Monday, September 18, 2023
Rebecca Kysar (Fordham; Google Scholar) presents The Global Tax Deal and Its Implications at Loyola-L.A. today as part of its Tax Policy Colloquium hosted by Katie Pratt and Ted Seto:
The ethos of economic integration and trade liberation no longer reigns supreme. Instead of multilateral trade agreements, nations are turning towards protectionism and unilateralism. Yet in late 2021, nearly 140 countries agreed to a new international tax system that is aimed at levelling the playing field among them, curtailing competition on corporate tax rates and corporate profit shifting to tax havens through a new global minimum tax as well as constructing a new allocation of taxing rights among nations.
Although multilateral trade agreements now seem out of reach, tax multilateralism is ascendant. This is surprising given the deep connection between taxation and national sovereignty. It also perplexing since international tax does not exhibit the same theoretical harmony between national and worldwide welfare that international trade enjoys. The traditional account offered by economists is that trade liberalization is a rising tide that will lift all boats because countries will produce according to their competitive advantages and trade the rest, making trade suitable for international coordination. In contrast, tax is largely described as a zero-sum contest for a fixed pot of tax revenues, deeming it ill-suited for collective action.
If multilateralism in the economic sphere is dead, then how did this agreement come to be? And perhaps more puzzlingly, why did a global deal emerge in international tax, of all places? This Article attempts to explain the forces by which the global tax deal came to pass. It contends that we must look beyond traditional rationales for the explanation, instead examining the global tax deal within a broader foreign and domestic economic policy context. The Article concludes that the fall of the multilateralism in the trade context and its rise in international tax can be explained by the same phenomenon—widespread dissatisfaction with the distribution of gains from globalization.
This account not only illuminates the stakes at issue in the debate over the implementation of the new global tax system, but also extends the rationales for each of its two parts, or “Pillars,” beyond those proffered. Further, it provides evidence that an alternative international economic order—a “new Paris Consensus,” coming out of the Paris School of Economics—is emerging rather than the old Washington Consensus simply dying. The story of the global tax deal also assists in identifying other areas that are candidates ripe for economic multilateralism, even as new global trade deals remain unlikely. Finally, the account helps to identify troubling aspects of the new industrial and trade strategies that nations are embracing and offers alternatives to them.
Commentator: John Vella (Oxford)