International Tax Sharing: Can the Dream become Reality?

Abstract

To answer the question posed in our title, we first review how corporate income taxes are shared in federal countries, EU efforts to harmonize corporate taxes, and previous experience with attempts at ‘global’ taxation. In all cases, the main lessons that emerge are that it takes much time and effort to reach any agreement and that any feasible solution is most unlikely to require much if any redistribution across jurisdictions. In the absence of any agreed global governance structure, the only way to build a better international tax system is through voluntary cooperation. We consider some of the elements such as transparency, inclusivity, and perceived fairness that appear essential to creating such an international alliance. To make much progress in this direction the most feasible approach is likely to start small, allowing countries considerable leeway to do things ‘their way’ to the extent possible while moving towards a common tax framework that may perhaps, over time, provide a basis for more ambitious measures.