Substantive Tax Sovereignty Under Globalization

Tax sovereignty stands for the ability of a political community to design its fiscal system in ways that support its collective self-determination. This article argues that substantive sovereignty is not merely about power, rather, it is about legitimate authority. It addresses the impact of globalisation on such sovereignty, considering the impact it has on the ability of the state to provide public goods, to promote distributive justice, and to respect political participation and membership in a political community. It argues that, if left unattended, globalisation might undermine substantive tax sovereignty. Therefore, globalization presents an acute challenge: how can substantive tax sovereignty be sustained to allow states to construct a tax system which is both viable and legitimate in a competitive environment. Finally, the article considers the ability of cooperative measures to support substantive tax sovereignty, and argues that for cooperation to yield legitimate outcomes it must commit to leveling the international tax playing field by progressively allocating the benefits of cooperation.