Society for the Advancement of Socio-Economics (SASE) hosts an annual conference today with a panel book salon on The International Tax Revolution:

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 based on a compromise reached in 1923. Until the 1980s, it functioned well by preventing most instances of double taxation and double non-taxation by allocating cross-border income between home and host jurisdictions.

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

These developments posed a problem for countries that wished to leave their financial borders open to reap the benefits of globalization. 

Countries were faced with a difficult choice if they wished to continue to participate in an open, globalized financial economy.

They could either refuse to engage in cutthroat tax competition and face the risk of capital fleeing their borders or they could give in, engage in tax competition, and lose tax revenue as they slashed rates to placate corporations. The outcome was a significant fall in tax revenues that threatened the social safety net of the modern welfare state.

The challenging trilemma faced by countries of open borders in the globalized economy,tax competition drop among countries, and financially supporting the welfare state became unsustainable following the financial crisis of 2008-9, after which many countries were forced to implement harsh austerity measures. These governments subjected their populations to austerity while parliamentary hearings, leaks, and media reports revealed that rich individuals and large corporations were paying 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 by countries. The key question going forward is how the new ITR will deal with inter-nation equity—i.e., the division of tax revenues among states. Here, we will first provide an overview of the decline and fall 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 inter-nation equity (especially between developed and developing countries).

Panelists: 

• Young Ran (Christine) Kim (Cardozo; Google Scholar) (Book Co-author) 
• Reuven S. Avi-Yonah (Michigan; Google Scholar) (Book Co-author) 
• David Duff (British Columbia; Google Scholar) (discussant) 
• Jennifer Farrell (Western) (discussant)

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