Kysar: The Global Tax Deal And The New International Economic Governance

Rebecca M. Kysar (Fordham; Google Scholar), The Global Tax Deal and the New International Economic Governance, 77 Tax L. Rev. __ (2024):

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 global tax deal that is aimed at coordinating their tax systems to curtail tax competition and corporation profit shifting to tax havens, 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 tradition of national control over tax policy. 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 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 (and indeed beyond those typically discussed in international tax policy). Further, this explanation provides evidence that an alternative international economic order is emerging rather than the old Washington Consensus simply dying —one where marshaling resources to reverse fiscal austerity and address distributional concerns is on the agenda. Finally, the story of the global tax deal helps to identify troubling aspects of the new industrial and trade strategies that nations are embracing and offers alternatives to them.