Derivatives can be embedded in financial engineered structures involving one or more conduit entities and jurisdictions. Increased innovation led to an emergent market view that assets can be both de-and re-composable, with each iteration version being tradable "aspect[s] of assets" in the marketplace. Conceptual methodology of this article provides a conceptual tax policy analysis arguing that derivatives instrument innovation poses several significant challenges to the traditional tax system. Such factors must be carefully weighed by policymakers, given their respective specific market dynamics and tax objectives, leading to the conclusion that not one approach represents a policy panacea to derivatives financial instruments. This article provides a conceptual tax policy analysis arguing that derivatives instrument innovation poses several significant challenges to the traditional global tax system, which has been traditionally predicated on a clear-cut demarcation regarding: (1) asymmetric tax treatment between debt and equity; (2) the timing rule in terms of income recognition for tax purposes (e.g. accrual versus realization); and (3) income characterization (e.g. ordinary income versus capital gains). The conceptual tax policy responses, including anti-avoidance measures, mark-to-market, bifurcation, integration, and various information-sharing regimes, have their benefits and weaknesses.

The theoretical literature on inequality and tax policy contains compelling and competing arguments for and against the inclusion of inequality measures and metrics into tax policy. Some tax policy arguments reflect equity-efficiency tradeoffs. Other tax policy arguments reflect attempts at achieving greater equity (fairness) through further inclusion of inequality over efficiency. The third school of thought seeks a middle ground, with arguments for achieving both lower income inequality and higher economic growth. Thus, the research question analyzed in this article and present in all three aforementioned policy views is whether inequality should be included in tax policy and design. This article implements an interpretivist methodological approach relating to tax policy, augmenting and complementing the relevant research and seminal scholarship of Saez and Zucman (2019), Mirrlees (1971) and Akerlof (1978), among others. This article argues that in balancing the current research literature and evidence, inequality measures incorporating equity and fairness should be part of tax policy and governance.