New Puzzles in International Tax Agreements

49 Pages Posted: 27 Jul 2021 Last revised: 15 Aug 2022

See all articles by Wei Cui

Wei Cui

University of British Columbia (UBC), Faculty of Law

Date Written: October 12, 2021


The G-7’s “global minimum tax” accord—followed by a new version of the OECD’s “Two Pillar Solution” and its endorsement by the G-20—is accepted by many as evidence for international tax cooperation. But recent policy discussions offer no answer to a basic question: What can countries cooperate to achieve? This Article shows that the answers provided by proponents of the new international tax agreement are alarmingly ad hoc, misleading, and incoherent. Scholarship on corporate taxation has also long failed to identify potentials for international cooperation. The more successful international agreements purport to be, in other words, the more puzzling they become.

I first examine three rationales recently identified for collective action. The first alleges a transformation in the services trade that supposedly undermines premises of traditional international tax design. The second emphasizes the international community’s need to appease the United States and prevent the latter from starting trade wars. Both make unusual and untenable factual and normative assumptions. A third rationale seems more familiar—countries should cooperate to end tax competition and multinational companies’ tax avoidance—but is at odds with both economic theory and the actual content of the OECD’s proposal. Theoretically, ending tax competitions—whether for productive capital or for corporate headquarters—cannot create gains for all countries. And in terms of policy content, the OECD proposal can more plausibly be read as limiting, rather than enhancing, governments’ capacities to tax MNCs.

Older and more basic puzzles in theories of international taxation—concerning source-country taxation, residence countries’ unilateral relief from double taxation, and bilateral tax treaties—compound these new puzzles. Arguably, these puzzles have led tax scholars to abandon a basic social scientific template for explaining cooperation. Indeed, much of economic scholarship takes international tax institutions as exogenously given. I contrast this state of affairs with economic theories of trade agreements—in particular, with the way the “terms-of-trade” theory rationalizes the GATT/WTO regime. To emulate the success of the “terms-of-trade” theory, I argue, certain assumptions that have long prevailed in discourses about international taxation may need to be jettisoned. Only a more fundamental reconceptualization of the subject matter of international taxation can shed light on the true past and future grounds for international tax cooperation.

Keywords: Global minimum tax, international tax competition, international tax cooperation, theory of international economic agreements, trade in services

JEL Classification: F13, F53, F55, H25, K34

Suggested Citation

Cui, Wei, New Puzzles in International Tax Agreements (October 12, 2021). 75(2) Tax Law Review 201-269, Available at SSRN: or

Wei Cui (Contact Author)

University of British Columbia (UBC), Faculty of Law ( email )

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Vancouver, BC V6T1Z1

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