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Wei Cuiregimes to reduce their tax liabilities in mergers and acquisitions.However, to protect the domestic tax base, developed country corporatereorganization rules tend to impose more stringent requirementswhen ownership of domestic assets is transferred to or among nonresidents.Developing countries should be equally cautious in grantingdeferral treatment for purported reorganizations carried out amongnon-residents.7. Taxing former residents on capital gainsThe present chapter has mainly focused on capital gains taxation froma source-country perspective. This section briefly touches on an issuethat properly belongs to the topic of resident country taxation. 98 Whenthe residence of a taxpayer changes on emigration, the taxing rightsof the former residence State are reduced to those of a source State. Inorder to preserve the right to tax gains accrued while the taxpayer isa resident, many countries impose an “exit tax” (also referred to asa “departure tax”) and/or a “trailing tax.” Under an exit tax, assetsowned by an emigrant are deemed to be alienated at market valueand reacquired at a cost equal to that value. For instance, under theAustralian domestic law exit tax rules, a person ceasing to be residentis deemed to dispose of assets other than taxable Australian assets (onwhich even non-residents are taxed) at market value.In the absence of coordination between the treaty States, aproblem regarding the potential double taxation of the accrued gainmay arise. This occurs when the property is actually alienated and thecurrent residence State taxes the entire gain, computed by referenceto the historical cost basis, which includes the gain that has been subjectto the exit tax in the former residence State. Countries with exittaxes, such as Australia, Canada, the Netherlands, South Africa andthe United States, may include special provisions in their tax treatiesto resolve the problem of double taxation. This is usually realized by98The following paragraphs draw largely on Jinyan Li and FrancescoAvella, “Article 13: Capital Gains,” supra note 72, Section 2.1.8, to whichreaders are referred for further discussion. See also Hugh J. Ault and Brian J.Arnold, Comparative Income Taxation: A Structural Analysis, supra note 18,Part IV, Chapter A, Section 2.1.152