The International Tax Regime and Global Power Shifts

Abstract

The global economy’s center of gravity is shifting. For the first time since the 19th century, emerging and developing countries have been contributing over 50% of the global GDP since the onset of the 21st century. If soft power mirrors but lags behind economic power, then the source for global and political influence will be shifting gradually east, particularly from the U.S. to China. This paper offers the first historical analysis of the impact of global power shifts and innovation at the technological and financial regulatory fronts on the evolution of the international tax regime (ITR) since its emergence in the early 20th century. It shows that the ITR has been evolving along a spiral trajectory correlated to two global power shifts: first, a power shift from the U.K. to the U.S. in the 1930s and then, an emerging power shift from the U.S. to China beginning in the early 21st century. The ITR evolutionary pat-tern has similarities with other global legal systems, including the Gold Standard (1880-1914), Bretton Woods (1945-1971) and the World Trade Organization (1948-2017). This paper identifies normative implications of the ITR spiral evolution in new problem areas, such as the taxation of global digital commerce. The theoretical framework rests on the dynamics of hegemonic orders and the rule-standard spectrum.