Monday, October 5, 2020
Steven Dean (NYU) presents A Constitutional Moment in Cross-Border Taxation virtually today as part of the San Diego-Davis-Hastings Tax Law Speaker Series:
Influential states and organizations guard a material constitution—identified here as the Classification and Assignment Constitution—that in turn shields multinationals from cross-border taxation. The rise of global digital giants against a backdrop of crisis has drawn disputes over the limits of its core algorithm into the light. This article shows why and how resisting reforms such as expanding the roles of marginalized states in that constitutional order threatens its long-term stability. ...
The Classification and Assignment Constitution has shaped cross-border policymaking for a century. Two global crises in quick succession have created both an opportunity and an urgent need to remake that material constitution, altering its substantive rules by transforming the processes that shape them. In tax, just as in trade and investment law, critics find “not a borderless market without states but a doubled world kept safe from mass demands for social justice and redistributive equality by the guardians of the economic constitution.” In order to rewrite the protective algorithm at the core of the Classification and Assignment Constitution to provide all states—and developing states in particular—with access to the revenues they desperately need, a more inclusive cast of constitutional actors must be empowered.
Over the last decade, during what the ongoing pandemic has revealed to be merely the eye of a fiscal storm, persistent inequality and austerity attracted an unprecedented level of attention to the way states collect revenues to meet their growing needs. A window of time that might have witnessed a restructuring of global tax policy instead culminated in an internecine struggle over how—and whether—the profits of digital giants such as Amazon and Google fit within its rigid numerus clausus algorithm.
The arrival of COVID has only exacerbated those unresolved tensions. This article offers a glimpse of what might have been—and perhaps still could be—by imagining a world in which marginalized countries willing to gamble on a new approach to taxing cross-border transactions gain a voice in setting the global tax policy agenda. Empowering additional constitutional actors would bring fresh perspectives to bear on perennial challenges, inviting increased innovation while decreasing errors.
Echoes of this constitutional moment—implicating similar questions of power and inequality—can be perceived in the unsettled nature of U.S. domestic law. In 2017, the United States enacted once-in-a-generation changes to its income tax laws, and for a tantalizing moment seemed close to a far more profound remaking. For much of 2019, it appeared that the 2020 U.S. election would serve as a referendum on a wealth tax. Although a wealth tax might survive a constitutional challenge, it would inevitably invite one by fundamentally rewriting U.S. tax law.