Ring: International Tax Reform And Improved Wealth Distribution Across The Globe

Diane Ring (Boston College), A Path to International Tax Reform and Improved Wealth Distribution Across the Globe (JOTWELL) (reviewing Tarcísio Diniz Magalhães (International Bureau of Fiscal Documentation), What Is Really Wrong with Global Tax Governance and How to Properly Fix It, 10 World Tax J. (2018)):

Thomas Piketty’s work brought the reality of unequal distributions of wealth into mainstream media and popular discourse. In the tax world, the conversation now regularly turns to a consideration of whether and how the international tax regime contributes to existing patterns of wealth and income distribution across nations. Certainly, the tax norms and rules that shape the basic roadmap of international tax (including source, residence and permanent establishment provisions) contribute to existing distributions of wealth—and relatedly taxable income—across jurisdictions. Why do these patterns persist? And perhaps more importantly, what would it take for change?

A recent article by Tarcísio Diniz Magalhães aims to develop answers to both questions.

That article builds on an active conversation in international tax. In responding to the question, Magalhães argues that the international tax world we see today is the product of a 100 years of tax policy advocacy and design by a subset of nations and actors—and that this subset has maintained a hold on international tax policy norms through a combination of power and expertise. Although the story of developed economies dominating the origins of international tax is not new, Magalhães offers a nuanced argument regarding how these countries have maintained their level of influence in policy design. His weaving of technical tax expertise into a narrative that has typically been cast as a raw power play provides a closer look at the mechanisms by which privileged positions can be maintained. This process of tax law design is, in his view, more important than the substantive outcomes—although the substantive outcomes have been less than ideal from the perspective of many developing countries. ...

Magalhães offers an astute critique of current global tax policy-making that reaches beyond power and highlights the more subtle impact of framing and expertise. Even when these features of the process are not the product of calculated efforts, they can nonetheless combine to solidify a particular vision of international tax. Magalhães’ forthcoming work continues to explore these issues of global fiscal policymaking and promises continued insights in both understanding and in reforming global tax governance. I plan to stay tuned.