l. 1: cat.—Ms. B 3: chat.
P. 195, l. 2: Entrues.—Ms. B 3: Cependent. Fº 182 vº.
P. 195, l. 5: reverser.—Ms. B 3: renverser.
P. 195, l. 5 et 6: estrain.—Ms. B 3: paille.
P. 195, l. 10: bierefroi—Ms. B 3: beufroy.
P. 195, l. 19: cel berfroi.—Ms. B 4: ce biaufroy. Fº 169.
P. 195, l. 29 et p. 196, l. 10: Et de.... cose.—Toute cette fin du §
369 manque dans le ms. B 5.
P. 195, l. 28: ensonniièrent.—Ms. B 3: mirent en neccessité.
P. 195, l. 30: ou toit.—Ms. B 3: au cuyr.—Ms. B 4: ou cuier.
P. 196, l. 8: à tous lés.—Ms. B 3: de tous coustés.
§ 370. P. 196, l. 11: En ce temps.—Ms. d’Amiens: Li prinches de

Galles se tenoit en le chité de Bourdiaux et eut desir de chevauchier
en Franche si avant que de passer le rivierre de Loire, et de venir en
Normendie deviers son cousin le duc de Lancastre, qui faisoit la
guerre pour les Navarrois, car bien estoit informés et segnefiés que il
avoit grans aliances entre le roy son père et monseigneur Phelippe
de Navarre. Si fist tout le temps ses pourveancez de touttez coses.
Et quant li Sains Jehans aprocha, que li bleds sont sur le meurir et
qu’il fait boin hostoiier, il se parti de Bourdiaux à belle compaignie de
gens d’armes, trois mille armures de fier, chevaliers et escuiers, tant
d’Engleterre comme de Gascoingne, car d’estraigniers y eut petit, et
estoient quatre mille archiers et six mille brigans de piet.
Or vous voeil compter les plus grant partie des seigneurs qui en
ceste chevauchie furent, et premierement d’Engleterre: li comtez de
Warvich, li comtes de Sufforch (chil estoient li doy marescal de
l’hoost), et puis li comtes de Sallebrin et li comtes d’Askesufforch,
messires Renaux de Gobehen, messires Richars de Stamfort,
messires Jehans Camdos, messires Bietremieux de Broues,
messires Edouars Despenssiers, messires Estievenes de
Gouseigon, li sires de le Warre, messirez Jamez d’Audelée,
messires Pières d’Audelée, ses frèrez, messires Guillaume Fil
Warine, li sirez de Bercler, li sires de Basset, li sires de Willebi;
Gascons: li sires de Labret, lui quatrime de frèrez, messires Ernaut,
messires Ainmemon, et Bemardet li mainnés, li sirez de Pumiers, lui
tiers de frèrez, messires Jehans, messires Helies et messires
Ainmemons, li sirez de Chaummont, li sirez de l’Espare, li sirez de
Muchident, messires Jehans de Grailli, cappittainnes de Beus,
messires Aimeris de Tarse, li sirez de Rosem, li sirez de Landuras, li
sirez de Courton. Et encorres y furent d’Engleterre messires
Thummas de Felleton et Guillaummes, ses frères, et li sirez de
Braseton. Et se y furent li sires de Salich et messires Danniaux
Pasèle; et de Haynnau: messires Ustasses d’Aubrechicourt et
messires Jehans de Ghistellez. Encorrez y eut pluisseurs chevaliers
et escuiers que je ne puis mies tout noummer. Si se departirent de le
chité de Bourdiaux à grant arroy, et avoient très grant charroy et
grosses pourveanches de tout ce que il besongnoit à gens d’armes.
Et chevauçoient li seigneur à l’aise de leurs cevaux trois ou quatre
lieuwez par jour tant seullement, et entrèrent en ce bon pays
d’Aginois et s’adrechièrent pour venir vers Rochemadour et en
Limozin, ardant et essillant le pays. Et quant il trouvoient une crasse
marce, il y sejournoient trois jours ou quatre, tant qu’il estoient tout
rafresci et leurs chevaux. Et puis si chevauchoient plus avant et
envoioient leurs coureurs courir et fourer le pays entours yaulx bien
souvent dix lieuwez de large à deux costés. Et quant il trouvoient
bien à fourer, il demoroient deux jours ou troix et ramenoient en leur
host grant proie de touttez bestes, dont il estoient bien servi; et
largement trouvoient de vins plus qu’il ne leur besongnast, dont il
faisoient grant essil. Ensi chevaucièrent tant par leurs journées qu’il
entrèrent en Limozin; si trouvèrent le pays bon et gras, car, en
devant ce, il n’y avoit euv point de guerre.
Ces nouvellez vinrent au roy de France, qui se tenoit devant
Evrues, coumment li Englèz li ardoient et essilloient son pays. Si en
fu durement courouchiéz, et se hasta moult d’assaillir et constraindre
ciaux du castiel d’Evruez, affin que plus tost il pewist chevauchier
contre ses ennemis. Tant lez appressa li roys Jehans, que messires
Jehans Carbiniaux, cappitaines d’Evrues, rendi le dit castiel parmy
che qu’il s’en pooit partir, lui et li sien, sauvement et sans peril, et
portèrent tout ce qui leur estoit. A ce tretié s’acorda li roys Jehans
plus legierement pour ce qu’il volloit chevauchier ailleurs; si prist le
fort castiel d’Evrues et envoya dedens son marescal monseigneur
Ernoul d’Audrehen pour ent prendre le saisinne, et mist ung
chevalier à cappittainne de par lui, de Kaus, qui s’appelloit messire
Tournebus. Et puis deffist son siège et s’en revint à Roem, et ne
donna à nullui congiet, car il volloit ses gens emploiier d’autre part.
Si ne sejourna gairez à Roem, mèz s’en vint à Paris. Fº 102 vº.
Or avint que li sirez de Montegny en Ostrevant, qui s’appelloit
Robers, li et uns siens escuiers qui se noummoit Jakemez de
Winclez allèrent un jour à heure de relevée esbattre sus ces terréez
autour dou castiel pour adviser et regarder le fortrèce. Si allèrent
trop follement, car il furent apercheu de ciaux de le garnison; si
yssirent hors aucuns compaignons par une posterne qui ouvroit sus
lez fossés. Là furent assailli li sirez de Montegny et sez escuiers, et
combatu tellement que pris li sirez et mors li escuiers: de laquelle
prise li roys Jehans fu durement courouchiés, mès amender ne le
peult tant qu’à ceste fois. Ne demoura gairez de tamps apriès que
chil de dedens eurent consseil d’iaux rendre, sauve leurs viez et le
leur, car il virent bien qu’il ne seroient secouru ne comforté de nul
costé. Si tretiièrent deviers le roy Jehan si doucement qu’il lez prist à
merchy, et se partirent sans dammaige du corps, mès il
n’enportèrent riens dou leur, et si rendirent tous leurs prisonniers:
parmy ce rendaige fu li sirez de Montegny delivrés. Enssi eult li roys
Jehans le fort castel de Bretuel, que li Navarois avoient tenu contre li
moult vaillamment. Si emprist li dis roys le saisinne et possession, et
le fist remparer et y mist gens et gardez de par lui, et puis se retraist
devers le chité de Chartrez et touttes ses hoos pour yaux rafrescir.
Or parlerons dou prince de Galles, et d’un grant esploit d’armez et
haute emprise qu’il fist en celle saison sus le royaumme de France.
Fº 102.
P. 196, l. 12: se departi.—Ms. B 6: Le prinche de Galles se tenoit à
Bourdiau et eult desir de chevauchier en Franche et sy avant, che
disoit, que de passer la rivière de Loire et venir en Normendie
devers son cousin le duc de Lenclastre et monseigneur Phelippe de
Navare, pour aydier à reconquerre les castiaulx perdus que le roy
Jehan avoit pris sur l’irtaige du roy de Navare. Sur celle entente et
en celle meisme saison que le roy de Franche avoit mis le siège
devant Bretuel, environ le Saint Jehan Baptiste l’an mil trois cens
cinquante six que les blés et les avaines sont meurs à camps et qu’il
fait bon ostoiier pour hommes et pour chevaulx, sy party le dit
prinche de Bourdiaus à belle compaignie de gens d’armes, trois mille
lanches de chevaliers et d’escuiers de Gascongne et de Engleterre
et quatre mille archiés et cinq mille bidaus et brigans de piet.
Or vous voel jou nommer la plus grant partie des signeurs qui en
che voiaige furent, et prumiers: d’Engleterre, le conte de Wervich, le
conte de Sallebry, le conte de Sufort, le conte d’Asquesouffort,
messire Renaus de Gobehem, messire Richart de Stanfort, messire
Jehan Candos, messire Bertran de Bruch, le droit sire Despensier,
messire Edouart, messire Estiène de Gonsenton, messire Gillame
Fil Warine, messire James, messire Pières d’Audelée, le sire de le
Ware, le sire de Willeby, le sire de Berclo, messire Thomas et
messire Guillaume de Fellton, le sire de Brasertons; et de cheulx de
Gascongne: le sire de Labret, luy quatrième de frères, messire
Ernault, messire Amemons et Bernaudet le maisné, le sire de
Pumiers, luy troisième de frères, messire Jehan, messire Helies et
messire Ammemons, le sire de Caumont, le sire de Lespare,
messire Jehan de Grailly le capital de Beus, messire Aimery de
Tharse, le sire de Muchident, le sire de Condon, le sire de Salich,
messire Daniaus Pasèle; et deus chevaliers de Haynau: messire
Eustasses d’Aubrechicourt, messire Jehan de Ghistellez, et
pluiseurs aultres chevaliers que escuiers, que je ne puis mies tous
nommer. Et se partirent de Bourdiaus en grant arroy et en bonne
conduite. Et estoient marisal de l’ost le conte de Wervich et le conte
de Suffort, et avoient très grant caroy et très belles pourveanches. Si
chevauchèrent chil signeurs et leur ost à petite[s] journées à l’aise
de leurs chevaulx, et s’esploitèrent tant qu’il entrèrent en Berry, où il
trouvèrent bon pais et cras; se s’y arestèrent et sy commenchièrent
à faire moult de desroy. Fos 528 à 530.
P. 196, l. 13: sus Garone.—Ms. B 3: sur Gironde. Fº 182 vº.
P. 196, l. 14: pourveances.—Ms. B 3: provisions.
P. 196, l. 17: et.... Bretagne.—Ms. B 3: devers les frontières de
Navarre.
P. 196, l. 19: li rois.—Le ms. B 3 ajoute: d’Angleterre.
P. 196, l. 21: istance.—Ms. B 3: entention.
P. 196, l. 23: parmi.—Ms. B 3: sans.
P. 197, l. 2: Bregerach.—Ms. B 3: Bragerac.
P. 197, l. 2: et puis.... Roerge.—Ms. B 3: et puis entrèrent ou pais
de Rouergue.
P. 197, l. 8: essilliet.—Ms. B 3: exillé.
P. 197, l. 8: Auvergne.—Ms. B 4: Avergne. Fº 169.
P. 197, l. 10: d’Allier.—Ms. B 5: d’Aliec. Fº 372 vº.
P. 197, l. 13: Des.... trouvoient.—Ms. B 4: De vivres recouvroient
tant li Englès et li Gascon que il....
P. 197, l. 18: efforciement.—Ms. B 3: à grant puissance. Fº 183.
P. 197, l. 27: Montegni.—Ms. B 3: Montigny.
P. 197, l. 27: Ostrevant.—Ms. B 6 ajoute: qui estoit biau chevalier,
preu et hardis. Fº 525.
P. 197, l. 31: au matin.—Ms. B 3: devers le matin.
P. 197, l. 32: perceu.—Ms. B 3: aparceuz.—Ms. B 4: percheu.
Fº 169 vº.
P. 198, l. 3 et 4: deffendirent.—Le ms. B 3 ajoute: vaillamment.
P. 198, l. 5: conforté.—Ms. B 3: secouruz.
P. 198, l. 6: peril.—Ms. B 3: dangier.
P. 198, l. 8: parmi.—Ms. B 6: le roielle du genoul. Fº 526.
P. 198, l. 15 et 16: confors.—Ms. B 3: secours.
P. 198, l. 20: tanés.—Ms. B 3: ennuyé. Fº 183.—Ms. B 5: tenné.
Fº 373.
P. 198, l. 24: yaus.—Ms. B 6: sur leur chevaulx. Et ensy fu le
castiel de Bretuel pris, et rendirent le sire de Montigny qui
maisement avoit esté poursongniés et medechinés de se blechure
en prison: dont il demora afollés d’une gambe, tant qu’il vesqui.
Fº 527.
P. 198, l. 25: Chierebourch.—Ms. B 3: Cherbourg.
P. 198, l. 26: conduit.—Ms. B 3: leur saufconduit.
P. 198, l. 27: le saisine.—Ms. B 3: la possession.
P. 198, l. 30: les pensoit.... part.—Ms. B 5: avoit entencion de les
emploier assez briefment. Fº 373.
SUPPLÉMENT AUX VARIANTES.
Le texte que nous publions ci-après comme supplément aux

variantes de ce volume, est fourni par les mss. A ou mss. de la
première rédaction proprement dite[302]; il correspond à cette partie
des mss. B ou mss. de la première rédaction revisée où Froissart
raconte les événements compris entre les années 1350 et 1356,
c’est-à-dire aux paragraphes 321 à 370 inclusivement. Ce texte n’est
que la reproduction, parfois abrégée[303], le plus souvent littérale[304],
des Grandes Chroniques de France, à tel point que le savant qui
voudra donner un jour une édition critique de ce dernier ouvrage,
devra comprendre cette partie des mss. A dans son travail de
classification et de collation. Toutefois, comme le fragment emprunté
aux Grandes Chroniques par les mss. A, qui sont au nombre de 40,
est devenu en quelque sorte partie intégrante de ces manuscrits,
comme il figure à ce titre dans les éditions de Vérard, de Sauvage,
de Dacier, et même dans la première édition de Buchon, il a semblé
indispensable de le reproduire, au moins comme supplément, dans
une édition complète des Chroniques de Froissart.
§§ 321 à 370.—Mss. A[305]: En l’an mil trois cens cinquante, en
l’entrée du mois d’aoust, se combati monseigneur Raoul de Caours
et plusieurs autres chevaliers et escuiers jusques au nombre de six
vingt hommes d’armes ou environ, contre le capitaine du roy
d’Engleterre en Bretaigne appellé messire Thomas d’Augorne,
anglois, devant un chastel appelé Auroy. Et fu le dit messire Thomas
mort, et toutes ses gens jusques au nombre de cent hommes
d’armes ou environ.
Item, au dit an trois cens cinquante, le dymenche vingt deuxième
jour du dit mois d’aoust, le dit roy de France mourut à Nogent le Roy
près de Coulons; et fu apporté à Nostre Dame de Paris. Le jeudi
ensievant, fut enterré le corps à Saint Denis, au costé senestre du
grant autel; et les entrailles en furent enterrées aus Jacobins de
Paris; et le cuer fu enterré à Bourfontaine en Valois.
Item, ou dit an, le vingt sixième jour de septembre, un jour de
dimenche, fu sacré à Reins le roy Jehan, ainsné filz du dit roy
Phelippe. Et aussi fu couronnée le dit jour la royne Jehanne, femme
au dit roy Jehan. Et là fist le dit roy chevaliers, c’est assavoir Charles
son ainsné, dalphin de Vienne, Loys, son second filz, le conte
d’Alençon, le comte d’Estampes, monseigneur Jehan d’Artoys,
messire Phelippe, duc d’Orliens, frère du dit roy Jehan et duc de
Bourgoingne, filz de la dite royne Jehanne de son premier mari, c’est
assavoir de monseigneur Phelippe de Bourgoingne, le comte de
Dampmartin et plusieurs autres. Et puis se parti le dit roy de la dite
ville de Reins le lundi au soir et s’en retourna à Paris par Laon, par
Soissons et par Senlis. Et entrèrent les diz roy et royne à Paris à très
belle feste le dimanche dix septième jour d’octobre après ensievant
après vespres; et dura la feste toute celle sepmaine. Et puis demora
le roy à Paris à Neelle au Palais jusques près de la Saint Martin
ensievant, et fist l’ordenance de son parlement.
Item, le mardi seizième jour de novembre après ensievant, Raoul,
conte d’Eu et de Guines, conestable de France, qui nouvellement
estoit venu d’Engleterre, de sa prison en laquelle il avoit esté depuis
l’an quarante six qu’il avoit esté pris à Caen, fors tant qu’il avoit esté
eslargi pour venir en France par plusieurs fois, fu pris en l’ostel de
Neelle à Paris, là où le dit roy Jehan estoit, par le prevost de Paris,
du commandement du roy; et ou dit hostel de Neelle fu tenu
prisonnier jusques au jeudi ensievant dix huitième jour du dit mois de
novembre. Et là, à heures de matines dont le vendredi adjourna, en
la prison là où il estoit, fu decapité, presens le duc de Bourbon, le
conte d’Armignac, le conte de Monfort, monseigneur Jehan de
Boulongne, le seigneur de Revel et plusieurs autres chevaliers et
autres qui, du commandement du roy, estoient là: lequel estoit au
Palais. Et fu le dit connestable decapité pour très grans et
mauvaises traisons qu’il avoit faites et commises contre le dit roy de
France Jehan, lesquelles il confessa en la presence du duc
d’Athènes et de plusieurs autres de son lignage. Et en fu le corps
enterré aus Augustins de Paris hors du moustier, du commandement
du dit roy, pour l’onneur des amis du dit connestable.
Item, ou mois de janvier après ensuiant, Charles de Espaigne, à
qui le dit roy Jehan avoit donné la conté d’Angolesme, fu fait par
celui roy connestable de France.
Item, le premier jour d’avril après ensuiant, se combati
monseigneur Guy de Neelle, mareschal de France, en Xantonge à
plusieurs Anglois et Gascons; et [fu[306]] le dit mareschal et sa
compaignie desconfiz. Et y fu pris le dit mareschal, messire
Guillaume son frère, messire Ernoul [d’Audrehen[307]] et plusieurs
autres.
Item, le jour de Pasques flouries qui furent le dixième jour d’avril
l’an mil trois cens cinquante, fu presenté à Gille Rigaut de Roici, qui
avoit esté abbé de Saint Denis, et de nouvel avoit esté fait cardinal,
le chappeau rouge, au Palais, à Paris, en la presence du dit roy
Jehan, par les evesques de Laon et de Paris, et par mandement du
pape fait à eulz par bulle: ce qui n’avoit point acoustumé à estre faiz
autres foiz, mais fu par la prière du dit roy Jehan.
Item, en ycelui an mil trois cens cinquante un, ou moys de
septembre, fu recouvrée des François la ville de Saint Jehan
d’Angeli que les Anglois avoient tenue cinq ans ou environ; et fu
rendue par les gens du roy anglois, pour ce qu’ilz n’avoient nulz
vivres, et sans bataille aucune.
Item, en ycelui an mil trois cens cinquante un, ou mois d’octobre,
fu publiée la confrairie de la Noble Maison de Saint Oin près de
Paris par le dit roy Jehan. Et portoient ceulz qui en estoient chascun
une estoille en son chaperon par devant [ou[308]] en son mantel.
Item, en ycelui an cinquante un, fu la plus grant chierté de toutes
choses que homme qui vesquist lors eust onques veue, par tout le
royaume de France, et par especial de grains; car un sextier de
froment valoit à Paris par aucun temps en la dite année huit livres
parisis, un sextier d’avoine soixante sous parisis, un sextier de pois
huit, et les autres grains à la value.
Item, en ycelui an, ou dit mois d’octobre, le jour que la dite
confrarie seist à Saint Oin, comme dit est, fu prise la ville de Guines
des Anglois durans les trèves.
Item, en ycelui an, fu fait le mariage de monseigneur Charles
d’Espaigne, lors connestable de France, auquel le dit roy Jehan
avoit donné la conté d’Angolesme, et de la fille de monseigneur
Charles de Blois duc de Bretaigne.
En l’an mil trois cens cinquante deux, la veille de la Nostre Dame
en aoust, se combati monseigneur Guy de Neelle, seigneur
d’Offemont, lors mareschal de France, en Bretaigne. Et fu le dit
mareschal occis en la dite bataille, le sire de Briquebec, le
chastellain de Beauvais et plusieurs autres nobles, tant du dit pais
de Bretaigne comme d’autres marches du royaume de France.
Item, en ycelui an trois cens [cinquante deux[309]], le mardi
quatrième jour de decembre, se dot combatre à Paris un duc
d’Alemaigne appellé le duc de Bresvic contre le duc de Lencastre,
pour paroles que le dit duc de Lencastre devoit avoir dittes du dit duc
de Bresvic: dont il appella en la court du roy de France. Et vindrent
le dit jour les deux ducs dessus nommez en champ touz armés pour
combatre en unes lices qui pour celle cause furent faites ou Pré aus
Clers, l’Alemant demandeur et l’Anglois deffendeur. Et jà soit ce que
le dit Anglois fust ennemi du dit roy Jehan de France, et que par sauf
conduit il fust venu soy combatre pour garder son honneur,
toutesvoies le dit roy de France ne souffri pas qu’i[l] se
combatissent. Mais depuis qu’ilz orent fait les seremens, et qu’ilz
furent montés à cheval pour assembler, les glaives ès poings, le roy
prist la besoingne sur lui et les mist à acort.
Item, en icelui an trois cens cinquante deux, le jeudi sixième jour
de decembre, mourut le pape Clement VIe à Avignon, lequel estoit
en l’onzième an de son pontificat.
Item, le mardi du dit mois de decembre, fu esleu en pape, environ
heure de tierce, un cardinal limosin que l’on appeloit par son tiltre [de
cardinal[310]] le cardinal d’Ostie; mais pour ce qu’il avoit esté evesque
de Cleremont, l’en appelloit plus communement le cardinal de
Clermont. Et fu appellé Innocent; et par son propre nom estoit
appelé messire Estienne Aubert.
Item, l’an mil trois cens cinquante trois, le huitième jour de janvier,
assés tost après le point du jour, monseigneur Charles, roy de
Navarre, et conte d’Evreux, fist tuer en la ville de l’Aigle en
Normendie, en une hostellerie, monseigneur Charles d’Espaigne,
[lors[311]] connestable de France. Et fu le dit connestable tué en son
lit par plusieurs gens d’armes que le dit roy de Navarre y envoia:
lequel demora en une granche au dehors de la dite ville de l’Aigle
jusques à ce que ceulz qui firent le dit fait retournèrent par devers
lui. Et en sa compaignie estoient, si comme l’en disoit, messire
Phelippe de Navarre son frère, messire Jehan conte de Harecourt,
son frère messire Loys de Harecourt, messire Godeffroy de
Harecourt leur oncle, et pluseurs chevaliers et autres de Normendie
comme Navarrois et autres.
Et après se retraist le roy de Navarre et sa compaignie en la cité
d’Evreux dont il estoit conte, et là se garni et enforça. Et avec lui se
alièrent pluseurs nobles, par especial de Normendie, c’est assavoir
les dessus nommés de Harecourt, le seigneur de Hambuie, messire
Jehan Malet seigneur de Graavile, messire Amalry de Meulent et
pluseurs autres.
Et assés tost après se transporta le dit roy de Navarre en sa ville
de Mante, qui jà paravant avoit envoié lettres closes à pluseurs des
bonnes villes du royaume de France et aussi à grant conseil du roy,
par lesquelles il escripvoit qu’il avoit fait mettre à mort le dit
connestable pour pluseurs grans meffais que le dit connestable lui
avoit fais, et envoia le conte de Namur par devers le roy de France à
Paris.
Et depuis le roy de France envoia en la dicte ville de Mante par
devers le roy de Navarre pluseurs grans hommes, c’est assavoir
messire Guy de Bouloingne cardinal, monseigneur Robert Le Coq
evesque de Laon, le duc de Bourbon, le conte de Vendosme et
pluseurs autres: lesquielx traitièrent avec le dit roy de Navarre [et]
son conseil. Car jà soit ce que icelui roy eust fait mettre à mort le dit
connestable, si comme dessus est dit, il ne lui souffisoit pas que le
roy de France de qui il avoit espousé la fille lui pardonnast le dit fait,
mais faisoit pluseurs requestes au dit roy de France son seigneur.
Et cuida l’en bien ou royaume de France que entre les deux rois
dessus dis deust avoir grant guerre; car le dit roy de Navarre avoit
fait grans aliances et grans semonces en diverses regions, et si
garnissoit et enforçoit ses villes et chasteaulz. Finablement, après
pluseurs traittiez, fu fait accort entre les deux roys dessus dis par
certainnes manières dont aucuns des poins s’ensuient. C’est
assavoir que le dit roy de France bailleroit au dit de Navarre vingt
huit [mil] livres à tournois de terre, tant pour cause de certainne rente
que ledit de Navarre prenoit sur le tresor à Paris comme pour autre
terre que le dit roy de France lui devoit asseoir par certains traittiez
faiz lonc temps avoit entre les deux predecesseurs des deux roys
dessus dis pour cause de la conté de Champaigne, tant aussi pour
cause de mariage du dit roy de Navarre qui avoit espousée la fille du
dit roy de France: par lequel mariage lui avoit esté promise certainne
quantité de terre, c’est assavoir douze mil livres à tournois. Pour
lesquelles trente huit mille livres de terre le dit roy de Navarre veult
avoir la conté de Beaumont le Rogier, la terre de Breteul en
Normendie, de Conches et d’Orbec, la vicomté de Pont Audemer et
le balliage de Costantin. Lesquelles choses lui furent accordées par
le roy de France, jà soit ce que la dicte conté de Beaumont et les
terres de Conches, de Bretueil et d’Orbec fussent à monseigneur
Phelippe, frère du dit roy de France, qui estoit duc d’Orleans: auquel
duc le dit roy bailla autres terres en recompensacion de ce.
Oultre couvint accorder au dit roy de Navarre, pour paix avoir, que
les dessus dis de Harecourt et tous ses autres aliez entreroient en
sa foy, se il leur plaisoit, de toutes leurs terres de Navarre, quelque
part qu’elles fussent ou royaume de France; et en aroit le dit roy de
Navarre les hommages, se ilz vouloient, autrement non. Oultre lui fu
accordé que il tendroit toutes les dictes terres avec celles qu’il tenoit
paravant en partie, et pourroit tenir eschiquier deux fois l’an, se il
vouloit, aussi noblement comme le duc de Normendie. Encore lui fu
accordé que le roy de France pardonrroit à tous ceulz qui avoient
esté à mettre à mort le dit connestable, la mort d’icelui. Et ainsi le
fist, et promist par son serement que jamais, pour occasion de ce,
ne leur feroit ou feroit faire vilenie ou dommage. Et avec toutes ces
choses ot encores le dit roy de Navarre une grant somme d’escus
d’or du dit roy de France. Et avant ce que le dit roy de Navarre
voulsist venir par devers le roy de France, il couvint que l’en lui
envoiast par manière d’ostage le conte d’Anjou, second filz du dit roy
de France.
Et après ce vint à Paris à grant foison de gens d’armes, le mardi
quatrième jour de mars ou dit an trois cens cinquante trois, vint le dit
de Navarre en parlement pour la mort du dit connestable, comme dit
est, environ heure de prime, et descendi ou Palais. Et puis vint en la
dicte chambre de parlement, en laquèle estoit le roy en siège et
pluseurs de ses pers de France avec ses gens de parlement et
pluseurs autres de son conseil, et si y estoit le dit cardinal de
Bouloingne. Et en la presence de tous pria le dit roy de Navarre au
roy que il lui voulsist pardonner le dit fait du dit connestable; car il
avoit eue bonne cause et juste d’avoir fait ce qu’il avoit fait: laquelle il
estoit prest de dire au roy lors ou autres fois, si comme il disoit. Et
oultre dist lors et jura que il ne l’avoit fait en [contempt[312]] du roy ne
de son office, et qu’il ne seroit de riens si courroucié comme d’estre
en l’indignacion du roy.
Et ce fait monseigneur Jacques de Bourbon, connestables de
France, du commandement du roy, mist la main au dit roy de
Navarre; et puis si le fist l’en traire arrière. Et assés tost après
Jehanne, ante, et la royne Blanche, seur du dit roy de Navarre,
laquelle Jehanne avoit esté femme du roy Charles, et la dicte
Blanche avoit esté femme du roy Phelippe derrenier trespassés,
vindrent en la presence du roy, et lui firent la reverence, en eulz
enclinant devant lui. Et adonc monseigneur Regnaut de Trie, dit
Patroulart, se agenoulla devant le roy et lui dist tèles paroles en
substance: «Mon très redoubté seigneur, veez cy mes dames la
royne Jehanne, Blanche, qui ont entendu que monseigneur de
Navarre est en vostre male grace, dont elles sont forment
courrouciées. Et pour ce sont venues par devers vous et vous
supplient que vous lui vueilliez pardonner vostre mautalent; et, se
Dieu plaist, il se portera si bien envers vous que vous et tout le
pueple de France vous en tenrés bien contens.»
Les dictes paroles dictes, les dis connestable et mareschalx
alèrent querre le dit roy de Navarre et le firent venir de rechief
devant le roy, lequel se mist ou milieu des dictes roynes. Et adonc le
dit cardinal dist les paroles qui ensuient en substance:
«Monseigneur de Navarre, nul ne se doit esmerveillier se le roy
monseigneur s’est tenu pour mal content de vous pour le fait qui est
avenu, lequel il ne convient jà que je le die; car vous l’avez si publié
par vos lettres et autrement partout que chascun le scet. Car vous
estes tant tenu à lui que vous ne le deussiés avoir fait: vous estes de
son sanc si prochain comme chascun scet; vous estes son homme
et son per, et se avez espousée madame sa fille, et de tant avés
plus mespris. Toutesvoies, pour l’amour de mes dames les roynes
qui cy sont, qui moult affectueusement l’ent ont prié, et aussi pour ce
qu’il tient que vous l’avés fait par petit conseil, il le vous pardonne de
bon cuer et de bonne voulenté.» Et lors les dictes roynes et le dit roy
de Navarre, qui mist le genoul à terre, en [mercièrent[313]] le roy. Et
encore dist lors le dit cardinal que aucun du lignage du roy ou autre
ne se aventurast d’ores en avant de faire telz fais comme le dit roy
de Navarre avoit fait; car vraiement s’il avenoit, et feust le filz du roy
qui le feist du plus petit officier que le roy eust, si en feroit il justice.
Et ce fait et dit, le roy se leva et la court se departi.
Item, le vendredi devant la mi quaresme après ensuivant vingt
unième jour de mars, un chevalier banneret de basses marches,
appellé messire Regnaut de Prissegny, seigneur de Marant près de
la Rochelle, fu trainé et puis pendu ou gibet de Paris par le jugement
de parlement et de pluseurs du grant conseil du roy.
Item, l’an mil trois cens cinquante quatre, environ le mois d’aoust,
se reconsilièrent au roy de France les dis conte de Harecourt et
monseigneur Loys son frère, et lui deurent moult reveler de choses,
si comme l’en disoit; et par especial luy devoient reveler tout le
traittié de la mort du dit monseigneur Charles d’Espaingne, jadis
connestable de France, et par qui ce avoit esté.
Et assés tost après, c’est assavoir ou mois de septembre, se parti
de Paris le dit cardinal de Bouloingne et s’en ala à Avignon. Et disoit
l’en communement qu’il n’estoit point en la grace du roy, jà soit ce
que paravant, bien par l’espace d’un an qu’il avoit demouré en
France, il eust esté tous jours avec le roy si privé comme povoit
estre d’autre.
Et en ce temps se departi messire Robert de Lorris, chambellan
du roy, et se absenta tant hors du royaume de France comme autre
part. Et disoit l’en communement que, se il ne se feust absenté, il
eust villenie et dommage du corps; car le roy estoit courroucié et
moult esmeu contre luy, mais la cause fu tenue si secrète que pou
de gens la sceurent. Toutesvoies disoit l’en qu’il devoit avoir sceu la
mort du dit connestable avant qu’il feust mis à mort, et qu’il devoit
avoir revelé au dit roy de Navarre aucuns consaulz secrès du roy, et
que toutes ces choses furent revelées au roy par les dis conte de
Harecourt et messire Loys son frère.
Item, assés tost après, c’est assavoir environ le moys de
novembre, l’an cinquante quatre dessus dit, le dit roy de Navarre se
parti de Normendie et se ala latitant en divers lieus jusques en
Avignon.
Item, en ycelui moys de novembre, partirent de Paris l’arcevesque
de Rouen, chancellier de France, le duc de Bourbonnès et pluseurs
autres, pour aler en Avignon. Et y alèrent le duc de Lencastre et
pluseurs autres Anglois, pour traittier de paix devant le pape entre
les roys de France et d’Engleterre.
Item, en ycelui mois de novembre, l’an dessus dit, parti le roy de
Paris et ala en Normandie et fu jusques à Caen et fist prendre et
mettre toutes les terres du dit roy de Navarre en sa main et instituer
officiers de par luy et mettre gardes ès chasteaulz du dit roy de
Navarre, excepté en six, c’est assavoir Evreux, le Pont Audemer,
Cherebourc, Gavray, Avranches et Mortaing: lesquels ne lui furent
pas rendus; car il avoit dedens Navarrois qui respondirent à ceulz
que le roy y envoia que ilz ne les rendroient, fors au roy de Navarre
leur seigneur qui les leur avoit bailliés en garde.
Item, ou moys de janvier ensuivant, vint à Paris le dit messire
Robert de Lorris par sauf conduit qu’il ot du roy et demoura bien
quinze jours à Paris avant qu’il eust assés de parler au roy. Et après
y parla il, mais il ne fu pas reconsilié à plain; mais s’en retourna en
Avignon par l’ordenance du conseil du roy pour estre aus traittiez
avec les gens du roy. Et assés tost après, c’est assavoir vers la fin
de fevrier ou dit an, vindrent nouvelles que les trèves, qui avoient
esté prises entre les deux roys jusques en avril ensuivant, estoient
esloingniées par le pape jusques à la Nativité Saint Jehan Baptiste,
pour ce que le dit pape n’avoit peu trouver voie de paix à laquelle les
dis tracteurs qui estoient en Avignon, tant pour l’un roy que pour
l’autre, s’i voulsissent consentir. Et envoia le pape messages par
devers les dis roys sur une autre voie de traittié que celle qui avoit
esté pourpalée autres fois entre les dis tractteurs.
Item, en cel an mil trois cens cinquante quatre, ou moys de
janvier, fist faire le roy de France florins de fin or appellés florins à
l’aignel, pour ce que en la palle avoit un aignel, et estoient de
cinquante deux ou marc. Et le roy en donnoit lors qui furent fais
quarante huit pour un marc de fin or, et deffendi l’en le cours de tous
autres florins.
Item, en ycelui an, du dit moys de janvier, vint à Paris messire
Gauchier de Lor, chevalier, comme messoge du dit roy de Navare,
car devers le roy et parla à luy, et finablement s’en retourna ou moys
de fevrier ensuivant par devers le dit roy de Navarre et emporta
lettres de saufconduit pour le dit roy de Navarre jusques en avril
ensuivant.
Item, en ycelui an, le soir de karesme prenant qui fu le dix
septième jour de fevrier, vindrent pluseurs Anglois près de la ville de
Nantes en Bretaingne, et en entra par eschielles environ cinquante
deux dedens le chastel et le pristrent. Mais messire Guy de
Rochefort, qui en estoit capitainne et estoit en la dicte ville hors du
dit chastel, fist tant par assault et effort que il le recouvra en la nuit
meismes; et furent tous les dis cinquante deux Anglois que mors que
pris.
Item, à Pasques ensuivant qui furent l’an mil trois cens cinquante
cinq, le dit roy de France Jehan envoia en Normandie Charles
dalphin de Viennès, son ainsné filz, son lieutenant, et y demoura tout
l’esté. Et luy ottroièrent les gens du pais de Normandie deux mil
hommes d’armes pour trois mois. Et ou mois d’aoust ensuivant ou
dit [an] cinquante cinq, le dit roy de Navarre vint de Navarre et
descendi ou chastiel de Cherebourc en Coustentin, et avec luy
environ deux mil hommes, que uns que autres. Et furent pluseurs
traittiés entre les gens du roy de France, duquel le dit roy de Navarre
avoit espousé la fille, et le dit roy de Navarre. Et envoièrent par
pluseurs fois de leurs gens l’un des dis roys par devers l’autre.
Et cuida [l’en[314]], telle fois fu, vers la fin du dit mois d’aoust, qu’ilz
deussent avoir grant guerre l’un contre l’autre. Et les gens du dit roy
de Navarre, qui estoient ou chasteau d’Evreux, du Pont Audemer, en
faisoient bien semblant, car ilz tenoient et gardoient moult
diligemment les dis chasteaulx, et pilloient le pais d’environ comme
ennemis. Et en vint aucun ou chastel de Conches qui estoit en la
main du roy, et le pristrent et garnirent de vivres et de gens. Et
pluseurs autres choses firent les gens du dit roy de Navarre contre le
roy de France et contre ses gens. Et finablement fu fait acort entre
eulz. Et ala le dit roy de Navarre par devers le dit daulphin ou chastel
du Val de Reul là où il estoit, environ le seizième ou dix huitième jour
de septembre ensuivant; et de là le dit daulphin le mena à Paris
devers le roy. Et le jeudi vingt quatrième jour du dit mois de
septembre, vindrent à Paris devers le roy ou chastel du Louvre. Et
là, en la presence de moult grant quantité de gens et des roynes
Jehanne, ante, et Blanche, seur, du roy de Navarre, fist ycelui roy de
Navarre la reverence au dit roy de France, et s’escusa par devers le
roy de ce qu’il s’estoit parti du royaume de France. Et avec ce dit l’en
lui avoit rapporté que aucuns le devoient avoir blasmé par devers le
roy: si requist au roy qu’il luy voulsist nommer ceulz qui ce avoient
fait. Et après jura moult forment que il n’avoit onques fait chose,
après la mort du connestable, contre le roy que loyaulx homs ne
peust et deust faire. Et noient moins requist au roy qu’i[l] luy voulsist
tout pardonner, et le voulsist tenir en sa grace, et luy promist que il
luy seroit bons et loyaulx, si comme filz doit estre à père et vassal à
son seigneur. Et lors luy fist dire le roy par le duc d’Athènes que il luy
pardonnoit tout de bon cuer.
Item, en ycelui an mil trois cens cinquante cinq, ala le prince de
Galles, ainsné filz du roy d’Engleterre, en Gascoingne, ou moys
d’octembre, et chevaucha jusques près de Thoulouse et puis passa
la rivière de Garonne et ala à Carcassonne, et ardi le bourc; mais il
ne pot forfaire à la cité, car elle fu deffendue. Et de là ala à
Nerbonne, ardant et pillant le pais.
Item, ycelui an cinquante cinq, descendi le roy [d’Engleterre[315]] à
Calais en la fin du mois d’octembre, et chevaucha jusques à Hedin,
et rompi le parc et ardi les maisons qui estoient ou dit parc; mais il
n’entra point ou chastel ne en la ville. Et le roy de France, qui avoit
fait son mandement à Amiens, tantost qu’il ot oy nouvelles de la
venue du dit Anglois, se parti de la dicte ville d’Amiens où il estoit, et
les gens qui y estoient avec luy, pour aler contre les Anglois. Mais il

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University of Toronto Press acknowledges the financial support for its

PART I: DESIGNING TAX RULES FOR FOREIGN DIRECT

1 Introduction: The Last Battleground of Globalization 3

1.0 The Battle for International Investments 3

2 Taxing Foreign Direct Investment in a Non-cooperative Setting:

2.2 How Should Rules Promote Neutral Tax Treatment of

3 China’s Tax Incentive Regime for Foreign Direct Investment:

4 Outbound Direct Investment and the Sourcing of Interest

3.0 National Welfare, Ownership Neutrality, and Interest

5 Assessing the Foreign Direct Investment Response to Tax Reform

PART II: THE IMPACT OF GLOBALIZATION

6 Improving Inter-nation Equity through Territorial Taxation and

1.0 Introduction 117

3.3 An Opportune Time 124

7 Harmonizing Corporate Income Taxes in the United States

1.0 Introduction 138

8 Missing Women: Gender-Impact Analysis and International

1.0 Finding Women in International and Tax Law 153

9 Globalization and the Hong Kong Revenue Regime 171

1.0 Introduction 171

PART III: TAX TREATIES

10 Canada’s Evolving Tax Treaty Policy toward Low-Income

1.0 The Importance of Tax Treaty Design for Low-Income

3.2.1 Interest Income 201

11 Tax Treaties and the Taxation of Non-residents’ Capital

1.0 Introduction 212

12 Tax Treaty Templates 239

1.0 Introduction 239

3.2 Future Amendments 249

PART IV: TAXING CROSS-BORDER SERVICES AND SERVICE

13 Tax Discrimination and Trade in Services: Should the Non-

1.0 Overview 257

5.4 Grandfathering Provisions 271

14 The New Services Permanent Establishment Rule in the

15 Consumption Taxation of Cross-border Trade in Services in an

Designing Tax Rules for Foreign Direct

1.0 The Battle for International Investments

da’s international tax regime.’4 In December 2008, the Advisory Panel

• the increasing activity of multinational companies;

• the shrinking of geographical constraints to international business

Easson bore more direct witness to the globalization process through

2.0 The Increasing Sensitivity of Cross-border Investment to Tax