Assaf Harpaz (Georgia; Google Scholar) presents Global Tax Wars and the Shift to Source-Based Taxation at Alabama today as part of its Junior/Senior SEC Workshop:
Current debates in international taxation often center on how to fairly allocate taxing rights among different jurisdictions. When an enterprise earns income abroad, the country of residence (where the taxpayer resides) and the country of source (where income is generated) have legitimate, competing claims to tax that income. The question is further complicated in a digital economy where tax avoidance and profit shifting practices are abundant.
The international tax system has traditionally favored residence-based taxation. Now, international taxation is at a crossroads with intergovernmental organizations battling to redefine the principles of cross-border taxation. The regime has been dominated by the Global North through the Organisation for Economic Co-operation and Development (OECD), which has drawn backlash due to its undemocratic procedure and unfavorable outputs for developing countries. The United Nations has held a relatively peripheral role in global tax governance, though this could change with an upcoming UN Framework Convention on International Tax Cooperation – an initiative overwhelmingly supported by developing countries.
This article conceptualizes the international tax discourse as “tax wars,” contrasting the taxing powers and interests of the OECD-led Global North with those of the UN-backed Global South. It highlights the distortive outcomes created by model treaties and argues for a shift toward source-based taxation. To do so, it proposes revisiting the permanent establishment standard in model treaty language, creating an opportunity for broader taxation of business profits in the source country. This transition will address longstanding disparities and is increasingly warranted in a digital economy that does not rely on physical presence.
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