Tax Claims in Transnational Insolvencies: A "Revenue Rule-Approach"‪.‬

This article addresses the issue of how foreign tax claims should be treated in the context of a transnational insolvency. Generally, in a transnational insolvency, the home country of the debtor pools the assets of the debtor and distributes them in accordance with its bankruptcy laws. While this may result in detrimental outcomes to non-home countries, the predictability it promotes has been accepted as a worthwhile goal. However, this cooperation does not extend to foreign tax claims which are asserted in bankruptcy, and this lack of cooperation threatens both the policy goals and the practical results of transnational insolvencies. In fact, this gap in the law has been recognized both by leading bankruptcy scholars and by influential organizations such as the American Law Institute and the United Nations. This article analyzes the reasons behind the reluctance to enforce foreign tax claims, both in the bankruptcy context and in general. It then develops a number of solutions, which, if implemented, would successfully allow for the enforcement of foreign tax claims in bankruptcy in a manner that would not only mitigate the policy concerns of nations, but would actively promote acknowledged policy goals in both the bankruptcy and tax contexts.