Abstract
How do nation states relate to each other in terms of power? How do they relate to private parties in terms of power? Nation states are often thought of as sovereign to tax. In a legal sense that may be true. However, to be legally sovereign is not the same thing as being able to effectively exercise sovereignty. The mobility of capital and businesses, or at least the perception of their mobility, is increasingly pressuring sovereignty to tax. To shed light on the economic constrains on nation states and the beliefs about such constrains, this article introduces the concept of economic-ideological forces and contends that sovereignty should be understood in a way that encompasses these forces. Otherwise, it does not provide an adequate account of power and thus becomes a tool for maintaining established power relations.
Highlights
How do nation states relate to each other in terms of power? How do they relate to private parties in terms of power? Nation states are often thought of as sovereign to tax
Tax law scholars often acknowledge the existence of unequal power relations among nation states and the growing economic power of private parties while, at the same time, maintaining that sovereignty has nothing to do with this
When sovereignty is thought of in a formal sense it does not take political, military or economic power into account. Understood in this way, the concept of sovereignty is not informative on the power relations that are vested in the international tax order
Summary
In Sapiens - A brief history of humankind, Yuval Noah Harari argues that humans came to dominate other animals due to a greater capacity to cooperate in very large groups. The development of the international tax order has been connected, to a large extent, to the emergence of income taxation as the main source of revenue for many states. For some types of income, the treaties stipulate a reduction of the tax rate of the source state and, in some cases, even grant the jurisdiction to tax solely to the residence state (Dagan 2000, 939-96) This is fine if the contracting states are on an equal level of economic development. Sergio André Rocha argues that the international tax regime may be said to display “international tax imperialism” (2017, 183) To explain this concept, he begins by defining “imperialism” as the control exercised by countries that are more economically and military developed over less developed countries. It’s not certain that increased FDI compensates for the losses in tax revenue, which can be quite substantial for developing countries (Jansky 2018)
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