Change and Stability in Global Tax Policy

Abstract

This chapter takes a look at the ability of a great power like the United States to unilaterally effect fundamental change in international tax policy through coercion. It first shows that the structural constraints precluding a common interest in countermeasures to tax evasion were still in place when the US Congress passed the Foreign Account Tax Compliance Act (FATCA). Second, the chapter reveals that there was no need for normative change, because regulative norms have never consistently prevented the United States from interfering with the legal systems of tax havens. From there, the chapter considers when a great power like the United States can effect fundamental change in international tax policy and the domestic tax policies of less powerful countries through coercion. It argues that a government reaches great power status if it controls an internal market large enough to reduce its dependence on international trade and investment relative to the government's negotiating partners and uses its regulatory capacity to effectively restrict market access for foreign firms or investors.