The Scope of the Schumacker Doctrine - A case study of thresholds and rules that take into account the ability to pay

Abstract: The aim with this thesis is to clarify the scope of the Schumacker doctrine and specifically to answer the questions "Which tax rules are considered to take into account the ability to pay?" and "What are the thresholds for determining when a non-resident is in a comparable situation to that of a resident?". The findings of the study are that such rules are difficult to identify, since there are considerable differences between countries and the aim of the rules vary. However, rules that take into account the ability to pay generally weighs unspecified on a taxpayer's total income. It is not possible to set a general threshold for determining the proportion of income that has to be earned in the source state in order for the non-resident to be considered comparable to a resident. The reason is that the treatment in the source state is dependent on whether the income in the residence state is sufficient for that state to take into account the personal and family circumstances of the taxpayer. It may be the case that the taxpayer earns equal amounts of income in the source and the residence state, but the amount earned in the residence state is not taxable there. In such case it is only the source state that has the possibility to take into account personal and family circumstances of the taxpayer. They must be taken into account once somewhere.