The State Administration of International Tax Avoidance

67 Pages Posted: 4 Nov 2015 Last revised: 20 Oct 2017

See all articles by Omri Y. Marian

Omri Y. Marian

University of California, Irvine School of Law

Date Written: March 23, 2017


This Article documents a process in which a national tax administration in one jurisdiction, is consciously and systematically assisting taxpayers to avoid taxes in other jurisdictions. The aiding tax administration collects a small amount tax from the aided taxpayers. Such tax is functionally structured as a fee paid for government-provided tax avoidance services. Such behavior can be easily copied (and probably is copied) by other tax administrations. The implications are profound. On the normative front, the findings should fundamentally change our understanding of the concept of international tax competition. Tax competition is generally understood to be the adoption of low tax rates in order to attract investments into the jurisdiction. Instead, this Article identifies an intentional “beggar thy neighbor” behavior, aimed at attracting revenue generated by successful investments in other jurisdictions, without attracting actual investments. The result is a distorted competitive environment, in which revenue is denied from jurisdictions the infrastructure and workforce of which support economically productive activity. On the practical front, the findings suggest that internationally coordinated efforts to combat tax avoidance are misaimed. Current efforts are largely aimed at curtailing aggressive taxpayer behavior. Instead, the Article proposes that the focus of such efforts should be curtailing certain rogue practices adopted by national tax administrations.

To explain these arguments, the Article uses an original dataset. In November of 2014, hundreds of advance tax agreement (ATAs) issued by Luxembourg’s Administration des Contributions Directes (Luxembourg’s Inland Revenue, or LACD) to multinational corporate taxpayers (MNCs) were made public. 172 of the documents are hand-coded and analyzed. The analysis demonstrates that LACD cannot be reasonably viewed – as some have suggested in LACD’s defense – a passive player in tax avoidance schemes of multinational taxpayers. Rather, LACD is best described as a for-profit manufacturer of tax avoidance opportunities.

Keywords: International Tax, Tax Arbitrage, Tax Avoidance, Lux Leaks, LuxLeaks

JEL Classification: E62, H25, H26, K34, H73

Suggested Citation

Marian, Omri Y., The State Administration of International Tax Avoidance (March 23, 2017). 1 Harvard Business Law Review, Vol. 7, 2017, UC Irvine School of Law Research Paper No. 2015-95, Available at SSRN: or

Omri Y. Marian (Contact Author)

University of California, Irvine School of Law ( email )

401 E. Peltason Dr.
Ste. 1000
Irvine, CA 92697-1000
United States

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