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Assaf Prussak

SJD Student Captures Top International Tax Writing Award

By John Masson
Feb. 6, 2013

The problems that arise when a slow-adapting institution like international tax law encounters a fast-developing phenomenon like Internet commerce recently led to a national prize-winning paper by Michigan Law SJD student Assaf Prussak.

Prussak, who practiced as a tax attorney in Israel for two years before coming to Michigan for his International Tax LLM in 2012, wrote the paper as an independent research project under the aegis of the program's director, Prof. Reuven Avi-Yonah. Later, with Prof. Avi-Yonah's encouragement and support, Prussak submitted the paper for consideration by the U.S. branch of the International Fiscal Association.

He recently learned that his work, "The Income of the 21st Century: Online Advertising as a Case Study for the Implications of Technology for Source-Based Taxation" was judged the best of the year.

The main point of the paper, which will serve as the jumping-off point for his dissertation: that the age of the Internet has provided a new opportunity for generating income—specifically, online advertising—that is unbound by jurisdiction lines or any specific earthly location.

And that's a major departure for taxing authorities, which are bound by traditional rules and concepts that are based at least in part on geography and physical presence. So what happens, Prussak said, if a French company's pay-per-click advertisement with a U.S. online publisher is clicked millions of times by Internet users in India? Income for the U.S. publisher is clearly being generated by users in India, but who has the right to tax it? Who should have the right to tax it?

It's related to, but not identical with, problems that have cropped up in the United States, as well, Prussak said.

"In the U.S., when you talk about cross-state sales with Amazon and other online retailers, states are now saying 'I don't care if you don't have a physical presence in our state, if you're selling to our residents you have economic presence and should collect sales taxes.' I believe that the application of the economic presence test in the international context is the only way to solve the incompatibility between traditional tax concepts and the new technological reality."

The paper is available on SSRN. The award will be presented at the IFA's annual meeting in New York City Feb. 28-March 1.

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