International Tax Relations: Theory and Implications

Abstract:     
How do countries resolve conflicts over taxation? When and under what circumstances are they able to reach agreement? The international tax literature has devoted tremendous resources to considering substantive issues in international taxation. Little attention, however, has been directed to how conflict is handled - essentially the "relations" aspect of international tax.

Drawing upon valuable work ("regime theory") from the international relations field, Part I of the paper develops a model for evaluating when countries are likely to reach a resolution on a significant issue of tax law or procedure (i.e., create a regime). Part II then applies the model to the most well known agreement in international tax, the formation of a "regime" for addressing the pervasive problem of double taxation. Based on that analysis, the paper draws a number of specific conclusions about the case study. Part III offers more general observations about regime formation in international tax, and outlines a detailed research agenda for further developing our understanding of when regimes will and will not be formed. This improved knowledge of the relations in international tax will enhance our ability to predict the shape of international disagreements, and consider strategies likely to support regime formation.

Keywords: international relations, international tax, double taxation, treaties, regimes

JEL Classifications: K34, H20, F23

Accepted Paper Series