Download This PaperThe Transformation of International Tax
American Journal of International Law, forthcoming July 2020
Virginia Public Law and Legal Theory Research Paper No. 2020-36
60 Pages Posted: 15 Apr 2020 Last revised: 15 Dec 2025
Date Written: April 15, 2020
Abstract
This Article argues that the OECD/G20 BEPS Project did more than produce a grab bag of technical “deliverables.” It altered international tax’s participants, agenda, institutions, norms, and even legal forms. But efforts to close corporate tax gaps widened a distributive rift that now threatens the long-standing treaty framework. After sketching the classic architecture—source vs. residence, bilateral treaties based on the OECD Model, limits like permanent establishment, and allocation via arm’s-length transfer pricing—the article explains how globalization, digitization, and national-law fragmentation made profit-shifting and stateless-income strategies increasingly feasible (illustrated with examples like Apple’s residency mismatch planning and the enabling effect of check-the-box). For decades, cooperation was blocked by collective-action dynamics, sovereignty concerns, monitoring problems, and more. But the financial crisis combined with leaks and public investigations make reform possible. The key conceptual move of BEPS was the shift from a dominant norm of avoiding double taxation toward a “full taxation” norm—the idea that income should not escape tax. BEPS implemented that shift through various coordination tools, including: the Multilateral Instrument, soft law coupled with monitoring, and “fiscal fail-safes”—rules designed so that if one country doesn’t tax, another will.
The Article concludes by analyzing the BEPS changes—on revenue, inclusivity, and policy innovation. It stresses that the BEPS Project constrains tax autonomy, locks-in questionable choices, and—most importantly—implements a full taxation norm that can’t be specified without agreement on a distributive rule about where income should be taxed. Failure to specify the distributive rule raises the specter of renewed double taxation. In light of a deepening rift between the United States and Europe, BEPS leaves international tax at an inflection point with competing futures: a drift back toward bilateralism, an era of more unilateralism (and potential double tax), or a deeper multilateralism.
Keywords: BEPS, corporate tax avoidance, full tax, single tax, OECD, tax competition, fiscal fail-safes, tax, soft law, Inclusive Framework, OECD acquis
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