Great powers in global tax governance: a comparison of the US role in the CRS and BEPS

Abstract

The G20 and the OECD recently claimed two successes in global tax governance: adopting automatic exchange of banking information in 2014, and the 2015 BEPS project on taxation of multinational companies. While the former signifies an essential step forward in reducing tax evasion, the BEPS outcomes were criticized for merely patching up flawed taxation principles based on the arms'-length standard. The emergence of global automatic exchange of information is often ascribed to the US who unilaterally enforced its own FATCA automatic information-exchange standard, while no comparable action happened during BEPS. This article investigates the US position on the BEPS outcomes and if a similar unilateral action would have led to more far-reaching cooperation concerning BEPS. By examining the distributional consequences of cooperation in both processes, we conclude that US power in tax governance in both issues is more limited than generally assumed and insufficient to explain global cooperation.

The EU Commission’s digital tax proposals and its cross-platform impact in the EU and the OECD

“…On the contrary, the digital tax saga shows the increased assertiveness of the EU Commission towards the US on tax matters. The EU's market power is large enough to grant it material power over the outcome of tax governance (Lips, 2018), if it can overcome the unanimity requirement (Hakelberg, 2016). While this did not happen, the ambiguousness the proposals created seemed enough to increase the conflict and catalyze change in the stable system of tax governance.…”

“…In the political stream, heavy opposition came from the US. A state with immense bargaining power over international tax governance, due to the size of its internal market (Hakelberg, 2016;Lips, 2018). It hosts 63 of the world's top 100 digital MNE's parent companies and 39% of all subsidiaries of digital companies (Unctad, 2017, p. 174).…”

“…It hosts 63 of the world's top 100 digital MNE's parent companies and 39% of all subsidiaries of digital companies (Unctad, 2017, p. 174). During BEPS, it opposed any proposal that ring-fenced digital companies (Lips, 2018). The US worried that other countries were trying to collect more taxes at their expense (Stack, quoted in Martin, 2016).…”

Elite professionals in transnational tax governance

“…This arguably reflects broad acceptance by the policy-making community of the solutions based on strong technical capacity to develop and diffuse new transnational tax standards (Christians 2010b; Sharman 2012; Vega 2012). Still, the project's focus on fixing rather than fundamentally overhauling the international tax system has led others to argue that its outcomes were rather 'weak' (Lips 2018) or 'moderate' (Christensen and Hearson 2019), which partly reflects the resistance of technical insiders to effective, comprehensive change (Büttner and Thiemann 2017).…”

Capital Taxation and International Cooperation

“…© Oxford University Press. DOI: 10.1093/oso/9780198854722.003.0007 far failed to deliver substantial progress in the fight against (legal) tax avoidance (Büttner and Thiemann 2017;Lips 2019).² These developments raise interesting questions of high policy relevance. In this contribution, we provide an overview of the questions and the answers we found in our research and in that of other international tax scholars.…”