# Rule against foreign revenue enforcement

Part of a series on :
Taxation :
An aspect of fiscal policy :
Policies
Government revenue
Property tax equalization
Tax revenue
Non-tax revenue
Tax law
Tax bracket
Flat tax
Tax threshold
Exemption
Credit
Deduction
Tax shift
Tax cut
Tax holiday
Tax amnesty
Tax advantage
Tax incentive
Tax reform
Tax harmonization
Tax competition
Tax withholding
Double taxation
Representation
Unions
Medical savings account :
Economics
General Theory
Price effect
Excess burden
Tax incidence
Laffer curve
Optimal tax
Theories
Optimal capital income taxation
Distribution of Tax
Tax rate
Flat
Progressive
Regressive
Proportional :
Collection
Revenue service
Revenue stamp
Tax assessment
Taxable income
Tax lien
Tax refund
Tax shield
Tax residence
Tax preparation
Tax investigation
Tax shelter
Tax collector
Private tax collection
Tax farming :
Noncompliance
General
Tax avoidance
Repatriation tax avoidance
Tax evasion
Tax resistance
Tax shelter
Debtors' prison
Smuggling
Black market
Unreported employment
Corporate
Tax inversion
Transfer mispricing
Base erosion and profit shifting (BEPS)
Double Irish
Dutch Sandwich
Single Malt
CAIA
Locations
Tax havens
Corporate havens
Offshore financial centres (OFCs)
Offshore magic circle
Conduit and sink OFCs
Financial centres
Financial Secrecy Index
Major examples
Ireland as a tax haven
Ireland v. Commission
Leprechaun economics
Liechtenstein tax affair
Luxembourg Leaks
Offshore Leaks
Paradise Papers
Panama Papers
Swiss Leaks
United States as a tax haven
Panama as a tax haven :
Types
Direct
Indirect
Per unit
Ad valorem
Aviation
Airport improvement
Landing
Solidarity
Capital gains
Expatriation
Consumption
Departure
Hotel
Sales
Stamp
Television
Tourist
Value-added
Dividend
Environmental tax
Carbon
Eco-tariff
Landfill
Natural resources consumption
Severance
Steering
Stumpage
Excise
Alcohol
Cigarette
Fat
Meat
Sin
Sugary drink
Tobacco
General
Georgist
Gift
Gross receipts
Hypothecated
Income
Inheritance (estate)
Land value
Luxury
Payroll
Pigouvian
Property
Resource rent
Single
Surtax
Turnover
Use
User charge/fee
Congestion
Fuel
Road/GNSS
Toll
Vehicle miles traveled
Corporate profit
Excess profits
Windfall
Negative (income)
Wealth :
International
Financial transaction tax
ATTAC
Currency transaction tax
European Union Common Consolidated Corporate Tax Base (CCCTB)
Global minimum corporate tax rate
Robin Hood tax
Tobin tax
Spahn tax
Tax equalization
Tax treaty
Exchange of Information
Permanent establishment
Transfer pricing
European Union FTT
Foreign revenue rule :
Trade
Custom
Duty
Tariff
Import
Export
Tariff war
Free trade
Free-trade zone
Trade agreement
ATA Carnet :
Research
Academic
Mihir A. Desai
Dhammika Dharmapala
James R. Hines Jr.
Ronen Palan
Joel Slemrod
Gabriel Zucman
Advocacy groups
Institute on Taxation and Economic Policy (ITEP)
Oxfam (UK)
Tax Foundation (US)
Tax Justice Network (TJN)
Tax Policy Center (US) :
Religious
Church tax
Eight per thousand
Teind
Tithe
Fiscus Judaicus
Leibzoll
Temple tax
Tolerance tax
Jizya
Kharaj
Khums
Nisab
Zakat :
By country
All Countries
List of countries by tax rates
Tax revenue to GDP ratio
Tax rates in Europe
Individual Countries
Albania
Algeria
Argentina
Armenia
Australia
Azerbaijan
Bangladesh
Bhutan
Brazil
Bulgaria
BVI
Canada
China
Colombia
Croatia
Denmark
Finland
France
Germany
Greece
Hong Kong
Iceland
India
Indonesia
Iran
Ireland
Israel
Italy
Japan
Kazakhstan
Lithuania
Malta
Morocco
Namibia
Netherlands
New Zealand
Norway
Pakistan
Palestine
Peru
Philippines
Poland
Portugal
Russia
South Africa
Sri Lanka
Sweden
Switzerland
Taiwan
Tanzania
United Arab Emirates
United Kingdom
United States
Uruguay :
Business portal
Money portal :
vte :
The rule against foreign revenue enforcement, often abbreviated to the revenue rule, is a general legal principle that the courts of one country will not enforce the tax laws of another country. The rule is part of the conflict of laws rules developed at common law, and forms part of the act of state doctrine.
In State of Colorado v. Harbeck, 133 N.E. 357, 360 (N.Y. 1921) the court referred to
   The ... well-settled principle of private international law which precludes one state from acting as a collector of taxes for a sister state and from enforcing its penal or revenue laws as such. The rule is universally recognized that the revenue laws of one state have no force in another.
In England, Lord Denning MR said in Att-Gen of New Zealand v Ortiz [1984] AC 1 at 20:
   No one has ever doubted that our courts will not entertain a suit brought by a foreign sovereign, directly or indirectly, to enforce the penal or revenue laws of that foreign state. We do not sit to collect taxes for another country or to inflict punishments for it.
The rule has been repeatedly applied in the United Kingdom, the United States, Canada, Australia, Ireland, Singapore, and other countries. It has also been codified into statute in various countries.

## History of the rule

The earliest reported case on the rule is believed to be Attorney General v Lutwydge (1729) Bumb 280, 145 ER 674. In that case, the English courts refused to enforce a bond for Scottish tobacco duties. In 1775 Lord Mansfield CJ pronounced in Holman v Johnson (1775) 1 Cowp 341 at 343, 98 ER 1120 at 1121 that "no country ever takes notice of the revenue laws of another". In 1779 he repeated that position in Planche v Fletcher (1779) 1 Douglas 251, 99 ER 164.

## English law

Although the rule had been referred to an applied in a number of English cases from as early as 1729, the rule itself was not considered beyond doubt in England until the decision of the House of Lords in Government of India v Taylor [1955] AC 491. In that case the House of Lords unanimously upheld the Court of Appeal (who had in turn unanimously upheld the trial judge) that the liquidator of an English company could not pay out sums to a foreign government because the tax claim was not justiciable in England.
The rule as it applies under English law is summarised in Dicey Morris & Collins at Rule 3:
   RULE 3 - English courts have no jurisdiction to entertain an action (1) for the enforcement, either directly or indirectly, of a penal, revenue or other public law of a foreign State; or (2) founded upon an act of state.
In Re State of Norway's Application (No 2) [1990] 1 AC 723 the Norwegian government sought assistance from the English courts in collecting evidence in relation to a tax claim. The respondent resisted the application on the basis that it violated the revenue rule, but the House of Lords held that assisting with the collection of evidence would not violate the rule. Lord Goff said "It is of importance to observe that that rule is limited to cases of direct or indirect enforcement in this country of the revenue laws of a foreign state. It is plain that the present case is not concerned with the direct enforcement of the revenue laws of the State of Norway. Is it concerned with their indirect enforcement? I do not think so."
In QRS 1 Aps v Frandsen [1999] 1 WLR 2169 it was held that to uphold a contractual provision between two private contracting parties for an indemnity against the payment of foreign taxes would not constitute an indirect enforcement of a foreign tax claim, and so was enforceable.

## United States

The revenue rule has been repeatedly applied by courts in the United States. The rule was first applied in the United States in 1806 in Ludlow v. Van Rensselaer, 1 Johns. R. 94 (N.Y. 1806).
Initially the rule was also applied to claims for taxes made by other states within the US. In Maryland v. Turner, 132 N.Y. 173, 174 (1911) the courts of New York state refused to enforce a judgment debt relating to taxes due in Maryland. In Colorado v. Harbeck, 133 N.E. 357, 360 (N.Y. 1921) it was held that there was a "well-settled principle of private international law which precludes one state from acting as a collector of taxes for a sister state and from enforcing its penal or revenue laws as such. The rule is universally recognized that the revenue laws of one state have no force in another." However, in Moore v. Mitchell, 30 F.2d 600, 600 (2d Cir. 1929) the U.S. Supreme Court limited the application of the rule in the interstate context.
In Milwaukee County v. M. E. White Co., 296 U.S. 268, 268 (1935) the Supreme Court was asked to consider whether revenue laws of other states should be enforced under the Full Faith and Credit Clause. The Supreme Court declined to extend the full faith and credit provision to revenue statutes themselves, but limited its ruling to enforcement of tax judgments handed down in the courts of other states.

## Canada

The Supreme Court of Canada has upheld and applied the revenue rule in United States v. Harden [1963] SCR 366.

## Civil law jurisdictions

Civil law (as opposed to common law) jurisdictions will not generally entertain foreign tax claims on the basis that they are public laws, and therefore cannot be enforced outside of the state or territory. In the Swedish case of Bulgariska Staten v Takvorian (NJA 1954 s.268) the court held "a state cannot use a Swedish court to collect taxes or to have other contributions made to a foreign state".

## European Union

The rule has been partially abrogated within the European Union by article 39 of the Insolvency Regulation (Council Regulation (EC) No 1346/2000).
   Any creditor who has his habitual residence, domicile or registered office in a Member State other than the State of the opening of proceedings, including the tax authorities and social security authorities of Member States, shall have the right to lodge claims in the insolvency proceedings in writing (emphasis added).

## Criticism

The rule has been subjected to criticism. Professor Adrian Briggs of Oxford University has criticised it on the basis that it promotes the evasion of tax liabilities. Another commentator has called it "anachronistic and destructive". But other commentators have defended it, both as a matter of practice and principle.

## Abrogation

Nations can, and do, abrogate the rule on a bilateral basis by treaty. In Ben Nevis (Holdings) Limited v HMRC [2013] EWCA Civ 578 the English courts enforced a claim for South African taxes under a bilateral treaty between the countries.
However, whilst treaties to share information relating to taxable liabilities are common, or for relief from double taxation, treaties empowering nations to enforce each other's tax law are relatively uncommon. Brenda Mallinak records that in 2006 the United States had only five such treaties, despite having a large number of international treaties for tax information exchange. On 28 January 2003, the OECD Model Tax Convention on Income and Capital was modified to include a new Article 27 as a model for comprehensive collection assistance in treaty negotiations.