Tax Cooperation with a Duty of Assistance

Abstract

This chapter examines how more affluent states could help create a world in which states with populations suffering subsistence rights deficits would be able to capture more of the benefits of cooperation on international capital mobility. It will show that one way in which states can relinquish unjust claims of entitlement is to make room for source-based taxation with two main approaches to be pursued in tandem. The first step is for states that export significant capital to expand their existing pass-through regimes for corporate income taxation, while guarding against double taxation and tax competition with carefully designed foreign tax credits. The effect of this step is to create a backstop or minimum level of corporate taxation, which will reduce some of the kinds of tax competition that effectively prevent some states from exercising their entitlement to a share of the benefits of cooperative surplus through taxation. The second step is for states with populations suffering subsistence rights to exercise their entitlement to cooperative surplus benefits. These two steps for reform of the international tax system are not radical departures from the status quo. The first step is a return to standards that were common across OECD states in the not-too-distant past, whilst the second is a take-up of an alternative but still broadly neutral division of cooperative surplus in line with some of the earliest proposals for international tax cooperation and consistent with the ongoing work of the United Nations and other institutions.