handbook-tb

Wei Cuion dividends, interest and royalties derived from related companies. 17Independently, there has also been a desire to align the treatment ofshareholder capital gains with the policy of exempting dividends paidboth to residents and non-residents, a policy that developed countriesmay already have adopted. 18 For developing countries that are capitalimporters and that have decided to maintain the classic corporateincome tax, the above reasons generally have been considered — andfrequently found to be outweighed by other considerations.Two practices of developed countries are, however, relevant.First, some of them have historically eschewed capital gains taxationof non-residents because of its perceived administrative burden. TheUnited States of America, for example, originally abandoned taxingnon-residents on capital gains realized on the sale of United Statessecurities in 1936 for administrative reasons. 19 Canada narrowed itsrange of capital gains taxation for foreigners recently, in 2010, partlyfor the same reason. 20 This shows that enforcing the tax may be challengingfor developed and developing countries alike. Second, evenin countries where the alienation of shares of domestic companiesby non-residents generally goes untaxed, special exceptions havebeen made — in Australia, Canada, Japan and the United States, for17See Harry Huizinga, “Taxing Corporate Income — Commentary,”in Stuart Adams and others, eds., Dimensions of Tax Design [The MirrleesReview] (Oxford: Oxford University Press, 2010), 894–903. In connectionwith the OECD Action Plan on Base Erosion and Profit Shifting initiative,some scholars have advocated for a reversal of this trend. See, for example,Katharina Finke, Clemens Fuest, Hannah Nusser and Christoph Spengel,“Extending Taxation of Interest and Royalty Income at Source — An Optionto Limit Base Erosion and Profit Shifting?” (2014), ZEW — Centre for EuropeanEconomic Research Discussion Paper No. 14-073.18See Hugh J. Ault and Brian J. Arnold, Comparative Income Taxation:A Structural Analysis (Alphen aan den Rijn, the Netherlands: Kluwer LawInternational, 2010), Part IV, Chapter C, Section 3.19See Stanford G. Ross, “United States taxation of aliens and foreign corporations:the Foreign Investors Tax Act of 1966 and related developments,”(1967) Vol. 22, Tax Law Review, 279, 293–5.20See Jinyan Li, Arthur J. Cockfield and J. Scott Wilkie, InternationalTaxation in Canada: Principles and Practices (Toronto: LexisNexis Canada,2011), at 184.116