The Costs of International Tax Cooperation

27 Pages Posted: 7 Jun 2002

See all articles by Tsilly Dagan

Tsilly Dagan

University of Oxford, Faculty of Law; Bar Ilan University

Date Written: 2002


This Article discusses the three levels of international tax (the unilateral, the bilateral and the multilateral). It describes the seemingly appealing arguments (based on cooperation) advocating neutrality, double taxation prevention, and harmonization. A closer look at these arguments, however, reveals that pursuing these goals often brings about completely different and sometimes undesirable results. While acknowledging the potential benefits of inter-nation cooperation for some, this article highlights the (sometimes hidden) costs of such cooperation for others. Thus, domestic interest groups tend to win or lose from adopting an (elusive) cooperative strategy as the unilateral mechanisms of their countries; developing countries tend systematically to lose tax revenue when they enter into the (more cooperative and thus seemingly benign) bilateral treaty regime; finally, the emerging multilateral regime, promoted as an all-benefiting cooperative strategy, also creates potential losers both among and within nations.

Based on this analysis, the paper argues that cooperation serves as a useful rhetorical tool that supports a certain contingent policy choice, but obscures other, potentially important, considerations and alternatives. Identifying the winners and losers of cooperative policies is necessary in order to evaluate such polices. Cooperation cannot be and is not the ultimate goal in international tax policy.

Suggested Citation

Dagan, Tsilly, The Costs of International Tax Cooperation (2002). Available at SSRN: or

Tsilly Dagan (Contact Author)

University of Oxford, Faculty of Law ( email )

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Bar Ilan University ( email )

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