Diane M. Ring (Boston College; Google Scholar) presents The Conflictual Core of Global Tax Cooperation (with Shu-Yi Oei (Duke; Google Scholar)) (reviewed by Blaine Saito (Ohio State; Google Scholar) here) at San Diego today as part of its Tax Law Speaker Series hosted by Michelle Layser:

It is widely argued that the world is in a new and distinctive era of global tax cooperation, as evidenced by the launch of a sweeping multilateral tax reform project spearheaded by the OECD and G20 to confront tax base erosion and profit shifting ("BEPS"). This Article argues, however, that this cooperation-centric account is overstated and masks fundamental conflicts between developing and developed countries' interests, conflicts that have recently culminated in a vote to shift the location of the reform work to the United Nations. This Article also argues that these conflicts constitute more than a random mélange of objections from losing parties in negotiations but instead reflect a coherent and unified set of developing country-centered concerns that extend far beyond tax policymaking.

This Article's highlights the conflictual elements inherent in the OECD/G20 BEPS project and presents an interpretative framework through which developing country-centered criticisms and their likely implications can be analyzed and understood. Fundamentally, these criticisms reflect concerns about the wide historical gulf in power and resources between developing and developed countries and how the BEPS reforms fail to address, and may even exacerbate, that gulf. Meanwhile, defenders of the BEPS reforms have largely missed this crux of the criticisms, focusing instead on the project's incremental short-term benefits for inter-developing country tax competition.

Our interpretation of these deep conflicts at the heart of contemporary global tax reform has important implications for accurately describing the state of asserted global tax cooperation and for appreciating both its promise and its risks.

Assaf Harpaz (Georgia; Google Scholar) presents Global Tax Wars in the Digital Era at Columbia today as part of its Davis Polk & Wardwell Tax Policy Colloquium hosted by Michael Love:

International tax debates often center on how to fairly allocate taxing rights on the profits of multinational enterprises, carrying significant global economic implications. When a business earns income abroad, the country of residence (where the taxpayer resides) and the country of source (where income is generated) both have legitimate, competing claims to tax that income. The international tax system favors residence-based taxation. The source country has the right to tax business profits only if the enterprise carries on a permanent establishment in its borders, which typically requires physical presence. The permanent establishment standard becomes flawed in a digital economy where profit shifting practices are abundant and businesses no longer require a physical presence in the location of their online consumers.

These enduring norms are poised to change with an upcoming United Nations (UN) Framework Convention on International Tax Cooperation — an initiative overwhelmingly supported by Global South economies. The Global North has historically dominated the international tax regime through the Organisation for Economic Co-operation and Development (OECD), informally known as the “World Tax Organization”. A UN framework convention could introduce new standards to address the tax challenges of digitalization, though it would need to bridge the underlying North-South divide.

This article explores the “tax wars” surrounding the leadership for global tax governance, contrasting the taxing powers and interests of the OECD-led Global North with those of the UN-backed Global South. It argues for a shift toward source-based taxation by revisiting the permanent establishment standard. This transition will address longstanding inequities and is increasingly warranted in a digital economy that does not rely on physical presence.

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