On the Frontier of Procedural Innovation: Advance Pricing Agreements and the Struggle to Allocate Income for Cross Border Taxation

This paper outlines a recent procedural innovation in the tax area, the Advance Pricing Agreement Program (“APA” program), and evaluates its success. Such a case study can play a significant role in linking procedural innovation to the broader issues of administrative law theory and regulatory reform. For example, a working model such as the APA program, built on flexibility and creativity, may support administrative theories advocating discretion, flexibility, and experimentation. Conversely, some interest group theories of regulation (e.g., public choice theory), can prompt critical examination of reforms like APAs that exhibit limited openness to scrutiny. The APA program is an ideal candidate for such analysis because it incorporates multiple factors germane to other fields including cross border transactions, intergovernmental relations, high information costs for regulation, and serious risks to all parties from uncertainty. Ultimately, detailed understandings of innovations in administrative systems are essential to developing and challenging positive and normative theories of administrative law-and to designing concrete applications of administrative law policy.