Netanya hosts the 9th International Roundtable on Taxation and Tax Policy (program) today:
Session I: International Taxation I: Pillar Two Chair: Yoram Margalioth (Tel Aviv University)
Sagit Leviner (Ono Academic College; Google Scholar), The Two Pillar Reform in International Taxation of Multinational Corporations: Challenges and Policy Recommendations:
The current international tax system, designed over a century ago, struggles to address the challenges of the modern economy. While in the past it was relatively easy to define where income was generated and where business activity took place, today’s digital and global economy presents new challenges arising from the fact that business activity occurs largely in the virtual space, without the need for physical presence, fundamentally different from the world for which the international tax rules were originally designed. This paper aims to contribute to the understanding of current trends in international taxation and their impact on Israel, by outlining key issues in the design of the contemporary international tax system and its trajectory. In particular, the paper presents and analyzes the emerging reform in international taxation led by the Organization for Economic Cooperation and Development (OECD), known as the “Two-Pillar Reform,” assuming it progresses based on its current status. This is against the backdrop of the critical intersection between the Two-Pillar Reform and Israel’s system of tax incentives and investment policy.
136 member countries signed the Statement on the Two-Pillar Reform in 2021, as part of the OECD’s inclusive framework (featuring 147 countries in 2024). The two pillars of the reform focus on different yet complementary aspects related to the development of the international tax system over the past few decades and are intended to address tax shortcomings emblematic of the digital age of the global economy. Against this backdrop, the first pillar centers on taxing large and highly profitable multinational corporations. It creates a new taxing right, transferring part of the profit generated by these corporations to the destination or market countries where goods and services are provided or where the final consumer is located. In this way, the first pillar expands the tax bite of destination or market countries, allowing them to increase their tax collection. The economic impact of the first pillar is expected to be small in most countries, and accordingly also in Israel. In contrast, the second pillar establishes a global mechanism for effective minimum taxation of multinational corporations at a rate of 15%. Thus, the second pillar focuses on the phenomenon of profit shifting and base erosion that has greatly intensified in recent decades, by setting a limit to international tax competition. The scope of the second pillar is broader than that of the first pillar, it applies to a larger number of companies, and may accordingly have a more significant effect on the global economy in general and the Israeli economy in particular.
Specifically, the paper analyzes the impact of the Two-Pillar Reform on the tax incentives system and the policy required to maintain Israel’s appeal for foreign investments in the new international tax-economic reality. In this context, the paper outlines and discusses three main scenarios regarding the implications of the Two-Pillar Reform for Israel’s policy, from which it emerges that the reform poses unique challenges as well as opportunities, especially in the field of tax incentives and investments. The challenges are the required changes in the tax system, resulting from the emerging reform, and their potential consequences for corporate incentives to invest in Israel. The opportunities, on the other hand, include the potential to increase revenue collection alongside possibly cutting back on the provision of tax benefits in light of the declining international tax competition and increasing international tax cooperation.
The paper’s recommendations include examining the corporate tax incentive system to identify which incentives should be maintained, which should be canceled, and which should be converted into grants or benefits external to the corporate tax system, in order to protect Israel’s relative advantage in attracting international investments/corporations. Furthermore, in light of the expected reduced capacity to attract international investments/corporations by means of tax benefits, the paper also recommends examining alternative investment incentives that comply with the rules of the reform, such as tax credits that turn into grants and regulatory simplification. These incentives should target companies that contribute significantly to the Israeli economy, such as investments that generate considerably more value than is reflected in corporate profits (“positive externalities”), or those that are particularly important to the economy, and have the capacity to relocate from Israel. More importantly, and more than ever, in light of the reform, it is essential to improve fundamental factors, such as education and other infrastructure, in order to strengthen Israel’s position as an international business center. These steps will support Israel’s economic growth and fiscal resilience.
Rifat Azam (Reichman University; Google Scholar), The Global Minimum Tax and Intra Western Tax Competition, 44 Berkeley J. Int’l L. ___ (2026) (reviewed by Assaf Harpaz (Georgia, Google Scholar) here):
This article provides a critical and timely analysis of the Global Minimum Tax (GMT) in the context of intra-Western tax competition, following the recent executive order by President Trump disavowing prior U.S. commitments to the OECD’s Global Tax Deal. Initially hailed as a landmark in international cooperation, the GMT reveals deeper geopolitical dynamics, including the persistence of Western dominance and emerging conflicts between the United States and Europe. The article argues that the GMT represents less a triumph of multilateralism and more a strategic maneuver within a fragmented international economic order. It explores the divergent interests of Western powers, with the European Union pursuing strategic autonomy and the United States grappling with domestic legislative gridlock and shifting policy priorities.
Session II: International Taxation II: Jurisdiction to Tax
Chair: Rifat Azam, (Reichman University; Google Scholar)
Yehonatan Givati (Hebrew University) & Hillel Nadler, (Wayne State University; Google Scholar), Counting the Days: Optimal Thresholds in Substantial-Presence Test:
Under the Internal Revenue Code, non-citizen visitors are classified as “resident” or “non-resident” for income-tax purposes based on the number of days they spend in the United States. Since 1984, Congress has fixed the bright-line at 183 days (with partial weight given to prior years), yet it has never explained why 183 is the appropriate threshold for tax residency. While this threshold is common internationally, as we show, no theoretical or welfare-based justification has been offered in the legal or economic literature. This Article fills that gap by developing the first welfare-based model of optimal day-count thresholds and by confronting this model with new data on actual visitor behavior.
We construct an economic framework in which visitors choose trip length to maximize private utility, while a social planner sets a tax residency threshold to balance the positive externalities from visitors against foregone tax revenue. Raising the threshold allows visitors to stay longer and generate greater spillover benefits for residents, but at the cost of reduced tax revenue from individuals who cap their stays to avoid tax residency. The optimal threshold is determined where the marginal external benefit of additional visitor days equals the marginal fiscal cost. Using data from the Survey of International Air Travelers, we simulate the distribution of stays among U.S. visitors. We show that a 183-day threshold is optimal only under specific and narrow conditions—conditions that are unlikely to hold across all time periods or countries. Our analysis provides a foundation for reevaluating fixed day-count rules and suggests that a more flexible, data-driven approach could improve welfare outcomes.
David Elkins (Netanya Academic College; Google Scholar), Measuring Location Specific Rents:
The concept of inter-nation equity describes the fair distribution of taxing rights among sovereign nations, addressing the fundamental question of which country is entitled to tax what income. Recent scholarship has explored the concept of location-specific rent (LSR), the idea being that each country should be entitled to tax the LSR generated in its territory. However, the literature has identified a number of problems regarding the quantification of LSR. The first is that quantifying the LSR derives from economic activity in a country would require knowledge not only of the firm’s actual income, but counterfactual knowledge of what the firm would have earned had it not been able to operate in the country in question. The second is the problem of overlapping LSR. If the contribution of each of a number of countries is essential to the production of wealth, then the sum of the LSRs derived from the various countries could be greater than the firm’s total profits.
This article examines how it is possible in practice to measure LSR. It explains that the advantages of operating in a given country, which are generally classified as public goods as far as local residents and entities are concerned, are effectively private goods from the perspective of foreign firms. Just as a competitive market can, at least in theory, allocate value to private factors of production in the domestic setting, so too can tax competition among countries quantify the LSR derived from each country.
Session III: Everything but International Taxation
Chair: Moran Harari, (Tax Justice Network)
Israel Klein (Ariel University; Google Scholar), Breaking the Boundaries of Tax Planning
Anat Alon-Beck (Case Western University; Google Scholar) & Nizan Packin (Haifa University; Google Scholar), Board Observers:
When Does a Board Observer Become a Tax Liability? As venture capital and private equity firms increasingly appoint board observers to monitor and influence their portfolio companies, a largely unexamined legal risk has emerged at the intersection of tax law and corporate governance. Can the presence of a board observer—lacking formal voting rights—nevertheless trigger adverse tax consequences under U.S. law? This article explores how investor-appointed observers may lead to constructive control findings by tax authorities, resulting in the unexpected classification of foreign companies as Controlled Foreign Corporations (CFCs) or Passive Foreign Investment Companies (PFICs). It further examines implications under state tax apportionment rules, the erosion of protective attribution barriers following the repeal of IRC § 958(b)(4), and the ways in which observer influence may be viewed as agency for regulatory purposes. Drawing on tax rulings, audit guidance, fund structuring practices, and emerging advisory trends, this paper proposes a framework for minimizing tax exposure while preserving strategic oversight—raising fundamental questions about when informal governance crosses the line into legally consequential control.
Limor Riza (Ono College), Proposal for Subsidy Law – The Solution for “Probably None of Us Will Have a Job”:
A substantial portion of tax revenue is derived from income tax. However, if predictions hold true that “probably none of us will have a job”, thereby eliminating income, income tax law will become less significant. This Article explores the global impact of AI on our fiscal law. In this changing labor landscape, where AI poses a threat to numerous jobs, income tax law may be applicable primarily to the most advantaged individuals in society, while the least advantaged may experience diminished income, if any. In response to this anticipated challenge, a shift towards distributive justice becomes imperative.
A version of universal basic income (UBI) is likely to be adopted in this emerging economic environment, providing support to individuals lacking labor income. However, the inevitable introduction of some form of UBI raises a unique dilemma. In a society where individuals receive unconditional income and there is limited work available, there is a concern that some may choose not to be active. This could result in an idle society experiencing creative atrophy.
To address this issue, this Article proposes a shift in focus from traditional income tax law to a novel subsidy law – from taxing wealth to promoting positive social contributions. Unlike tax law, which primarily seeks to enrich the public treasury, subsidy law aims to enhance social value by rewarding beneficial activities, even those that may not yield immediate economic growth. In this paradigm, the new suggested law becomes a tool not only for addressing economic disparities but also for fostering a more engaged and socially conscious society. By redirecting attention from wealth accumulation to recognizing and supporting valuable contributions to society, this legal framework tackles anticipated issues head-on.
Session IV: International Taxation III: Process and Procedure
Chair: Lior Davidai (College of Law and Business)
Noam Noked (Chinese University of Hong Kong; Google Scholar), “Congress-Proof” International Tax Reforms:
Reaching multilateral agreements on legal reforms to address transnational problems is a formidable challenge. This task is further complicated by the structure of U.S. policymaking, where Congress may reject or actively undermine international legal standards that were established with the support of the U.S. administration. A recent example of this is the so-called “global tax deal.” The previous U.S. administration played a crucial role in reaching what then-Treasury Secretary Janet Yellen described as a “historic agreement on new international tax rules,” which was endorsed by over 130 countries. This agreement aims to reform the international taxation of large multinational enterprises (Pillar One) and introduce a groundbreaking global minimum tax (Pillar Two). However, since the announcement of the agreement, Congress has been blocking one of these reforms and attempting to derail the other. .
Given this reality, how can the international community develop and implement effective international legal standards? Recent international tax reforms have sought to address this challenge with legal design: establishing legal standards that are resilient to Congressional inaction or that would disadvantage U.S. interests if not adopted. This Article analyzes the legal design techniques used to create “Congress-proof” international legal standards, examining six international tax standards and reforms from the past decade as case studies. This analysis demonstrates how variations in legal design affect the adoption and implementation of the relevant standards. For instance, it shows how differences in the legal design of Pillar One and Pillar Two have resulted in the failure of the former and the relative success of the latter.
The Article explores three strategies used in the legal design of the relevant reforms. The first strategy involves establishing a legal standard that the U.S. administration can implement within the existing legal framework, thereby eliminating the need for Congressional action. The second strategy focuses on minimizing the negative consequences of U.S. non-participation by ensuring that Congressional inaction cannot prevent the international rollout of the legal standard or undermine its effectiveness. The third strategy aims to create incentives for the U.S. government and relevant stakeholders to adopt the reform.
The Article evaluates these strategies and their effects, including their impact on the negotiation, adoption, and implementation of international reforms. It also discusses concerns related to extraterritoriality, treaty violations, legitimacy, and retaliatory actions.
Moran Harari (Tax Justice Network), Counties’ Global Commitment to Administrative Assistance in Tax Matters (and the Lack Thereof):
The Tax Justice Network’s June 2025 update to the Financial Secrecy Index introduced new data points focusing on countries’ commitments under the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAAC). The analysis shows that despite growing membership in the MAAC, many jurisdictions — particularly major financial centers— exploit reservations and opt-outs to limit their cooperation. In addition, most of the jurisdictions that are ranked high on the index, refuse to assistance in collecting foreign tax debts and avoid information exchange on non-compulsory taxes such as inheritance, wealth, and digital services taxes, often reserving these powers for selective bilateral agreements.
The Tax Justice Network also highlights the inconsistent global adoption of new international frameworks for the automatic exchange of information (for which the MAAC serves as the legal basis), particularly in areas such as crypto-assets, digital platforms, and other emerging sectors. Such selective commitments allow countries to present themselves as cooperative while continuing to limit meaningful tax information sharing. To address these shortcomings, the organization advocates for stronger, binding reforms through the United Nations Framework Convention on International Tax Cooperation, including mandatory participation in administrative assistance and firm deadlines for implementing automatic exchanges of tax information on a global scale.
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In January 2022, the Internal Revenue Service was cracking down on a tax dodge from the agency’s “
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Debra Berman (South Texas) & Denise Peterson (South Texas), 
Bloomberg, 
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