In Imposing Standards, Martin Hearson shifts the focus of political rhetoric regarding international tax rules from tax havens and the Global North to the damaging impact of this regime on the Global ...South. Even when not exploited by tax dodgers, international tax standards place severe limits on the ability of developing countries to tax businesses, denying the Global South access to much-needed revenue. The international rules that allow tax avoidance by multinational corporations have dominated political debate about international tax in the United States and Europe, especially since the global financial crisis of 2007–2008.Hearson asks how developing countries willingly gave up their right to tax foreign companies, charting their assimilation into an OECD-led regime from the days of early independence to the present day. Based on interviews with treaty negotiators, policymakers and lobbyists, as well as observation at intergovernmental meetings, archival research, and fieldwork in Africa and Asia, Imposing Standards shows that capacity constraints and imperfect negotiation strategies in developing countries were exploited by capital-exporting states, shielding multinationals from taxation and depriving nations in the Global South of revenue they both need and deserve.Thanks to generous funding from the Gates Foundation, the ebook editions of this book are available as Open Access volumes from Cornell Open (cornellopen.org) and other repositories.
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.
In Imposing Standards, Martin Hearson shifts the focus of political rhetoric regarding international tax rules from tax havens and the Global North to the damaging impact of this regime on the Global ...South. Even when not exploited by tax dodgers, international tax standards place severe limits on the ability of developing countries to tax businesses, denying the Global South access to much-needed revenue. The international rules that allow tax avoidance by multinational corporations have dominated political debate about international tax in the United States and Europe, especially since the global financial crisis of 2007–2008. Hearson asks how developing countries willingly gave up their right to tax foreign companies, charting their assimilation into an OECD-led regime from the days of early independence to the present day. Based on interviews with treaty negotiators, policymakers and lobbyists, as well as observation at intergovernmental meetings, archival research, and fieldwork in Africa and Asia, Imposing Standards shows that capacity constraints and imperfect negotiation strategies in developing countries were exploited by capital-exporting states, shielding multinationals from taxation and depriving nations in the Global South of revenue they both need and deserve. Thanks to generous funding from the Gates Foundation, the ebook editions of this book are available as Open Access volumes from Cornell Open (cornellpress.cornell.edu/cornell-open) and other repositories.
Developing countries face three main challenges in international tax cooperation. The most widely known are the twin problems of tax avoidance by foreign investors and tax evasion by domestic actors, ...which have become a major focus of debate in international organisations and of civil society activism in recent years. The second problem, tax competition, incorporates a range of issues from the 'prisoners' dilemma' facing countries competing for inward direct investment through to the harmful tax rules used by tax havens that enable tax avoidance and evasion. This article reviews four recent monographs that analyse these problems at an international level. While they contain much useful discussion of the problems and potential technical solutions, there remains a need for political economy research to understand why certain technical solutions have not been adopted by governments. A third challenge faced by developing countries, barely considered in the tax and development literature up to now, leads to a note of caution: international tax institutions tend to be designed in ways that place disproportionate restrictions on capital-importing countries' ability to tax foreign investors.
"International taxation rules allow Apple, Starbucks, and Nike to avoid billions of dollars of taxes. News stories have focused on tax dodging in developed countries, but developing countries lose at ...least $200 billion per year in tax revenue. In the Global South, an international tax regime designed by the states of multi-national corporations limits the local ability to raise sorely needed tax revenue from foreign investors. How did developing countries give up their right to tax foreign companies? Martin Hearson charts their assimilation into an OECD-led regime from independence through to the present day."--
Taxing multinationals is politically difficult because of the structural power of mobile firms within the global economy, and this structural power is expected to increase in the digital age. ...Recently however there has been a breakdown in the international corporate tax consensus that structured tax competition over the past century. A new norm of international taxation has emerged whereby states claim the right to tax corporate income based on presence in consumer markets. Our paper explains this unexpected reassertion of state power. Building on previous accounts of large-scale change in policy norms, we show how the emergence of digital business models led to a new tax consensus by setting in train a process of policy contestation that allowed countries to levy taxes on multinationals unilaterally, without fear of capital flight.
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.
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 characterized 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 maximize only China’s own share of the tax ‘pie’; 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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