International Tax Research Articles

Public International Law and Tax Law: A Fair and Equitable Nexus in International Taxation

This article, inspired by the authors’ participation in the research of the Tax Committee of the International Law Association, calls into question the appropriateness of the traditional definition of “tax nexus” and stresses the need to reconcile the existing rules with the principles of international law. It outlines possible avenues for establishing workable, fair and common criteria and rules for the definition of “tax nexus” that operate globally. The article focuses on the existing rules on international tax nexus, inter alia, residence and source, taking into account the principles of public international law, such as those related to tax sovereignty. It proposes the development of a new fair and equitable tax nexus to address the challenges of the globalized modern world, which can potentially draw from the practice in other areas of law, such as competition law. In such a global context, the goal is to verify whether and in which cases multiple criteria for nexus can be replaced with a single nexus based on the concept of the closest connection to a single jurisdiction.

The Quiet Evolution in International Tax: Domestic Law and Double Taxation

This article describes the respective roles of international tax law (predominantly tax treaties) and domestic tax law and their relationship with each other. This is a complex and interdependent relationship, with treaties, as special law, generally overriding domestic law. The article discusses the founding principle of tax treaties preventing double taxation, reflecting the original purpose of tax treaties. Subsequent developments over time have vigorously established the second principle of treaties: that the purpose of tax conventions is also to prevent tax avoidance and evasion. Such an increasingly important principle heralds the rise of anti-avoidance rules, prevention of abuse and the preservation of domestic taxing rights. The thesis in this article is that domestic law has prevailed against the more specialized law of treaties and at an increasing rate. This evolution has occurred in situations where the special law of treaties is “watered down” by the principle that treaties should not be allowed to be abused or in situations where they facilitate tax avoidance. What are the implications of this trend on the development of international tax policy? The article reflects on the respective roles of international and domestic law and guides us to suggestions on how to preserve important international tax principles in good faith and limit expedient domestic tax law changes when they are not driven by taxpayers’ abusive actions.

Double Taxation Conventions, Transfer Pricing and Fiscal Space. From Tax Law Underpinnings to Financial Assessments

Abstract This article tackles the sensible and complex problem of international taxation. The main objective of the paper is to create a comprehensive fiscal space, especially at the European level, in the direct taxation domain. The main scope of the research is to identify, evaluate, and assess the main pillars and features of this fiscal space. The research methodology is based both on theoretical analysis of double taxation and transfer pricing issues, but also on practical aspects of several specific case laws. The conclusions of the article highlight the further improvement and development of the arm’s length principle structure, improving double taxation multilateral conventions, recalibrating the mutual agreement procedure, and strengthening the tax authorities’ international cooperation techniques and tactics.

Colombia Rising (But Is It for All the Right Reasons?)

Colombia, home to the 4th largest economy in Latin America and an OCED member since 2020, was until 2021 one of most ardent supporters of the recommendations of the OECD’s BEPS Project. Yet recently, Colombia has taken a prominent position among the countries pushing for a UN alternative to the work of the OECD. In this Talking Points, Eric Thompson examines how Colombia has come to play a leading role in international tax reform efforts, and wonders whether its motives stem more from a desire to improve the position of countries in the developing world, or from a desire to enhance its own tax revenues.

Is There Any Consensus about Market Jurisdiction among Pillar One Participating Jurisdictions? – Comparing Source Rules for Taxing Online Advertising Services

This article examines the limited consensus among Pillar One participating jurisdictions regarding market jurisdiction. It explores the reasons behind such limited consensus and its broader implications for international tax law.

Article: A Time to Institutionalize the International Tax Regime

The paper proposes replacing the existing and outdated decentralized international tax system with a centralized tax authority that would include four branches: a hierarchic judiciary branch that would replace/subject thousands of domestic tax tribunals, a legislative branch that would replace the existing inclusive Organization for Economic Cooperation and Development (OECD) forum that would be more balanced and as such be able to continue developing the international tax policy in the coming challenges that the Twenty-first century will bring, an executive branch that would be responsible for issuing multilateral letter ruling and guidance of how to implement the international principles and norms, assist poor countries whose costs in implementing beneficial practices are high and offer sanctions for countries that secretly deviate from the general principles and foster harmful tax principles. Furthermore, we propose to establish an audit branch that would supervise the compliance of the different countries. The Article therefore blesses the recent multilateral cooperation of approximately 140 countries and suggests the time has come to institutionalize the international tax order and centralize it to better face the coming challenges that the technological breakthroughs would bring.

An international tax on crypto trading to help social protection respond to national emergencies

An international tax on crypto trading to help social protection respond to national emergencies

The Flaw in the Plan: Information Transparency and International Tax Avoidance Channels

The Flaw in the Plan: Information Transparency and International Tax Avoidance Channels

COMPLIANCE TRIBUTÁRIO INTERNACIONAL: DESAFIOS E ESTRATÉGIAS NA GESTÃO DO IVA E O USO DE PARAÍSOS FISCAIS

The complexity of the global fiscal landscape, marked by the variety of laws, regulations, and management and corporate strategies of multinational corporations. This article investigates international tax compliance, focusing on its relationship with Value Added Tax (VAT), tax havens, and tax law. The objective is to assess how compliance with tax obligations in multiple jurisdictions impacts multinational companies, particularly with regard to VAT, whose complexity requires rigorous management to avoid penalties. Using a qualitative approach, the study analyzes legislation, international treaties, and business practices, highlighting the challenges of harmonizing tax efficiency with legal compliance. The results indicate that the use of tax havens, although offering tax benefits, exposes companies to high risks due to increasing global regulatory scrutiny. Corporations must act cautiously when designing their global activities, ensuring that their tax planning strategies are not seen as abusive, illegal, or evasive, to avoid future problems. It is concluded that an effective tax compliance strategy, aligned with international tax law, is essential to mitigate risks and ensure business competitiveness in a dynamic and strictly regulated global environment.

The Formulaic Approach to “Substance-Based Income Exclusion” under Pillar Two: A Genuine Shift in International Tax Policy?

The Formulaic Approach to “Substance-Based Income Exclusion” under Pillar Two: A Genuine Shift in International Tax Policy?

Profit shifting and tax competition policy: a global justice perspective

Purpose This paper aims to argue that the endogenous processes of profit shifting by MNEs and tax competition lead not just to inequality but constitute a case of global injustice. The provisions of the planned “two-pillar” reforms to global corporate taxation are then considered relative to the minimum conditions for background justice in taxation. Design/methodology/approach This paper is partly conceptual, based on relevant theoretical work in philosophy, and partly policy-focussed, based on an assessment of the OECD/G20 “two-pillar solution”. Findings The normative case for considering international tax competition as a global justice issue is developed, contrasting the cosmopolitan and non-cosmopolitan (“internationalist”) approaches. Three key minimum conditions for background justice in term of international taxation are established. This paper concludes that the two-pillar solution is likely to fail in global justice terms not because of its principles, which are sound, but because its redistributive scope is insufficiently great to have a major effect in correcting the inequality arising from tax competition. Originality/value This paper applies the philosophical concept of global justice to a specific issue in international business: MNE profit shifting and tax competition policy.

Cross-Border Tax Ramifications of Swiss Blockchain Foundations: How Can a Rock Dam the Sea?

In this article, the authors explore some international tax concerns revolving around Swiss blockchain foundations, with a focus on the risk of triggering a permanent establishment where the resources working for such organizations are located and the need to determine an appropriate remuneration, in compliance with articles 5 and 7 of the OECD Model. In doing so, the authors envisage the need for revisiting the applicable tax framework, more in line with decentralized ways of working.

Automatic Exchange of Financial Information from the Perspective of Tax Fairness and Transparency

<p>Tax fairness and transparency concepts have gained increasing prominence in the global tax and financial regulatory landscape in recent years. Automatic Exchange of Financial Information (AEOI) has proven to be an effective tool for implementing these principles. This executive summary briefly overviews the key role AEOI plays in promoting tax fairness and transparency. It explores the mechanisms and framework behind AEOI and highlights its impact on curbing tax evasion and improving the fair sharing of the tax burden between individuals and businesses. Additionally, this summary highlights the implications of AEOI for financial institutions, governments, and taxpayers, and highlights the challenges and benefits associated with its implementation. By considering AEOI from multiple perspectives, this summary aims to contribute to the ongoing international tax discussion and facilitate further research on the multiple dimensions of tax fairness and transparency in the global financial ecosystem.<em></em></p>

Inter-Nation Equity And The Regulation of Tax Competition via the Global Minimum Tax Rule: A Case for Improvement

The Organization for Economic Co-operation and Development (OECD) is an institution that influences policymaking in international tax law, and it is changing the international tax architecture to deal with tax competition by encouraging countries to adopt a global minimum tax rule. This emerging rule – called Pillar Two in international tax circles – is inadequate for dealing with poverty and inequality in an asymmetrical global context. The rule is premised on the notion and argument that tax competition is a problem for international tax law. Notwithstanding, there is existing research and evidence to show that tax competition can also be a solution to the enormous challenge of poverty and inequality as it can have a redistributive effect. This is a valuable factor amid the inefficiently asymmetrical global society with extreme poverty in many countries and enormous wealth in a few others.This article submits that the Pillar Two minimum tax rule – the Global Anti-Base Erosion (GloBE) Rules encompassing the income inclusion rule (IIR), undertaxed payment/profit rule (UTPR), and qualified domestic minimum top-up tax (QDMTT) – should incorporate inter-nation equity to prevent exacerbating global inequality and poverty. Pillar Two intensifies these for at least two reasons: (1) it restricts the positive redistributive effects of tax competition on an inefficiently asymmetrical global society, and (2) it encourages tax competition more suited for high-income countries (HICs) and less suited for those that are low-income countries (LICs). There is latitude to incorporate a differentiated principle deriving from inter-nation equity into this new Pillar Two rule designed to regulate tax competition globally. This proposal requires that the emerging rule be disenabled in certain circumstances to enable LICs to choose whether to apply the rule without being worse off. The article’s proposal seeks to allow LICs room for effective tax competition needed to attain sustainable development goals.

On the Borrowed Points and Danger Prevention of Cross-Border Tax Planning

International tax planning can reflect the level of an enterprise's multinational business management, but also relates to the financial cost of growth and decline, is a must for enterprise managers. International tax planning refers to the multinational taxpayers to make in advance, used to reduce the international tax obligations of multinational investment and business plans. With the global inflation, the use of reasonable means to reduce the tax burden in the international tax environment has become a practical need to promote the further development and growth of China's multinational companies, but at present, China's multinational enterprises are still in the initial stage of multinational operations, many managers for the discussion of the international tax planning only stays on the surface. Therefore, this paper analyzes the possibility of international tax planning, tax jurisdiction, policy loopholes, tax avoidance risks and hazard prevention from the perspective of Apple, for example, and analyzes Apple's Irish-Dutch Sandwich tax avoidance structure, which provides certain reference significance to our country's multinational tax planning.

The Weakening of Taxpayer Rights in the Exchange of Information between Tax Authorities

Developments in international legislation and the growing digitalization of tax law support the development of global networks between tax authorities. We are witnessing an integration of databases that will lead to increasingly intense coordination of the fight against tax evasion at a supranational level. As in social networks and digital commerce, databases are increasingly enriched, contain increasingly precise information on the individual taxpayer and use common languages that allow for automated exchanges of information. While waiting for the creation of a global database – not conditioned by the constraints of reciprocity and abstractly usable by all authorized entities who need it – the first risks of limitation of the taxpayer’s rights are emerging. In fact, these phenomena have dark sides that are starting to emerge in use, at a national level and with respect to individual taxpayers, of interpolated databases. Moreover, a growing amount of information flows from heterogeneous and increasingly widespread sources, sometimes not protected by the requirements of professionalism, legality and public trust since data collection and entry can be delegated to economic entities, intermediaries and consultants. The absence of an authority responsible for the unitary management of global databases and for the resolution of their conflicts, the slow and timid affirmation (only in some national systems) of the taxpayer’s right of access to information concerning them, the difficult configuration of the faculty to request the correction of erroneous data and of the specular public power to remove the reported inaccuracies, weaken the system of protections gradually erected to protect the taxpayer’s position. In this way, the coordination of national systems that contemporary tax law creates is strongly unbalanced on the side of the protection of tax interests. International and European tax law should instead provide greater guarantees in favor of the taxpayers, defending their right to fair taxation.

Tax Challenges Arising from Digitalization: Evaluating the Taxation Models Proposed by the European Commission and the OECD

The world has entered a period of deep transition with rapid and phenomenal development of innovations. The rise of the digital economy has dramatically changed the global business environment, creating new challenges for the tax system. Newspapers and magazines are being replaced by the Internet, and trade in material goods – by digital services. The digital economy eliminates the barriers of time, space and distance. The server where the transaction is processed, the location from which the goods or services are supplied and the place of supply of such goods or services are in different jurisdictions, therefore, the question “Where should the transaction be taxed?” is raised. Meanwhile, the digital economy opens up unprecedented opportunities to avoid taxes with the international tax rules which are still “stuck” in 20th-century business concepts, because the companies operating in the digital space do not need factories, stores or other permanent residences to develop their activities. This article aims to evaluate the efforts of the European Union and international standard-setting entities to find a solution for fair taxation of the digital economy. The first part of the article delves into the concept of the digital economy and its essential features with a special emphasis on the role of the digital service user which is unique and more complex than the role usually played by the customer. This part also analyses the differences between digital and traditional business. The second part of the study emphasizes the reasons that will lead to the necessity of taxation of the digital economy, discusses the digital services tax applied in certain countries of the European Union and highlights the weakness of the concept of digital establishment in double taxation agreements concluded by the countries. The final part explores the proposals submitted by the European Commission regarding the introduction of a common consolidated corporate tax base and the inclusion of the concept of virtual permanent establishment in the tax system in the context of the digital economy taxation model proposed by international organizations.

Research on the Two-Pillar Solution and Its Implication

With the rapid development of economic globalization and digitalization, new business models are activating the world economy while exacerbating the remaining problems of base erosion and profit shifting (BEPS). In the face of intensifying international tax avoidance, The Organisation for Economic Co-operation and Development (OECD) has announced its Two-pillar solution to the international community, proposing a global minimum tax regime, which is effectively a coordination of global anti-tax avoidance measures. At present, Pillar 2 has come into effect, and Pillar 1 has also been opened for signature, marking the implementation stage of the two-pillar solution. In this paper, the two-pillar solution is the main research object. Firstly, from the perspective of large-scale tax avoidance by multinational corporations, this paper systematically analyzes the historical background of the introduction of the two-pillar solution of the OECD. After a detailed analysis of the provisions of the two-pillar solution, the existing institutional deficiencies and obstacles to its implementation are proposed. Finally, in response to the issues raised, practical recommendations are made that the elements of the two-pillar solution should aim to achieve general equity, balance the interests of developing countries and be in harmony with existing international tax policies. The governments should also optimize the structure of tax incentives.

When digital taxes come due: national digital taxes and the negotiation of the OECD inclusive framework

ABSTRACT What explains major shifts in international tax cooperation? Existing literature emphasises either the centrality of the United States for successful reform or the power of multinational corporations to exert downward pressure on global tax rates. Nonetheless, in 2021 members of the OECD Inclusive Framework (IF) agreed to tax some of the largest multinational companies based on their market activities rather than physical presence – a fundamental change to the international taxation regime that the U.S. government and U.S. multinational corporations (MNCs) had long opposed. We argue that the spread of digital value chains has exposed the activities of MNCs to greater regulatory activity, allowing governments to use unilateral regulatory action as leverage in international negotiations. By shifting the reversion point – the status quo absent an international agreement – governments were collectively able to transform an agreement. We demonstrate our argument by examining how the implementation of national digital services taxes (DSTs) affected the OECD IF negotiations. Drawing on interviews with key stakeholders and primary sources, we show that the adoption of DSTs, including in France and India, and the threat of additional proliferation of DSTs, pushed the United States to drop its longstanding opposition to parts of the IF process.

PepsiCo Embedded Royalties’ (Intermediate) Win – Zoom-Out Lessons

In June 2024, the Full Federal Court of Australia ruled in favour of PepsiCo against the tax authorities, overturning an earlier decision. The case involved potential embedded royalties in beverage concentrate agreements, focusing on withholding tax and the diverted profits tax. Beyond the ruling, the case highlighted key international tax issues like substance over form, transaction recharacterization and the principal purpose test. The differing views among the three judges emphasized the complexity of these concepts, suggesting future disputes are likely.