Taxation binds the state together with its citizens, and with other economic actors operating within its borders. The growth of cross-border capital flows and global corporations has complicated ...these taxing relationships, creating opportunities for competition and cooperation between states. 'Double taxation' occurs when two or more states disagree over who has the right to tax cross-border investment. At the same time, states can no longer fully enforce their tax laws over transnational capital without cooperating with each other. Finally, states have an incentive to compete for investors by offering them preferential tax treatment, including by shielding them from cooperation. To resolve these issues, a complex of binding bilateral agreements among states and multilateral soft law, in which the OECD plays the leading role, has developed over a century. The persistence of tax avoidance and evasion, which burst into the public and political consciousness following the financial crisis in recent years, has created a crisis of legitimacy for the OECD, whose membership is limited to wealthy capitalist states. This chapter discusses how IPE scholars have examined these stresses and strains in a century-old regime from three perspectives: state-centric, constructivist and critical.
Developing countries have concluded thousands of bilateral tax treaties, which restrict their ‘taxing rights’ over international investment. Qualitative case studies of these negotiation outcomes ...emphasize power politics, knowledge asymmetries and negotiating capability in the eventual distribution of taxing rights between signatories, yet such insights are absent from cross‐country quantitative work. This paper bridges the gap by replicating two quantitative studies, introducing new data on countries' ability to mobilize tax revenue and the outcomes of tax treaty negotiations. It provides statistical support for the insights from qualitative research. The size of a government's revenue base, and its reliance on corporate tax, might affect the salience of the revenue sacrifice in policy makers' minds. These variables influence the likelihood of signing a tax treaty and the particular concessions made. Power asymmetries between signatories lead to more unequal distributions of taxing rights away from developing countries, in contrast to the findings of earlier studies. Developing countries also become better negotiators as they gain experience.
This paper examines the relationship between China’s changing economy and its global business tax diplomacy. Three trends dominate: China is becoming a net capital exporter, emerging as a major ...consumer market, and is home to digital giant firms including Baidu, Tencent and Alibaba. The resulting drive to promote both ‘going out’ and ‘bringing in’ foreign direct investment has led China to engage selectively and strategically with Western-led institutions. We show how China variously challenges, defends, and develops alternatives to global tax standards in three cases: global efforts to tackle corporate tax avoidance, bilateral tax treaty negotiations, and administrative tax cooperation.
Debate over the taxation of international business has focused on the importance of the United States and its large tech firms, paying low tax rates by using tax havens, in shaping the global ...political agenda. Yet in an era of China’s rise to power, this focus has overlooked both China’s influential political engagement with the global tax system, and how its changing economy alters its interests at home and abroad. In this paper, we address this oversight by providing an account of the sources and nature of the new Chinese global tax diplomacy. We argue that China's becoming a global net capital exporter, emergence as a major consumer market, and the growth of its own digital giant firms like Baidu, Tencent and Alibaba, underpins its interest in simultaneous ‘going out’ and ‘bringing in’ foreign direct investment by selectively and strategically engaging with Western-liberal institutions. Specifically, we show how China variously challenges, defends, and develops alternatives to global tax standards in three cases: global efforts to tackle corporate tax avoidance, bilateral tax treaty negotiations, and administrative tax cooperation. A better understanding of China’s significant, distinctive and varying diplomatic engagement with Western economic institutions, will help inform debates on the Chinese business-politics nexus and expand analyses of global tax and economic politics beyond US-centrism
Twentieth century institutions of global economic governance face a profound challenge adapting to the rise of emerging markets and, especially, China's rise. This is especially the case for the ...international tax regime, whose institutional home is the OECD and which is based on norms that favour capital exporting states. To understand the nature of the challenge posed by China, we focus on the country's engagement with a foundational norm of the international tax regime: the arm's length principle. We show that China's approach to tax cooperation is characterised by a set of apparent contradictions: conciliatory language hides an assault on the arm's length principle; a rhetoric of common cause with developing countries is contradicted by actions that maximise only China's own share of the tax a€˜piea€™; and a willingness to court the OECD based on the leverage gained from flirtation with outside options. In these respects, China increasingly appears to be using its market power to seek special privileges within international regimes, in ways that mirror the historical actions of the United States.
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