2023

This article explores whether tax scholarship can be separated from tax activism by identifying the technical and political elements of international tax policy. It examines the appropriate roles of legal scholarship, economics, political science, and political philosophy in shaping the international tax debate.

This paper examines the economic impact of climate policies on different regions and countries, focusing on external adjustments. It finds that climate policies, such as a globally coordinated carbon tax, would decrease current account balances in greener advanced economies while increasing them in fossil-fuel-dependent regions due to reduced investment in the latter. Green supply-side policies, like subsidies and infrastructure investments, would boost investment and saving but have less effect on the external sector. Country-specific factors, like carbon intensity and fossil fuel exports, shape current account responses. A coordinated global climate policy would shift capital to advanced economies, with global interest rates initially rising but decreasing over time as carbon taxes increase. These effects depend on international policy coordination and credibility.

This paper explores the power dynamics between developed and developing countries in shaping international tax policy. It proposes the creation of a World Tax Authority (WTA) or transferring authority to a more politically balanced body, such as the WTO or World Bank, to resolve global tax conflicts. Additionally, it suggests the establishment of a World Tax Court (WTC), with judges representing both high- and low-income countries, to issue binding or declaratory rulings to ensure consistent interpretation of tax treaties worldwide.

The COVID-19 pandemic significantly impacted the global economy, pushing over 100 million people into extreme poverty and creating a $500 billion funding gap for low-and-middle-income countries (LMICs) to catch up with advanced economies by 2025. The pandemic also accelerated digitalization, leading to the rapid growth of the digital economy, including e-commerce and digital services. LMICs face challenges in taxing this new economy due to corporate tax competition and base erosion. The OECD's multilateral tax approach addresses issues like physical establishment and nexus but has limited impact on LMICs and threatens their tax sovereignty. In contrast, unilateral measures taken by countries like Nigeria and Kenya have successfully taxed certain multinationals, though they risk trade sanctions from high-income countries. The essay concludes that efforts are being made to tax the digital economy without violating tax principles, but it recommends redesigning current tax deals to better address LMICs' concerns and implementing a United Nations tax convention to ensure neutrality and reduce OECD control over international taxation.

Globalization has led to tax base erosion due to capital mobility and increased international tax competition. This has prompted governments in developing Asia to seek alternative, nontraditional revenue sources. This paper examines the potential of using the region's growing excess foreign exchange reserves to offset tax base erosion. The analysis suggests that managing these reserves through profit-maximizing sovereign wealth funds can significantly contribute to the region's nonconventional fiscal revenues.

This study introduces a method to measure the incidence of monopolistic markup distortions in the global economy. Using semi-parametric formulas, it evaluates how trade affects the deadweight loss of markups through changes in markup dispersion and international rent-shifting. The latter, akin to implicit tariffs, benefits countries exporting high-markup goods. By estimating firm-level markups and compiling global profit ownership data, the study finds that trade has reduced the deadweight loss of markups for high-income countries by 15% but increased it by 44% for low-income nations. These effects, due to international rent-shifting, imply an 8% implicit tariff by high-income countries on low-income partners. The study suggests that these distortions could be mitigated through preferential tariff concessions or a globally coordinated destination tax on profits, challenging the view that high-income countries have made greater concessions in trade agreements.

In late 2021, the House passed significant tax reform legislation through the Build Back Better Act, followed by the Treasury's release of the green book with further tax reform proposals from the Biden administration. The domestic reforms align with President Biden’s and Vice President Harris’s pledge not to raise taxes on individuals or families earning $400,000 or less per year. However, the international tax reform proposals may inadvertently increase the net U.S. federal income tax liability for individuals or families within this income bracket, including U.S. shareholders of controlled foreign corporations and those claiming foreign tax credits. These reforms impact nearly nine million Americans living abroad and millions of others with foreign income or foreign tax credits through various investments. The proposals potentially violating the Biden tax pledge need correction.

The misconception that the Base Erosion and Profit Shifting (BEPS) project began with the G20 Leaders' endorsement of the OECD's Action Plan in September 2013 highlights a broader tendency to focus on high-profile events rather than the underlying expert work. This focus on prominent events overshadows the contributions of tax experts who shape agendas and prepare foundational documents. These experts’ work, often perceived as mere technicalities, informs political actors who lack the technical skills to fully assess complex tax issues. The article emphasizes the need to recognize the role of experts in global tax governance, a topic often overlooked in legal academic discussions. Ignoring the influence of experts perpetuates the legitimacy deficit in global tax governance, reinforcing global power imbalances.

With corporate tax rates already exceeding 15%, India will need to think creatively to extract additional revenue through new pillar two rules, India’s planned commitment to the OECD’s global minimum taxation rules is expected to have a limited financial impact, according to local experts.

Courts worldwide generally interpret tax treaties more liberally than domestic legislation, often using the OECD Model Tax Convention Commentary for guidance. This article identifies significant issues with how Australian superior courts apply the Commentary. The author argues that the courts' narrow, literal interpretation of tax treaty terms and minimal reliance on the OECD Commentary, particularly regarding the taxation of hybrid entities and double tax relief, undermine the treaties' purposes. He concludes that this approach is similar to treaty override and could jeopardize multilateral efforts to enhance tax certainty and combat base erosion and profit shifting by multinational enterprises.

Prior to the 19th century, states rarely assisted each other with tax matters due to the emphasis on fiscal sovereignty. The advent of modern income tax introduced double taxation issues, leading to the development of double tax agreements (DTAs). Initial experimental DTAs in the mid-to-late 19th century increased significantly in the early 20th century, with over 3,500 DTAs now in force. Recently, the OECD has promoted multilateral tax treaties, such as the Convention on Mutual Administrative Assistance in Tax Matters and the Multilateral Convention to Implement Tax Treaty Related Measures To Prevent Base Erosion and Profit Shifting, transforming international tax law. The OECD is drafting more treaties under its “two pillar” program for further reform, with many countries agreeing to join. Multilateralism is now viewed by the OECD and its member states as the preferred method for tax system reform, though the success of these efforts remains uncertain.