Reuven S. Avi-Yonah (Michigan; Google Scholar), International Taxation, Globalization, and the Economic Digital Divide, 26 J. Int'l Econ. L. 101 (2023): 

The past decade has witnessed the creation of a new international tax regime (ITR). The original ITR was created a century ago by the League of Nations. Until the 1980s, it functioned reasonably well, and prevented most instances of double taxation and double non-taxation by allocating cross-border income between home and host jurisdictions based on a compromise reached in 1923.

However, since the advent of globalization in the 1980s and digitalization in the 1990s, the original ITR ceased to function as intended. The main problems were the increased mobility of capital related to increased intangibility and digitalization, together with a relaxation of capital controls and increased tax competition.

These developments posed a problem for countries that wished to leave their borders open to reap the benefits of globalization and to engage in tax competition to attract investment. The outcome was a significant fall in tax revenues that threatened the social safety net of the modern welfare state.

The trilemma of open borders, tax competition, and satisfying voters’ demand for social insurance culminated in the financial crisis of 2008-9, where many countries were forced to implement austerity measures at the same time that parliamentary hearings, leaks, and media reports revealed that rich individuals and large corporations were paying very little tax on cross-border income. The result over the past decade has been the creation of a new ITR designed to curb both tax evasion by the rich and tax competition.

The key question going forward is how will the new ITR deal with inter-nation equity i.e., the economic digital divide. In what follows, I will first discuss the decline of the original ITR from 1980 to 2009, then the creation of the new ITR from 2010 on, and finally the implications of the new ITR for the economic digital divide.