| ID | 153606 |
| Title Proper | Unintended consequences of bilateralism |
| Other Title Information | treaty shopping and international tax policy |
| Language | ENG |
| Author | Arel-Bundock, Vincent |
| Summary / Abstract (Note) | The international tax system is a complex regime composed of thousands of bilateral tax treaties. These agreements coordinate policies between countries to avoid double taxation and encourage international investment. I argue that by solving this coordination problem on a bilateral basis, states have inadvertently created opportunities for treaty shopping by multinationals. These opportunities, in turn, reduce the potency of fiscal policy, put pressure on governments to change their domestic tax laws, and ultimately constrain state autonomy. This constraint is theoretically distinct from the usual race-to-the-bottom story and it generates different testable implications. I use a motivating case study to show how multinationals leverage the structure of the treaty network to reduce their tax burden. Then, I develop a new measure of treaty-shopping opportunities for firms in 164 countries. Where the proliferation of tax treaties allows multinationals to engage in treaty shopping, states’ fiscal autonomy is limited, and governments tend to maintain lower tax rates. |
| `In' analytical Note | International Organization Vol. 71, No.2; Spring 2017: p.349-371 |
| Journal Source | International Organization Vol: 71 No 2 |
| Key Words | International investment ; Bilateralism ; International Tax Policy ; Treaty Shopping ; Bilateral Tax Treaties ; International Tax System |