Community Obligations in International Taxation

This paper describes the multilateral efforts regarding four key concerns of the international community: prevention of double taxation, fighting "harmful tax competition," sharing of information, and the "gaps and frictions" between the tax systems of various countries noted by the recent BEPS report. It then asks what, in fact, constitutes the community's interest in the international tax area, arguing that where tax policy is concerned, there is no clear "textbook answer" regarding the best way to tax internationally. The paper criticizes two proxies which are often implicitly endorsed in order to evaluate international tax policy: cooperation among states, and the prevention of transaction costs and market failures. It argues that cooperation, contrary to conventional wisdom, is neither a goal in itself, nor is it a good enough proxy for the collective good. Cooperation should be supported only when it genuinely promotes the interest of the community as a whole, which is not necessarily the case in the four initiatives examined. As for transaction costs and market failures, although their elimination indisputably seems to be a community interest that should be pursued, correcting only some of them may raise a second best problem.