Title

A Foundation for International Taxation: The Institutional Competence of Nations

Abstract

This Article proposes a conceptual foundation for the field of international tax law. The Article refers to this foundation as the institutional competence of nations in global economic development. A nation’s institutional competence is its discretion to make decisions in pursuit of our collective goal of global economic development, discretion that is subject to a number of standards and limitations.

The Article constructs the institutional competence of nations in global economic development from institutional economics, simple game theory, and the literature on social norms. The Article expresses the institutional competence of nations through standards and limitations that reduce the abuse of sovereign discretion and address international collective action problems in the pursuit of global economic development. These standards and limitations allocate prescriptive jurisdiction among nations over the global income tax base.

The foundation proposed by the Article would coordinate international taxation with the international regulation of trade. The Article also addresses the proper place of capital export neutrality in the hierarchy of values for economic development, the choice between territorial and worldwide tax systems, the evaluation of tax havens and appropriate responses, the use of anti-deferral regimes, and the possible need for a multilateral tax treaty.

On this institutional foundation, the role of the state is both essential and subordinate: sovereignty becomes an instrumental value and national law-making is seen in terms of a conceptual subsidiarity, to use the European term, or a consequentialist federalism in the realm of global economic development. Moreover, non-state actors facilitate sovereign competition and the benefits that such a constraint on the abuse of sovereign discretion brings to the world’s people.

Disciplines

International Law | International Trade Law | Jurisprudence | Law and Economics | Law and Society | Organizations Law | Public Law and Legal Theory | Taxation-Federal | Taxation-Transnational | Tax Law

Date of this Version

July 2005