The Political Economy of International Tax Governance
Abstract
Covering the period from the 1920s, when international tax policy was solely about avoiding double taxation, to the present era of international tax competition, Rixen investigates the fate of 'the power to tax' in an era of globalization, illustrating that tax sovereignty is both shaped and constrained by an international tax regime.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2734796
... They were nonetheless supportive of developing a model convention (Me) that could be employed as a template for bilateral DTTs. They insisted on keeping the MC non-binding to allow the necessary flexibility to make nationally differing tax systems compatible with one another (Rixen 2008(Rixen , 2010. ...
... In parallel to the drafting of the non-binding multilateral MC (and in some cases even prior to it), governments have developed domestic tax rules to avoid double taxation (Rixen 2008). Basically, all countries provide for relief of double taxation unilaterally. ...
... The precise sharing rules are laid down in the so-called source rules of the typical bilateral tax treaty and/or the MC (see OECD 2005: Articles 6-22). 6 This is the main reason why developing countries -generally net capital importersare supporters of the UN MC, which was first developed in the I 970s and emphasizes the source principle (see Rixen 2008). 7 According to Avi-Yonah (2006), the standard of single taxation has become part of customary international law. ...
Postprint. Please cite as: Leibrecht, Markus and Thomas Rixen (2010) Double Tax Avoidance and Tax Competition for Mobile Capital, in: Martin Zagler (Ed.): International Tax Coordination. An Interdisciplinary Perspective on Virtues and Pitfalls, Routledge, 61-97. https://doi.org/10.4324/9780203849026
... These tax treaties are promulgated by international organizations for the purpose of systematically dividing cross-border taxable base, between-countries, to eliminate market distortions from inharmonious domestic tax policies. However, this area of global governance, commonly referred to as the "international tax regime," does not have any conventional outside enforcement (Rixen 2008). Without outside enforcement, signatory countries can ignore treaty provisions with impunity, disrupting proper global governance. ...
... Tax treaties almost all descend from the 1967 Organisation for Economic Cooperation and Development (OECD) Model Tax Convention, and the contents of this convention have evolved incrementally over the years (Rixen 2008(Rixen , 2011. As a result, 75 percent of the wording across the world's tax treaties is essentially identical (Avi-Yonah 2009). ...
... New knowledge from these global forums is then eventually transferred to countries across the world through reports and tax conventions that provide a "focal point" for the negotiation of revised, or new, bilateral tax treaties (Rixen 2010, 589). The end result is a global policy network that has arisen to implement important policy concepts in international taxation, without the need for a comprehensive multilateral agreement (Rixen 2008). However, there appears to be no locus of power in the international tax regime. ...
The international tax regime appears to be a weak system of global governance on the surface; however, I find that this system remains effective. This governance structure is built off of the thousands of tax treaties that function as policy instruments for advancing the implementation of global tax policy. Yet, there is conflicting evidence in relation to the efficacy of these treaties, necessitating further exploration. In this article, I offer an accessible introduction to some of the key dynamics of the international tax regime and, in doing so, systematically address whether tax treaties may have the capacity to spur cross-border investment in securities. Using augmented gravity models, I find strong empirical evidence in favor of my theory that tax treaties function as credible commitments to international tax norms, potentially increasing portfolio holdings of some foreign securities. My findings should be of significant importance to scholars of international organizations, global governance, and international tax policy.
... Despite the existence of a UN Tax Committee since 1977, international tax governance has largely taken place at the OECD level (Rixen 2008). Calls for a global intergovernmental tax body under the United Nations has been brought up on several occasions, particularly in relation to the financing for development conferences, most recently by the G77 and China (Horner 2001;Oxfam et al. 2015). ...
... There is a wide range of research documenting the adverse effects of financial secrecy, from the literature on money laundering (Schwarz 2011;Unger et al. 2013;Unger 2017) and international political economy Rixen 2008;Seabrooke and Wigan 2014) to that on illicit financial flows (Cobham and Janský 2017;. While we do not aim to estimate or discuss the adverse effects of secrecy, we build on this literature in our conceptual framework, methodology, and policy recommendations. ...
This book showcases a multidisciplinary set of work on the impact of regulatory innovation on the scale and nature of tax evasion, tax avoidance, and money laundering. We consider the international tax environment an ecosystem undergoing a period of rapid change as shocks such as the financial crisis, new business forms, scandals and novel regulatory instruments impact upon it. This ecosystem evolves as jurisdictions, taxpayers, and experts react. Our analysis focuses mainly on Europe and five new regulations: Automatic Exchange of Information, which requires that accounts held by foreigners are reported to authorities in the account holder’s country of residence; the OECD’s Base Erosion and Profit Shifting initiative and Country by Country Reporting, which attempt to reduce the opportunity spaces in which corporations can limit tax payments and utilize low or no tax jurisdictions; the Legal Entity Identifier which provides a 20-digit identification code for all individual, corporate or government entities conducting financial transactions; and the Fourth and Fifth Anti-Money Laundering Directives, that criminalize tax crimes and prescribe that the Ultimate Beneficial Owner of a company is registered. Working from accounting, economic, political science, and legal perspectives, the analysis in this book provides an assessment of the reforms and policy recommendations that will reinforce the international tax system. The collection also flags the dangers posed by emerging tax loopholes provided by new business models and in the form of freeports and golden passports. Our central message is that inequality can and has to be reduced substantially, and we can achieve this through an improved international tax system.
... Only since the late 1990s, and especially since the global financial crisis did these fora get involved in the fight against tax evasion and avoidance. Since then, they significantly intensified their activities and their respective decisions and regulations became more influential and constraining for national tax policies (Rixen 2008;Christensen & Hearson 2019). Hence, while multi-level governance is not an entirely new phenomenon in taxation, it has become consequential in the latest era of globalization (part 2.1). ...
... As Sol Picciotto (2020) shows in his contribution, the international tax system developed since the 1920s in the form of technocratic, transgovernmental networks of finance ministries, and tax administrations. The aim of these cooperative efforts was to establish sovereignty-preserving regulations that facilitate international investment, but at the same time safeguard national tax policy as far as possible from international interference (Rixen 2008). With the advent and intensification of financial liberalization since the 1980s, this approach came under increasing pressure because it enabled international tax evasion and avoidance by (mostly wealthy) individuals and corporations (Rixen 2011). ...
This article makes four claims: First, tax systems at the national, regional and global level are regulatory systems. They can and should be studied as that. Second, taxation is an important extension to regulatory scholars’ empirical field of inquiry. It is a hard case to test prominent theories of new, softer modes of governance. Third, in the era of liberalization and globalization tax governance exhibits similar institutional changes as regulatory governance. It has changed (1) from national to multi‐level governance, (2) from public and direct to indirect with increased involvement of private actors, and (3) from hierarchical and coercive to cooperative and responsive. Fourth, since the global financial crisis, the new sites of tax governance have increasingly been involved in the fight against tax evasion and avoidance and have become more politicized. These claims are substantiated by reference to the contributions to the special issue that this article introduces.
... At the turn of the 20th century, the most important tax revenue sources were tariffs, followed by taxes on land and real estate. Income taxes, where they existed, were mostly imposed upon property and wealth, and the size of the public sector and governments' 'tax take' was generally low compared to today (Rixen, 2008). The earliest recorded international tax agreement was concluded between France and Belgium in 1843 (League of Nations, 1925a) and related to the sharing of documents and information to assist the effective collection of taxes imposed by the laws of the two countries. ...
... 6 Swiss Cantons -as sovereign members of the Swiss Confederation with sovereign taxing rights -fell under a confederal, constitutional prohibition of double taxation (League of Nations, 1928a;Langbein, 1986). Nonetheless, such treatments of double taxation were largely a regional phenomenon (Rixen, 2008). ...
The current “Separate Accounting” taxation of corporations gives governments the right to tax the national incomes of firms operating within their borders. However, multinational and increasingly digital business models beg the question: what is national taxable income? We argue that a radical rethink of the corporate taxation – moving away from a separate taxation of national corporate income to a taxation of global corporate income allocated via “Formula Apportionment” – is long overdue. Global corporate income as a basis for taxation is supported both by recent theoretical developments and corroborating empirical evidence, with the EU and emerging economies including China already considering its adoption. Nor is it new. As we relate, formula apportionment of global corporate income was used a century ago before commercial and political interests promoted separate accounting, thereby providing both precedent and experience to inform its re-adoption.
... Die verdragen zijn er vooral op gericht de voor de vrije wereldhandel en het kapitaalverkeer nadelige dubbele belasting te vermijden. 5 Een multinationaal bedrijf kan actief zijn in een residentieland en in bronlanden: in het residentieland is het hoofdkwartier van het bedrijf gevestigd, in de bronlanden is het ook bedrijvig. Uiteraard heeft het residentieland belastingbevoegdheid over het bedrijf. ...
... Dit heet het arm's-length principe: filialen van hetzelfde bedrijf moeten handel drijven alsof ze op een armslengte afstand van elkaar zouden staan. 5 Een voorbeeld om dit uit te leggen. Stel dat een Nederlands bedrijf in maatjes aan een Belgisch verkoopfiliaal een ton maatjes verkoopt. ...
... Betont wird daneben, dass Regionalorganisationen wie die Europäische Union solche Dynamiken anheizen ) oder im Gegenteil auf Steuerkooperation setzen (Christensen und Hearson 2019). An-dere Autoren heben den Eigensinn internationaler Organisationen wie der OECD hervor, wo ein Wandel theoretischer Konzepte neben Standardisierung (Rixen 2008) auch zur Diffusion neuer Normen führen könne (Christensen 2020) -sofern sie im Interesse des Hegemonen lägen (Hakelberg 2020). Diese Literatur verhandelt Modernisierung, Rationalisierung und Globalisierung also überwiegend als Faktoren einer "bedingten Konvergenz" (Ganghof 2007) von Steuerpolitik. ...
Zusammenfassung
Die makroskopische Fiskalsoziologie plagt ein Kategorienproblem: Sie lässt offen, ob es sich bei der Einheit ihres Vergleichs um Welten, Familien, Systeme, Regime oder Strukturen von Besteuerung handelt. Diese kategoriale Unbestimmtheit verweist auf theoretische Probleme. Denn indem die Literatur ihr Erkenntnisobjekt – Steuern – primär als Ausdruck von Ideen, Mentalitäten, innenpolitischen Konflikten oder ökonomischen Faktoren begreift, übergeht sie ihre soziologische Qualität als fiskalische Beziehung. Fasst man diese dagegen ins Auge, lassen sich steuerliche Gebilde nicht nur adäquater beschreiben. Vielmehr sorgt dies auch dafür, dass Steuern selbst eine erklärende Rolle zukommt: Welche fiskalischen Beziehungen wie gestiftet werden, zeitigt in dieser Perspektive je unterschiedliche politische und soziale Effekte. Um dies einzuholen schlägt der Beitrag vor, die Kategorie des Steuerstaats zu revitalisieren. In Abgrenzung zu überlieferten Ansätzen wird darunter das Zentrum eines Netzes fiskalischer Beziehungen verstanden, in denen die Geltung und der Inhalt von Steuerordnungen verhandelt werden und deren Wandel sich in vier Prozessbegriffen – Professionalisierung, Durchstaatlichung, Politisierung, Geofiskalisierung – abbilden lässt. Die Vorteile des Begriffs werden anhand eines kurzen Vergleichs des italienischen und deutschen Steuerstaats demonstriert, bevor abschließend für eine komparative Steuerstaatsforschung plädiert wird.
... On the other side of the country size spectrum, the strategy of choice among smaller countries and jurisdictions may consist of 'mock compliance', whereby they tick the boxes by complying with externally imposed requirements but avoid engaging in meaningful, substantive reform (Woodward 2016). Mock compliance is consistent with Rixen (2008), who uses the asymmetric prisoner's dilemma to explain the inability of the OECD's efforts to tame tax havens by the path dependency of the OECD initiatives. He argues that the discrete nature of systemic change at critical junctures together with the high opportunity cost of choosing a new institutional path cause mock compliance to be the dominant strategy for tax havens. ...
... Additionally, important developments in global tax governance, notably within the OECD as a leading international tax platform, increased the political salience of corporate taxation. While the global nature and effects of these developments have already been discussed in detail (see for example Rixen, 2008a;Eccleston, 2013), their impact on EU tax policy-making has remained underexposed so far. Importantly, the OECD cannot impose binding tax laws on its members, whereas the EU can. ...
EU corporate tax policy has long consisted solely in eliminating fiscal barriers. This changed after the financial and Eurozone crises when the European Commission proposed ‘market-correcting’ provisions to increase tax transparency and ‘fairness’, which were partially adopted by the Council. Analyses of EU responses to the crisis have largely ignored taxation issues. This article fills this gap and explains the substantive re-orientation of EU corporate tax policy through the concept of politicization. Based on 19 expert interviews, it details the politicization process of corporate taxation resulting from changes in global governance, media tax scandals, and the work of non-governmental organizations (NGOs). Through the politicization dynamic, new institutional and discursive opportunities were exploited by the European Commission, Parliament and NGOs to induce policy change. We explore this reciprocal interaction between social forces and supranational actors to demonstrate that ‘politicization at the top’ can facilitate a more progressive deepening of European integration.
... Moreover, there is no formal and binding dispute settlement mechanism which results in a lack of consistency and transparency in the international tax regime [10]. Disputes which arise from the application or interpretation of tax treaties are resolved through mutual agreement, and often, the chosen method is arbitration. ...
The current rules on international tax do not function properly due to the gaps which allow for tax manipulation. Whereas most tax agreements largely contribute to the prevention of double taxation, they do not effectively approach double non-taxation matters arising from tax competition based on the agreements’ bilateral nature. In order to tackle this issue, the Base Erosion and Profit Shifting project was introduced. Developed under the Organization for Economic Co-Operation and Development framework, the Base Erosion and Profit Shifting project deals with tax avoidance practices that use mismatches and gaps in tax rules. Nevertheless, the success of this new soft law initiative requires a forum that can promote and enforce its recommendations. The structural nature of the Organisation for Economic Co-operation and Development has led to the consideration of the World Trade Organization to be this forum by many. However, the World Trade Organization covered agreements are drafted in a way that includes some of the tax competition matters but not others, including traditional tax havens. This paper aims to bridge the gaps in the area of the international tax regime. By examining the international trade and international tax regimes, it is shown that there is space for variations in the World Trade Organization broadly drafted agreements for such matters to find a resolution. It is argued that the World Trade Organization can play a complementary role in the enforcement of the new international tax rules.
... Despite the existence of a UN Tax Committee since 1977, international tax governance has largely taken place at the OECD level (Rixen 2008). Calls for a global intergovernmental tax body under the United Nations has been brought up on several occasions, particularly in relation to the financing for development conferences, most recently by the G77 and China (Horner 2001;Oxfam et al. 2015). ...
This chapter provides an interdisciplinary framework for understanding changes in the international tax ecosystem. The chapter describes three broad disciplinary approaches to taxation grouped according to assumptions of how actors operate and project authority. On this basis, the international tax ecosystem framework consists of four components, with associated actors and forms of authority: jurisdictions, political mandates, markets, and normative environments. The framework emphasizes a sensitivity to different kinds of actorhood, and how changes are driven by actors’ claims to different forms of authority. After outlining the history of the international tax ecosystem, the framework is applied to present the most important changes to the tax ecology in the last decade. We argue that the evolution in the ecosystem is characterized by persistent legal indeterminacy and political complexity. The scholarly concern, then, is being open to different forms of actorhood and authority while untangling evolution within the international tax ecosystem.
... This weakest-link problem has been further analyzed by Elsayyad and Konrad (2012) who argued that tax havens that retain their business model the longest face less competition from other tax havens, increasing their model's profitability and further increasing their disincentives to cooperate. Using a similar methodological approach enriched by historical process tracing, Rixen (2008) provided a complementary explanation for the lack of success of the OECD's efforts before 2008 to counter tax havens in their harmful tax competition initiative. He argued that the confrontation inherent in the asymmetric prisoner's dilemma has not been resolved through sanctions or compensations to induce cooperation, largely due to the OECD's deep involvement in the establishment and management of thousands of bilateral tax treaties; this role of the OECD has thus far constrained any reform proposals to piecemeal approaches which have left the treaty setup largely unaffected. ...
Secrecy jurisdictions provide opportunities for nonresidents to escape the laws and regulations of their home countries by allowing them to hide their identities. In this paper we quantify which jurisdictions supply secrecy to which countries and assess how successful countries are in targeting that secrecy with their policies. To that objective, we develop the Bilateral Financial Secrecy Index (BFSI) which maps the financial secrecy faced by 82 countries and supplied to them by 131 jurisdictions, thus providing the study of the world of financial secrecy with unprecedented nuance. We then use the BFSI to evaluate the progress of two recent policy initiatives designed to curb financial secrecy: automatic information exchange (AIE) and the blacklisting of noncooperative jurisdictions. By embedding the role of power in the center of our analytical framework, we reconcile the apparently conflicting findings of the existing literature on the effectiveness of these policies. We show that secrecy jurisdictions engage in selective resistance depending on whom they are dealing with, and that the hypocrisy of Organisation for Economic Co‐Operation and Development member countries lies at the heart of the design and operation of the AIE system and the blacklisting exercise. We argue that focusing policy on the most relevant secrecy jurisdictions, which – despite its pivotal role in recent offshore document leaks – only rarely include Panama, would enable countries to more effectively mitigate the harm caused by financial secrecy.
... See Slemrod and Weber (2012) for a discussion of the many approaches to, and difficulties in, measurement. For insightful discussions of the international context and its impacts on taxation, see Genschel (2002), Rixen (2008), Genschel and Rixen (2015), and Murphy (2020). 5 See Alm (2014) for a recent analysis of ATPs and Vlcek (2019) for a general discussion of tax avoidance schemes in an international setting. ...
How can governments get individuals and firms to pay taxes, especially given increasing tax base erosion via tax evasion, tax avoidance, and money laundering? In this paper we discuss the many different perspectives to explain why people pay-and do not pay-their taxes, especially perspectives based on "responsive regulation," and we use then these perspectives to suggest policies that governments may use to improve tax collections. We first describe an approach that is based on a single individual pursuing a single motivation by choosing a single method (tax evasion) and operating in a single country. This perspective has generated important insights, but it nonetheless has significant limitations. As a result, we then argue that this perspective must be expanded to include additional actors in the field, all pursuing additional motivations. We also expand our discussion to include additional methods of tax base erosion like tax avoidance and money laundering, as well as additional countries. We argue that explaining behavior and then devising appropriate policies requires incorporating all of these additional considerations. We also discuss the likely impact of technological innovations both on the ability of governments to collect taxes and on the ability of private agents to reduce their taxes. An important contribution of our paper is that we simulate the effects of all of these expansions to the basic model using a novel agent-based model that is fully grounded in theory and calibrated for 33 European economics. We use this model to simulate the impacts over time of various reforms, especially reforms that implement international information-sharing programs, by comparing tax base erosion in the absence of these reforms to erosion in their presence. Our simulation results demonstrate the importance of using a fully specified theoretical model that goes well beyond the standard economics of crime approach when considering the effects of government policy innovations. We conclude with recommendations that can in principle reduce tax base erosion via evasion, avoidance, and money laundering in the current multi-dimensional environment as derived from the responsive regulation framework. However , these recommendations require a firm commitment from governments to their tax administrations, and these recommendations also cannot be introduced unilaterally by a single country but require international cooperation, especially via information sharing across borders.
... In any case, academics are increasingly familiar with tax secrecy jurisdictions (havens), permanent establishment, beneficial ownership, country-by-country reporting, commercialization of sovereignty, the finance curse, transfer pricing and the arm's length principle, and many other concepts and mechanisms that might otherwise be arcane preserves of accountants, tax consultants and a few specialists (e.g. Palan, 2002;Palan et al., 2010;Rixen, 2011Rixen, , 2008Sharman, 2010Sharman, , 2006Shaxson, 2011). ...
Global Wealth Chain analysis explores the potential for wealth creation to become wealth capture. Corporate tax avoidance is a component in many GWC. The problem is complex, involving both practices and undergirding macro-narratives that support a status quo and limit political and regulatory action. In this paper, I argue that the Laffer theorem and its legacy plays a background role in framing tax avoidance. The theorem is one component in a general direction of travel of neoliberal policy. Following general discussion of the issues I note that the original version of the theorem takes no account of avoidance and subsequent iterations do so based on incompatible concepts of firm behaviour. These problems are rooted in mainstream economic methodology and distort a more historical, sociological and institutional understanding of the economy. This has additional consequences for issues of tax justice, since these sit awkwardly with formal economic analysis.
... Importantly, BEPS is also a highly technical policy project, driven by elite professionals and experts from international organizations, governments and the private sector. Organized around the technical bureaucracy of the Organisation for Economic Co-operation and Development (OECD), this transnational professional community has a strong historical track record of creating and diffusing soft law tax outputs across the globe (Rixen 2008;Sharman 2006). ...
Since the global financial crisis, international corporate taxation has risen to the top of the global political agenda, as political leaders have called for collective action to shore up corporate tax systems. However, high‐level political initiative alone does not create new international corporate tax rules. Rather, these transnational governance processes are centrally driven by elite tax professionals competing for prestige and influence. In this article, I investigate this competition in the case of one crucial post‐crisis reform – the OECD/G20 Base Erosion and Profit Shifting project. I argue that hierarchies of prestige and influence for elite professionals in transnational tax governance are based on strategic combinations of career resources in issue‐specific ‘linked ecologies'. In particular, I detail the expertise and network positioning of elite professionals, and discuss how these resources were mobilized in competitions for professional authority, which in turn shaped the transnational policy process. Evidence is drawn from qualitative interviews and career analysis.
... Major corporate economic transactions have a legal dimension through the sovereign stamp of the territorial state under whose tax rules the transactions take place (Palan et al. 2010). Greater cross-border movement of goods, people, and services increase the challenge associated with determining the jurisdiction of tax laws (Rixen 2008). While each country has the sovereign right to define and implement its tax laws, it cannot dictate these to other states, opening up the possibility of dissociating the physical location from the legal location of a transaction. ...
Little is known about the drivers of corporate investments in tax havens from emerging markets. This paper offers extensive descriptive statistics and regression analysis to illustrate the patterns and motivations for tax haven investments by Indian firms over the 2007–2017 period. We find that the motivations for Indian firms to invest in tax havens are not only driven by the benefits of tax avoidance and secrecy of these jurisdictions, but also to seek strategic advantage and efficiency gains in global markets.
... Tax compliance is difficult to enforce despite these functional pressures since comprehensive international cooperation is required to identify and sanction tax evaders (Rixen 2008). As a result, a complex landscape of international agreements aiming to curb the concealment of capital globalisation trilemma requires robust international cooperation, i.e. effective political globalisation, which counters voices that are sceptical towards such a possibility (e.g. ...
After decades of ineffective attempts to fight tax evasion, the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS) recently implemented the first encompassing international exchange of tax-related information on an automatic basis. This is an important development because tax evasion contributes to rising socio-political inequality and political sovereignty losses. This article assesses the treaties’ impact on tax evasion by conducting a difference-in-difference analysis of cross-border asset data. The results shows that the treaties are successful. Household assets in tax havens that are not hidden behind corporate identities are estimated to be 67 per cent lower than they would have been without automatic exchange of information. Furthermore, this reduction is not offset by an increase in treaty circumvention using identity concealment or asset shifting to non-compliant jurisdictions. FATCA and CRS thus implement the first effective international cooperation against tax evasion. The results imply that political globalisation is capable to mitigate the political sovereignty losses and rise of inequality caused by economic globalisation.
... Tax has become an increasingly prominent and contested area of multilateral governance over the last decade (Cobham et al., 2015;Dietsch and Rixen, 2017;Eccleston and Gray, 2014;Palan and Wigan, 2014;Rixen, 2008Rixen, , 2011aSeabrooke and Wigan, 2016;Sharman, 2006). This has been a direct response to the globalisation of financial and corporate networks and practices, meaning that national tax policies now have implications well beyond single jurisdictions, as does corporate activity such as transfer-pricingthe rules and methods through which economic transactions are priced and accounted for within a transnational enterprise under common ownership (Bryan et al., 2017, Palan, Murphy andChavagneux, 2010;Picciotto, 1992;Zucman, 2014). ...
Tax spillovers are the effects one country's tax rules and practices have on other countries. They have been assessed in aggregate terms by the IMF using econometric models, and were found to have a ‘significant and sizable’ impact in reducing corporate tax bases and rates in ‘developing countries. However, a widely accepted form of country level spillover analysis remains elusive, despite demands from non‐governmental organisations (NGOs) and international organisations (IOs). We present the first framework for conducting comprehensive national level spillover analyses using a qualitative evaluation framework in three steps. First we identify the importance of the normative underpinnings of multilateral evaluation frameworks. We make the case for an international moral harm convention that discourages states from doing harm to other states through their tax policies. Second we illustrate some of the difficulties in conducting country level spillover analyses using econometric methods, while advancing a broader conception of spillover, based on the defensive purpose of corporation tax. Third we present a new framework for conducting spillover analysis, that assesses relationships between four direct taxes and a number of administrative and institutional features of tax systems. Finally, we present initial pilot qualitative assessments for the UK and Denmark, involving scores, risk dashboards and visualisations. The most important question facing a future form of spillover analysis, is the purpose it should serve, or its overarching objective based on a ‘systemic vision’ of a good or better international tax system and its prospective constituent norms.
... International Political Economy has no less failed to forge the link between financial innovation, tax avoidance and the fiscal crisis of the state. The literature on what is now widely known as 'the offshore world' (Palan 2003) has concentrated on the historical development of the international tax architecture, the institutional basis of that architecture in nationally circumscribed mutually exclusive fiscal sovereignty under conditions of economic globalisation, the impact of 'tax havens' on developing countries and multilateral policy efforts to regulate activities in offshore jurisdictions (Burn 1999;Eccleston 2012;Kurdle 2010;Rixen;Palan, Chavagneux and Murphy 2010;Picciotto 1992;Sharman 2006;Leaman and Warris 2013) This is despite evidence that financial innovation in the form of structured finance 2 and derivatives is in good part driven by the tax advantages that it can create. Early on, the noble laureate Merton Miller, a leading derivative architect and doyen of the Chicago School, emphasised regulatory and tax 'frictions' in explaining financial innovation (1986). ...
Contemporary derivatives mark the development of capital and constitute a novel form of ownership. In abstracting from the object of ownership, the underlying asset, derivatives sever direct material ties be- tween the owner and property and, in doing, transform the capacities of ownership. is transformation is spatial, temporal and legal. is is signi cant for relations between borrowers and lenders, between the various participants in nancial markets, and, indeed, for the overarching institutional fabric of the politi- cal economy. However, one relatively neglected aspect of the transformations manifest through derivatives is the relationship between the scal state and nancial innovation. By recon guring the temporal, spatial and legal character of ownership derivatives present a substantive challenge to the tax collecting state. While scal systems are nationally bounded and inherently static, capital itself is unprecedentedly mobile, uid and fungible. In these terms, nancial derivatives not only challenge default conceptions of the o shore world in International Political Economy, which have predominantly focused on nationally variegated tax systems, but via abstraction recon gure the materiality of contemporary capitalism.
... They argue that increasing capital mobility forces governments to decrease effective tax rates on capital income, corporate profits and high-income earners, thereby leading to a race to the bottom (Frey 1990). To explain the emergence of tax competition, Rixen (2008) reconstructed the institutional trajectory of international tax governance. According to him, it was the necessity to eliminate double taxation in a context of economic liberalization at the beginning of the 20th century that lead to the current system of bilateral tax treaties supervised by the OECD. ...
This contribution discusses the possibility of tax cooperation from a European perspective. Research on tax cooperation focuses on the resistance of powerful states or the failed efforts of the OECD and emphasizes the unlikelihood of cooperation in tax matters. Important developments from the EU tend to be overlooked. This paper closes this gap by providing a detailed account of EU corporate tax policy and reconstructing the evolution of this policy field over a period of 15 years. The study is based on a chronological review of EU corporate tax provisions since 2003 and a quantitative content analysis of 936 documents from the Commission and the Council. It shows that EU corporate tax policy has undergone a significant change, which is characterized by an intensification of the regulatory efforts against corporate tax avoidance and the identification of new problems and solutions along the ideas of fairness and transparency. Contrary to conventional scholarship, those findings suggest that tax cooperation is becoming feasible within the EU, at least in the field of corporate taxation.
... The OECD Model Convention states its own main purpose as being 'the application by all countries of common solutions to identical cases of double taxation', it being 'scarcely necessary to stress the importance of removing the obstacles that double taxation presents to the development of economic relations between countries' (OECD, 2017, p. 9). To achieve this, the community settled on an agreed equilibrium point amongst multiple stable equilibriathe OECD Model (Rixen, 2008b)then promoted adherence to it. States now take care of the 'heroic' double taxation that motivated the original League of Nations work through their national tax laws (Dagan, 2000), and the words 'double taxation' have been removed from the Model's title. ...
Global economic governance outcomes in areas such as corporate taxation may be influenced by transnational policy communities acting at national and transnational levels. Yet, while transnational tax policy processes are increasingly analyzed through the politics of expertise, national preferences have usually been derived from domestic interest group preferences. We know little about how technical expertise interacts with interest group politics at national level, an important deficit given the sovereignty-preserving, decentralized way in which transnational tax norms become hard law. This article examines the drivers of expansion of the UK’s bilateral tax treaty network in the 1970s, which cannot be explained solely through monolithic interest group politics. Evidence from the British national archives demonstrates how tax experts in the civil service and the private sector, members of a transnational policy community, used tax treaties to impose OECD standards for taxing British firms on host countries, at times overruling the preferences of other political, bureaucratic and business actors. Expertise politics and business power may shape the development of norms and focal points within a transnational policy community, but it is often their interaction at domestic level that determines the implementation of transnational norms as hard law.
... Nesse cenário, o Direito Internacional Tributário, compreendido a partir de um novo paradigma de centralidade da dignidade humana, "deve colocar-se ao serviço da promoção da transparência democrática, do desenvolvimento econômico e social e da justa distribuição de rendimentos à escala global", além do que deve promover "a transparência e a neutralidade econômica da legislação fiscal" (MACHADO; COSTA,2016, p. 154-156).Por essas razões, o Direito Fiscal Internacional vem ganhando renovada importância no contexto da construção de um sistema internacional que proporcione maior equilíbrio e coordenação dos países na área fiscal, reduzindo o espaço para a competição nociva e a erosão das fontes de financiamento do Estado social. A cooperação fiscal internacional preocupava-se inicialmente com mecanismos para evitar a dupla-tributação internacional, e, com o tempo, a evasão fiscal e o planejamento fiscal agressivo foram sendo incorporados às agendas das negociações e tratados internacionais(RIXEN, 2008).Um instrumento indispensável para combater a evasão fiscal é disponibilizar informações sobre ativos financeiros às autoridades fiscais. De um modo geral, o fisco pode ter acesso a informações bancárias dos contribuintes relativamente aos ativos mantidos em instituições financeiras localizadas em seu território, respeitados os parâmetros legais e constitucionais. ...
Este trabalho objetiva analisar os novos instrumentos de governança global da tributação e a controvérsia sobre a possível inconstitucionalidade das normas domésticas que implementam tratados fiscais internacionais de cooperação e troca automática de informações. O trabalho aborda os impactos da globalização sobre os sistemas tributários, apontando que a mobilidade do capital internacional e a ausência de mecanismos eficientes e transparentes de cooperação e troca de informações fiscais facilitam a evasão fiscal e o planejamento tributário agressivo. Sistemas fiscais domésticos isolados e não coordenados não são capazes de apresentar resposta adequada a esses efeitos indesejados, e, consequentemente, os Estados perdem sua capacidade de financiar a efetivação dos direitos humanos. Nesse cenário, surge um novo paradigma de governança global da tributação e do Direito Fiscal Internacional, que volta sua atenção para os problemas da evasão fiscal e da erosão das bases imponíveis. Partindo dessas premissas, este artigo apresenta dois instrumentos de governança global da tributação – os tratados relativos ao FATCA e a Ação 12 do Projeto BEPS. Por fim, investiga-se a possível violação de direitos de privacidade e de livre iniciativa em razão da implementação desses instrumentos internacionais na ordem jurídica nacional, efetuando-se uma análise a partir de precedentes do Supremo Tribunal Federal e do direito comparado. Conclui-se que a implementação de tratados internacionais para cooperação e transparência fiscal não é prima facie inconstitucional, embora gere maiores responsabilidades às autoridades tributárias no que tange à preservação dos direitos dos contribuintes.
... Some studies explore the impact of capital or corporate income taxation by individual governments on public revenues, investment flows, etc. in third countries (Cnossen, 2016;IMF, (International Monetary Fund), 2014;McGauran, 2013;van de Poel, 2016). The underlying political economy is sometimes modelled in game-theoretic terms, with national governments as primary players (Rixen, 2008). From a normative perspective, scholars explore how globalization undermines the fiscal sovereignty of nations (van Apeldoorn, 2016). ...
The article provides an overview over recent developments in the field of global tax cooperation, with a specific focus on the activities of the G20 under the German presidency. It argues that Germany has mostly limited itself to following-up on previous initiatives, rather than presenting new initiatives concerning the international tax governance structure. Progress has been achieved with regard to fighting tax avoidance by multinational corporations and exchanging information between tax authorities. However, these changes are insufficient to address spillovers arising from mismatches between public finance and public service delivery. Developing countries in particular are challenged to manage such spillovers under the current international tax system.
... Erstens könnte man einen Vergleich der bisherigen institutionellen Entwicklung auf dem Feld der internationalen Steuerpolitik mit dem hier vorliegenden Vorschlag heranziehen. Wie anderswo gezeigt (Rixen 2008), wurde in der internationalen Steuerpolitik traditionell vor allem auf weiche Governanceformen gesetzt. Während diese Lösung für das Problem der Vermeidung von Doppelbesteuerung angemessen war, ist sie für den Kampf gegen Steuerflucht und Steuerwettbewerb nicht funktional. ...
Dieser Artikel sucht nach Lösungen für ein Dilemma: Ein starker Steuerstaat ist die Grundvoraussetzung für die politische Stabilität der wirtschaftlichen Globalisierung. Die Globalisierung – in Form des Steuerwettbewerbs – unterminiert aber die demokratische Selbstbestimmung der Nationalstaaten über die Höhe, Struktur und Verteilungswirkung ihrer Steuereinnahmen kollektiv zu entscheiden. Zur Rückgewinnung der demokratisch legitimierten nationalen Souveränität bedarf es einer internationalen Regulierung des Steuerwettbewerbs. Wie können aber unter Bedingungen fiskalischer Interdependenz die fiskalischen Selbstbestimmungsrechte aller Staaten legitim voneinander abgegrenzt werden? Es wird eine republikanische Konzeption fiskalischer Selbstbestimmung vorgeschlagen. Daraus werden zwei Prinzipien der internationalen Steuerpolitik sowie eine mögliche Form ihrer Institutionalisierung in einer internationalen Steuerorganisation (International Tax Organization – ITO) abgeleitet.
... Politikwissenschaftler und Ökonomen differieren in der Einschätzung des internationalen Steuerwettbewerbs. Aus politikwissenschaftlicher Sicht ist der Wettbewerb Bestandteil eines übergeordneten Standortwettbewerbs um Handelsanteile und Investitionsbedingungen in einem Umfeld deregulierter Kapitalmärkte (Rixen, 2008). In der Konsequenz führe der Steuerwettbewerb zu einem Unterbietungswettlauf (race to the bottom) um niedrige Steuersätze (von Kulessa u. ...
... Furthermore, the very nature of the system provides great scope for MNEs to contest any challenge. The current system may formally oppose tax avoidance but is unable to effectively prevent it (for context see Rixen 2008;Sharman 2006). ...
Contemporary populism is rooted in a crisis of legitimacy. Corporate tax avoidance by multinationals is one cause of that crisis. Although states tend to be increasingly formally committed to tackling avoidance, they do so in a system that promotes contradictory sets of behaviour. This tends to undermine attempts to solve the problem of avoidance unless a more transformative collective approach is taken. Ironically, despite its own democratic deficit, the European Commission has taken a leading role in promoting such a solution: the Common Consolidated Corporate Tax Base (CCCTB). In this paper, I set out the case for ‘unitary taxation’ based on the CCCTB and state some of its current problems. The problem of corporation tax raises a basic issue in terms of who is sovereignty for, and solving the problem provides an important contribution to legitimacy of both the state and the EU.
... If a country facilitates the creation of structures that allow asset holders to avoid taxation, launder money or finance illicit activities, other countries have few means at their disposal to avert the negative consequences. Hence, the literature on offshore finance argues, there is little that can be done against financial secrecy outside of multilateral initiatives that substantially restrict the state's legal sovereignty, but due to collective action problems, such initiatives are unlikely to succeed (Palan 2002;Webb 2004;Eden and Kudrle 2005;Rixen 2008;Sharman 2008;Genschel and Schwarz 2011). ...
This article explores the tactics of an emergent extraterritoriality in international finance by examining how the US was unilaterally able to pierce Swiss banking secrecy regulations before Switzerland was forced to make similar concessions at the multilateral level. Complementing power-based approaches that emphasise control over market access, we show that, for most of the conflict starting in early 2008, the key agents of change were the US law enforcement authorities. By relying on legal action against Swiss banks following a large tax evasion scandal, rather than engaging in a direct confrontation with the Swiss government, the US was able to avoid politicisation of the conflict, which would have raised questions of legitimacy. The US law enforcement authorities’ ability to promote institutional change in Switzerland is based on three factors: the structural economic dependence of banks on access to the US market; the corporate liability for legal transgressions of employees; and an adversarial legal system characterised by extensive prosecutorial autonomy. More generally, we show that powerful states have the capacity to re-embed international finance by extending the boundaries of their law enforcement authorities’ jurisdiction extraterritorially.
During the 1970s, governments increasingly expressed concerns about the loss of revenue through the use of tax havens by both individuals and corporations. This article explores a covert international working group (the Group of Four) set up between France, Germany, the United Kingdom, and the United States in 1969 in response to such concerns. At regular meetings, officials exchanged information gathered by their respective tax authorities in auditing multinational companies. In the 1980s, under increasing pressure from governments in a now much more hostile climate to tax authorities, the Group’s work shifted away from multinationals and toward more general, technical questions. The history of the Group of Four illustrates the importance of the 1960s and 1970s as a period for regulating economic actors and the impact of broader circumstances on the success or failure of anti-tax avoidance measures.
This research paper examines the phenomenon of the globalization of tax rules in the context of a de-globalizing world. It delves into the history of international tax cooperation, exploring major milestones and developments that have shaped tax rules and policies. The paper then analyses the current challenges posed by the rise of protectionist policies and nationalistic approaches to tax regulations, along with the role of technology in shaping tax rules in a de-globalizing world. Furthermore, the impact on taxation and international businesses is discussed, highlighting the consequences for multinational corporations, tax planning strategies, and compliance requirements. Finally, potential solutions and future trends are explored, including increased international tax cooperation, alternative tax models, and expected developments in tax rules amid de-globalizations.
The OECD led BEPS project attempts key changes to the international tax standards to limit harmful tax avoidance. First, it is found that calls for the BEPS project are based on arguments (illicit financial flows and tax competition) that are supported by limited evidence and hence may not offer much fiscal gain to the developing countries. Second, it is found that the BEPS project would, through information sharing, further limit the fiscal jurisdiction of capital importing states. Further it is found that tax competition, even if existing in a limited form, is a result of the international tax architecture and the externalities caused by it. In fact, it is seen that the MNCs actually reduce the inefficiencies created by this tax architecture and thereby reduce transaction costs. By agreeing to the BEPS agenda of information sharing the developing countries would be paying the cost of internalising the externality.
Despite the centrality of tax havens to the global political economy, up to this point historians have largely neglected in-depth research on the origin of the global phenomenon. Literature within an International Political Economy (IPE) tradition of the social sciences has placed the role of the British Empire at the centre of the formation of a British-based tax haven system within a broader offshore world of global reach. However, this literature does not fully explain how this British system came about with much historical detail. This thesis contributes with one historical assessment of the British administrative tax haven experience as the phenomenon unfolded in a formative stage during the 1960s and 1970s. The study brings together insights from IPE studies with historiographies relevant to the specific historical context and official records from British public archives to examine the central features of the role that the British administration played in tax haven formation in British dependencies. This study’s primary focus is how the British administration allowed tax haven developments to proliferate within British dependencies, a focus that will extend to the responses of sub-institutions of the British state in the context of decolonization. Institutions operating under the authority of the Treasury and the Foreign and Commonwealth Office headed the negotiation of a formal UK tax haven policy established in 1971. The central argument presented in this thesis is that the British tax haven system was not the result of a strategically deployed master plan designed to serve the interests of the metropolitan power as formerly suggested. Rather, it was the end result of a complex process involving ad hoc practices, incoherent management of official policy, and indecision as tax havens developed. This more unstable process reflects a negotiation between the conflicting interests of those working to financially sustain the political independence movements in British dependencies and those working to maintain UK domestic interests. This study re-affirms the importance of semi-sovereignty to tax haven formation as a factor that allowed for an expansion in influence from private interests.
Economic activities have tremendously globalized as a result of advances in transportation and information and communication technologies. Although business can now be easily conducted across multiple jurisdictions, the rules regulating these economic activities remain local in their scope. Each jurisdiction legislates its own laws in accordance with its respective policy goals. This creates inconsistencies among rules and fosters opportunities for tax avoidance by economic actors. In order to contribute to the exposure of tax avoidance and a better regulatory environment for international taxation, we analyze tax rules, firm-level equity investments, and multinational corporate structures within the framework of network science. We assert that countries must develop countermeasures and international tax rules, and engage in international cooperation in order to combat tax-avoiding behaviors.
This chapter addresses the causes and consequences of automatic cross-border exchange of taxpayer information (AEI). First, we argue that the introduction of AEI was enabled by the willingness of the United States to exert its superior economic power. Second, we find that AEI leads to shifts of international investment out of tax havens, while at the same time very sophisticated tax evaders have been able to use loopholes in the AEI regime. Third, we focus on the impact of AEI on domestic tax policies and show that AEI removes the pressure of international tax competition and enables governments to increase taxes on internationally mobile capital. International cooperation in the form of AEI increases the domestic policy space of governments under conditions of economic globalization and may enable a return to more progressive tax systems and a reversion of the trend of rising income and wealth inequality.
The multilateral adoption of the automatic exchange of information (AEI) on bank accounts held by nonresidents was a breakthrough in the fight against cross-border tax evasion, which led to a substantial reduction in the value of bank deposits and investment portfolios in traditional tax havens. However, there is suspicion that sophisticated tax evaders engage in regulatory arbitrage of AEI provisions. We examine whether two widely discussed secrecy schemes, namely golden visas and anonymous trusts and shell corporations, have been used to circumvent information reporting. Relying on a difference-indifference design, we only find scattered evidence for use of the secrecy schemes. Overall, our results suggest that regulatory arbitrage is not yet widespread, but it seems to increase over time. We thus provide evidence for the current effectiveness of the AEI but also show that closing remaining loopholes is of utmost importance. We link our findings to debates about the (im)possibility of re-embedding neoliberal globalization.
The downward trend in capital taxes since the 1980s has recently reversed for personal capital income. At the same time, it continued for corporate profits. Why have these tax rates diverged after a long period of parallel decline? We argue that the answer lies in different levels of change in the fights against tax evasion and tax avoidance. The fight against evasion by households progressed significantly since 2009, culminating in the multilateral adoption of automatic exchange of information (AEI). In contrast, international efforts against base erosion and profit shifting (BEPS) failed to curb tax avoidance by corporations. We theorize that international cooperation is an intervening variable, countering the negative impact of tax competition on capital taxation by reducing the risk of capital flight. Under such conditions, domestic political pressures in favor of higher capital taxes can unfold. We confirm our argument in a difference-in-difference analysis and through additional tests with data for up to 35 OECD countries from 2000–2017. Our central estimate suggests that the average tax rate on dividends in 2017 is 4.5 percentage points higher than it would have been absent international tax cooperation.
Why have OECD governments raised taxes on dividends at the shareholder level since 2008? Previous research points to the importance of budget deficits and voter demand for compensa-tory fairness in the aftermath of the financial crisis. We complement this literature by showing that the effect of domestic drivers of tax increases on capital income crucially depends on the level of financial transparency in a country’s investment network. Low financial transparency increases the risk of capital flight in response to a tax hike, whereas high financial transparency reduces this risk. Hence, governments facing fiscal pressure become more likely to raise taxes on capital income when transparency is high. To substantiate our argument, we construct an original indicator of financial transparency in countries’ investment networks, which we utilize in a regression analysis of tax reforms by 204 cabinets in 35 OECD countries between 2001 and 2018.
Why have Organisation for Economic Co-operation and Development (OECD) governments raised taxes on dividends at the shareholder level since 2008? Previous research points to the importance of budget deficits and voter demand for compensatory fairness in the aftermath of the financial crisis. We complement this literature by showing that the effect of domestic drivers of tax increases on capital income crucially depends on the level of financial transparency in a country’s investment network. Low financial transparency increases the risk of capital flight in response to a tax hike, whereas high financial transparency reduces this risk. Hence, governments facing fiscal pressure become more likely to raise taxes on capital income when transparency is high. To substantiate our argument, we construct an original indicator of financial transparency in countries’ investment networks, which we utilize in a regression analysis of tax reforms by 204 cabinets in 35 OECD countries between 2001 and 2018.
This dissertation analyses the design of tax policies of the Organisation for Economic Co-operation and Development (OECD) between 2008 and 2018. Critiques levelled against some of the OECD’s earlier work raise the question if its recent tax policies for countering tax evasion and avoidance are fit for purpose. In answering this question, the thesis explores four policies under the prism of a typology of international tax cooperation that takes into account the divergences of interests among OECD members, and between OECD and non-members. The first policy is the tax haven blacklist (black-grey-whitelist) which has been endorsed in April 2009 during the G20 summit in London as a response to the global financial crisis. The second policy is the automatic exchange of tax information which has gradually become part of the “internationally agreed tax standard”. The third policy under review is country by country reporting (CbCR), which has been proposed by the OECD during its Base Erosion and Profit Shifting (BEPS) action plan, targeting the tax avoidance of large multinational corporations. The fourth policy concerns the requirements around beneficial ownership of legal entities under tax standards established by the Global Forum of the OECD and anti-money laundering standards established by the Financial Action Task Force (FATF). A central finding emanating from the four case study analyses is that there is a mismatch between OECD’s aspiration and self-presentation as a globally inclusive, efficient and apolitical expert think tank and the ultimate policy outputs both in terms of material policy positions and processes.
After an overview of size and methods of tax evasion and avoidance, I provide an ethical evaluation of a number of controversial enforcement methods used to coerce compliance with tax laws: creating third-party liability for lost VAT; the abuse of law doctrine as developed by the Court of Justice of the European Union; blacklisting of tax havens; public shaming of tax avoiders; and imposing mandatory, third-party, cross-border reporting. The results of the evaluation are mixed but, generally, not positive. Third-party liability is reasonably applied in the EU when it comes to persons acting in good faith but the standards applied to those acting with some degree of mala fides are less satisfactory. Blacklisting is an ethically unacceptable effort to pressure low-tax countries, while violating their sovereignty, towards revising their policies and adhering to a higher rate of taxation and tax policy standards developed without their input or consent. Public shaming is an inefficient and misleading effort to coerce multinational companies to terminate tax planning strategies. FATCA has triggered a development into global information exchange which raises questions as to the protection of civil liberties. Although, the subject measures are not judged positively, this does not diminish the indispensable role of tax law enforcement as a constituent component of the equilibrium model. Policymakers are advised to ensure that tax law enforcement measures meet the equilibrium test, i.e., the required proportionality, because that would not only enhance voluntary compliance but encourage taxpayers to include ethical considerations when deciding on tax planning; and it may lead to a synergetic relationship between taxpayers and tax agencies.
What do we know about justice in international taxation? Justice requires a principle-based judgement on how to distribute the costs between taxpayers and the benefits between the states. This principle-based judgement has been interpreted by the doctrine through the concepts of inter-individual and inter-nation equity. The meaning and the role of equity in determining taxing rights and profit allocation between states has changed a lot in the recent decades. Globalisation, mobility of production factors and digitalisation underscore the importance of inter-nation equity in the quest for a just system of international taxation. The author of this thesis develops a politico-philosophical normative framework of global social justice and proposes an egalitarian approach to interpretation of inter-nation equity.
The financial crisis of 2007–2009 is now broadly recognised as a once-in-a-generation inflection point in the history of global economic governance. It has also prompted a reconsideration of established paradigms in international political economy (IPE) scholarship. Developments in global tax governance open a window onto these ongoing changes, and in this essay we discuss four recent volumes on the topic drawn from IPE and beyond, arguing against an emphasis on institutional stability and analyses that consider taxation in isolation. In contrast, we identify unprecedented changes in tax cooperation that reflect a significant contemporary reconfiguration of the politics of global economic governance writ large. To develop these arguments, we discuss the links between global tax governance and four fundamental changes underway in IPE: the return of the state through more activist policies; the global power shift towards large emerging markets; the politics of austerity and populism; and the digitalisation of the economy.
International tax competition undermines states’ capacity for redistributive taxation. It is thus problematic from the point of view of both cosmopolitan and internationalist theories of justice. This article examines the proposal of a fiscal policy constraint that prohibits tax policies if they are strategically motivated and harmful to effective fiscal self-determination internationally. I argue that we should opt for a more robust, preference-independent mechanism to prevent harmful tax competition instead. States should, as a matter of justice, accept global minimum tax rates on mobile tax bases.
A significant number of scholars have written about the nexus between fairness in the allocation of taxing rights in double taxation treaties and sustainable development in developing countries. These scholars have argued for expansive taxing rights for developing countries, as against the current source- restricting provisions in taxation treaties between developed and developing countries based on the OECD and UN Model taxation treaties. They have also highlighted the need for developing countries to critically assess their treaty networks, and to consider gaps in their local laws and policies that encourage revenue loss. This paper contributes to this body of knowledge by identifying provisions in Nigeria’s double taxation treaties that encourage revenue loss. It concludes by recommending amendments to Nigeria’s double taxation treaties.
Blacklisting is a policy tool that is used extensively in the international political economy, and blacklists have been invoked following the Panama Papers scandal, Russia's annexation of Crimea and the Democratic Republic of North Korea's proliferation activities. To analyse the principal mechanisms at work in what is an understudied tool of global governance, this paper compares the Organisation for Economic Co-operation and Development’s and the Financial Action Task Force's blacklisting of secrecy havens in the years 2000–2009. We show that blacklisting can be used to impose both reputational and financial costs on a state and highlight three factors that contribute to a blacklist's effectiveness: the stigma attached to the act that led to the blacklisting, the nature of any sanctions that it imposes and the blacklist's legitimacy. The blacklisting of Liechtenstein and Nauru highlight the interplay between these factors, but they also raise questions about the legitimacy of blacklisting itself.
Neoliberal tax policies at the local and the global levels risk democracy consolidating economic inequality by allowing and fostering capital accumulation. As a consequence capital owners have increased their political power to influence and decide on local and global tax policies for their own benefit. The Chilean income tax system and the international tax law system (including tax competition among states and tax havens) are analyzed as examples of neoliberal tax policies at the local and the global level, respectively. At the same time, neoliberalism as a normative order of reason has replaced the political aspect of taxation with economic concepts that tend to dissolve the connection between taxes and solidarity. In this scenario, taxes make no economic or political sense as they are not understood as duties of citizenship. In this chapter recent alternatives proposed to diminish global no taxation and inequality, as the OECD BEPS project and Thomas Piketty’s proposal for a global tax on capital are analyzed and criticized.
In the midst of the 2016 Panama Papers scandal, Pascal Saint-Amans, Director of the Centre of Tax Policy and Administration, pointed out that transparency was one of the three main pillars of the international tax agenda. Indeed, the opaque nature of corporate vehicles, habitually associated with tax havens, has been heralded as the major contributor to the increase in tax avoidance. Anonymous legal structures are often enabled using the so-called shell companies, or “legal fictions”. By adding extra layers of complexity to the ownership structure, these companies can serve the devious purpose of obscuring transactions trails, which is handy for taxpayers wishing to minimise their tax burden. Although often associated with tax havens in the public imagination, evidence suggests that anonymous legal entities are provided on a much larger scale in some of the OECD countries. The world’s leading governments have been recently promoting transparency as the new way forward to address tax avoidance and evasion by multinational companies, with the OECD holding the leading position among transnational tax regulators. While the initiatives aiming to look through corporate vehicles are abundant, the implementation and effects thereof seemed to escape the interest of policymakers. Clearly, there is a need to step back and try to understand the effects of the existing regulations. In this chapter, we provide an outline of the transnational regulatory initiatives targeting the opaqueness of corporate vehicles, and discuss the potential effectiveness of the current transnational initiatives aiming to increase transparency of beneficial ownership and enforce better regulations on tax havens. The most active and internationally recognised transnational tax regulator is the OECD; hence, in this chapter, we concentrate on the OECD initiatives in tax matters, in particular, on the Base Erosion and Profit Shifting (BEPS) project, and its role within the transparency of beneficial ownership agenda. In the discussion section, we conclude that categorisation of the countries into tax havens might not be helpful for the overall regulatory goals of the OECD, which, in turn, undermines the neutrality of the organisation as a transnational regulator, and that the apparent lack of belief in the international initiative from the OECD member countries is not helpful in furthering the OECD objectives.
This study aims to explore the reasons for the ineffectiveness of tax holiday policy implementation in Indonesia as well as the government’s strategies to improve the investment climate. This research uses exploratory study type which does not test theory or hypothesis by using preliminary survey method, conducting direct or indirect interview via e-mail to certain informant by giving questionnaire and direct observation passively observing the field and related websites supporting statistical data in this study in depth. In testing the validity of research data used source triangulation and method triangulation. The progress that has been achieved to date in the implementation of tax holiday policy is to provide ease of bureaucracy administration and simplicity of licensing services in investing by improving coordination among government to improve foreign investors' confidence when investing in Indonesia. So technically, the implementation of tax holiday policy is quite effective in attracting foreign direct investment because it can perform the right obligations according to the regulations. In the investment point of view, tax holiday policy is not effective in attracting foreign direct investment or not becoming the main factor of investor's goal in investment. The cause of the ineffectiveness of the tax holiday policy in attracting foreign direct investment in Indonesia is another indicator that becomes an assessment among others the ease of investment licensing, infrastructure, electricity supply, investor protection, minority and tax administration. Indonesian government's strategy to improve the investment climate is through deregulation, debureaucracy, law enforcement and business certainty for investors.
Why do tax havens, whose attractiveness for foreign investors depends upon financial secrecy, agree to automatically report account data to foreign governments? From a contractualist perspective, their cooperation should be motivated by the expectation of joint gains. Prior to such agreement, however, tax havens expected outflows of foreign capital and reductions in economic activity as likely outcomes. We show that the United States (US) imposed automatic information exchange on these countries without itself participating. The result is a strongly redistributive regime that worsens the economic situation of tax havens. By means of a difference-in-differences analysis, we ascertain a substantial and statistically significant negative effect of a US sanction threat on the value of assets held by foreigners in tax havens relative to non-havens. The effect becomes stronger when the US is included in the non-haven group. The analysis confirms the US's ability to redistribute financial wealth internationally through organized hypocrisy.
Tax havens and tax flight have lately received increasing attention, while interest toward multilateral trade policies has somewhat diminished. We argue that more attention needs to be paid exactly to the interrelations between trade and tax policies. Drawing from two case studies on Panama's trade disputes, we show how World Trade Organization (WTO) rules can be used both to resist attempts to sanction secrecy structures and to promote measures against tax flight. The theory of new constitutionalism can help to explain how trade treaties can ‘lock in’ tax policies. However, our case studies show that trade policy not only ‘locks in’ democratic policy-making, but also enables tax havens to use their commercialized sovereignty to resists anti-secrecy measures. What is being ‘locked in’ are the policy tools, not necessarily the policies. The changing relationship between trade and tax policies can also create new and unexpected tools for tackling tax evasion, underlining the importance of epistemic arbitrage in the context of new constitutionalism. In principle, political actors with sufficient technical and juridical knowledge can shape global tax governance to various directions regardless of their formal position in the world political hierarchies. This should be taken into account when trade treaties are being negotiated or revised.
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