Taxation in a Time of Crisis: Policy Leadership from the OECD to the G20

After decades of directing global economic policy standards alone, the United States and Europe publicly extended leadership power to some developing countries in response to the economic crisis of 2008-2009. But an entrenched international architecture of tax policy expertise ensures that a small group of established players continue to shape tax norms and practices throughout the world. This architecture is based on historical international power relationships and institutional history. For diplomatic restructuring on the world stage to usher in a new age of inclusion for previously marginalized states and peoples, systemic changes must also take place in these entrenched institutions and processes

Networks, Norms, and National Tax Policy

Increasing economic integration inevitably draws states to coordinate their tax policies, yet policymakers are eager to protect their autonomous “tax sovereignty.” Cooperation and autonomy are balanced in transnational networks, especially the OECD, where state representatives, experts, and interest groups engage in continuous negotiation to develop nonbinding, or “soft” global tax policy norms. While the merits of these norms have prompted much scholarly analysis, little is understood about the nature and significance of using networks to develop tax policy norms in this manner. This Article demonstrates how and why states use the unique soft governance structure of the OECD to develop global tax policy norms and achieve national tax policy goals, and explores some of the implications of this particular means of balancing the competing goals of international cooperation and national autonomy in a politically, socially, and economically globalized world

A Global Perspective on Citizenship-Based Taxation

This Article contends that, with regard to individuals who reside permanently outside of the United States, the global assistance sought under FATCA to enforce U.S. income taxation solely on the basis of citizenship violates international law. It argues that insisting upon foreign cooperation with the FATCA regime, under threat of serious economic penalties, is inconsistent with universally accepted norms regarding appropriate limits to the state’s jurisdiction to tax, while also being normatively unjustified. Accordingly, FATCA should be rejected by all other nation states to the extent it imposes any obligations with respect to individuals who permanently reside outside of, and have no economic ties to, the United States

How Nations Share

Every nation has an interest in sharing the gains they help create by participating in globalization. Citizens should be very interested in discovering how well their governments fare in claiming an adequate share of this international income stream, since a government that cannot or will not exert its taxing jurisdiction internationally is potentially missing out on a very large and very productive source of revenue. Yet it is all but impossible for citizens to observe exactly how, or how well, their governments navigate this aspect of economic globalization. The vast majority of international tax law plays out in practice through a series of intergovernmental dispute resolutions that are handled in complete secrecy through diplomatic channels, subject to no oversight by any judicial or legislative body and subject to no scrutiny by the taxpaying public. This Article shows that in thus obscuring public observation of international tax law as it develops, the structure of the international tax regime prevents citizens from comprehensively assessing the quality of their own nation’s tax systems. Without more information to determine what, if anything, one’s government ultimately claims from the massive stream of income created by international trade and investment, it is impossible to use any policy assessment tools, such as standards of economic efficiency and fairness, to talk coherently about the tax system. The Article concludes that at a time when national economic and political fortunes are experiencing high stress, uncertainty, and volatility, we need much better information about how international tax law develops and works out in practice

BEPS and the New International Tax Order

Nations across the world are currently engaged in a coordinated international effort, ostensibly to curb excessive tax avoidance by the world’s biggest multinational companies. This Article contends, however, that the most likely impact will be to entrench a monopoly held by a small number of rich countries over the policymaking processes that created the tax avoidance problem to begin with. To examine this contention and probe possible solutions to it, the Article considers the legal and institutional components of the coordination project, by situating them historically and analyzing their multi-functionality as both norm diffusion and institutional reinforcement mechanisms. The Article concludes that while history has repeatedly taught the world to be pessimistic about the potential for meaningful reform of the international tax order, there are reasons for cautious optimism in some of the recently-introduced institutions and processes. To avoid perpetual returns to a damaging status quo, careful attention will need to be devoted to ensuring meaningful participation by countries that have been systematically excluded from the global tax policy dialogue to date

Avoidance, Evasion, and Taxpayer Morality

This Essay fleshes out the case for caution in employing morality as a stop-gap measure to avoid drawing a regulated line between tax evasion and tax avoidance, while still meting out punishment within the undefined space between these two poles. It suggests that the alternate view—that taxpayer behavior must be managed by law rather than social sanction—has the best chance of driving tax policy toward greater coherence in the long run. This alternate view, that tax policy must be contained in law, does not mean the public must be uninvolved in policy discourse; the opposite is clearly true. The public seems uniquely suited to the task of demanding transparency in governance as a mechanism for monitoring lawmaking and addressing tax policy problems. Transparency is of course an imperfect mechanism, but it seems to be the best hope for achieving justice across a wide variety of governance-related failures of which unjust taxation is a prominent example. Transparency forms the central core of all contemporary treatments of the problem of governance, and there is no reason why it should not also define the contours of thinking about what behaviors should be acceptable when it comes to taxation. For this reason, this Essay concludes that the problem of distinguishing tax avoidance from tax evasion presents a base case for demanding transparency in both tax information and tax lawmaking, in the service of pursuing tax justice

Designing a More Sustainable Global Tax System

The international tax system incentivizes unsustainable business practices because it ignores the private profits created by externalizing human, societal, and environmental costs. This paper proposes a novel reform: applying living wage and externality assessment tools to the rules for establishing where income arises for tax purposes. To do so, I propose a method that is relatively complex but arguably more accurate (in tax terms) and a complementary but relatively simpler proxy method. I examine how each method would implicate treaty-based and domestic rules and processes and conclude that the proposed design provides a viable starting point to make the global tax system support sustainable business practices without running afoul of international standards and without necessarily driving down cross-border investment. Le système fiscal international encourage les pratiques commerciales non durables parce qu’il ne tient pas compte des profits privés créés par l’externalisation des coûts humains, sociétaux et environnementaux. Cet article propose une réforme novatrice : l’application d’outils d’évaluation du revenu de subsistance et des externalités aux règles permettant de déterminer le lieu d’origine du revenu à des fins fiscales. Pour ce faire, je propose une méthode relativement complexe mais sans doute plus précise (en termes fiscaux), ou alors une méthode de substitution complémentaire mais relativement plus simple. J’examine comment chaque méthode impliquerait des règles et des processus nationaux et fondés sur des traités, et je conclus que la conception proposée constitue un point de départ viable pour que le système fiscal mondial soutienne les pratiques commerciales durables sans enfreindre les normes internationales et sans nécessairement faire diminuer les investissements étrangers

Putting the Reign Back in Sovereign

In its first term, the Obama administration enacted two pieces of legislation, each designed to protect an increasingly vulnerable income tax base, and each of which had the potential to set a new and unprecedented course for no less than the regulation of the global economy by the nation-state. The first, the Foreign Account Tax Compliance Act (FATCA), sought to end global tax evasion through tax havens. The second, a little-noticed two-page addendum to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), sought to end the contribution of American multinationals to corruption in governance by codifying the transparency principles of the global Extractive Industries Transparency Initiative (EITI). Both of these reforms reasserted a role for the nation state in regulating people and resources. But neither has yet to fulfill its potential. First, each has raised difficult questions about what the state can and cannot do to enforce disclosure and compliance on a global basis; failing to answer these questions is impeding implementation and aggravating an already-flagging taxpayer morale. Second, neither is broad enough: FATCA should be truly reciprocal and EITI should expand beyond the extractive industries. By acknowledging and responding in a principled way to the obstacles that limit their effectiveness, a second Obama administration could take significant steps to bring each piece of legislation to its potential, while ensuring that its scope focuses on its intended target in each case. This article outlines how these proposals could be accomplished and makes the case that they should be attempted