Rosenzweig: BEPS—Endgame

Adam H. Rosenzweig (Washington University), BEPS: Endgame, 54 U. Mem. L. Rev. 83 (2023):

By all accounts the international tax regime is facing a transformational moment marking the end of international tax avoidance by multinational corporations through a concerted global effort at tax reform spearheaded by the Organization for Economic Cooperation and Development (“OECD”) under its Base Erosion and Profit Shifting (“BEPS”) project. BEPS initially began as a technical project to identify and propose remedies for many of the more complex and persistent planning techniques in cross-border taxation. After a series of remarkably successful breakthroughs, however, the scope of BEPS grew into a much more ambitious project with the OECD identifying fifteen specific action items it would pursue with the ultimate goal being the emergence of a single set of global rules and principles agreed to by nearly every country in the world. To this end, in 2022 the OECD announced that over one hundred countries had entered into an agreement to establish a global minimum corporate tax—the first of its kind. Both the U.S. Secretary of Treasury and the President of the United States hailed the agreement as the beginning of the end of international corporate tax evasion forever.

Despite these remarkable successes, however, BEPS has also faced a number of delays and disappointments throughout the process. For the most part, especially given its recent successes, these setbacks have been dismissed as minor “speed bumps” along the way toward an ultimate comprehensive final agreement. But what if this was not the case? What if these small but recurring setbacks actually comprise a feature of the BEPS negotiations rather than a bug? In such case, dismissing or disregarding these setbacks might not only mean they will continue to recur but under certain conditions could ultimately undermine the success of the entire project itself. This article will directly confront these setbacks by analyzing them within the framework of international negotiation theory, and in particular recent strands of the negotiations literature sometimes referred to as “False Negotiations” theory. In doing so, this article will identify the conditions under which certain states may be actively engaged in the negotiation process and even cooperative on major issues but ultimately do not have an incentive for the process to result in a final negotiated solution but rather are actively engaged in the negotiations solely to maintain a state of perpetual negotiations. In short, there are conditions under which prolonged negotiations would be preferable to either a successful or failed final negotiated agreement. In such cases, the result would be a repeated loop of negotiations marked by periods of remarkable success followed shortly by recurring minor setbacks significant enough to delay the process but not so significant to cause the negotiations to fail. If true, these incentives must be incorporated into any BEPS analysis before any final outcome might be possible. In other words, BEPS can finally break out of its cycle of False Negotiations and finally enter its endgame. 

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