Tax Cooperation in an Unjust World
I have a new book out! Here is what it is about:
Over the past century, national competition over global resources has been facilitated by cross border regulatory cooperation, with taxation a central focus. This cooperation has always been ostensibly for the mutual advantage of all participating nations, yet we continue to live in an unjust world in which resources and power are hoarded by a few, while many suffer under intolerable conditions. Against this backdrop, how should we understand the way that nations share power and resources in their dealings with each other?
Tax cooperation in an unjust world demonstrates that the international tax system is key to answering this question.
In making our claim, we argue that the international tax system currently contributes to the extreme conditions of injustice in the world today, but it is capable of altering course. The scope of unmet need and attendant injustice visited upon the world’s most vulnerable populations is well-documented, and most visibly encapsulated in the Sustainable Development Goals unanimously adopted in 2015 by the 193 member states of the United Nations. As is clear by now, the COVID-19 pandemic has dramatically increased the magnitude of the problems to be addressed. That tax revenues are key to resolving these problems is uncontroversial—the main intergovernmental institutions including the United Nations, the Organisation for Economic Co-operation and Development, the International Monetary Fund, and the World Bank have expressed solid agreement on this fact. Yet the international community finds itself unwilling or incapable of centering its core tax cooperation efforts on such resolution.
We see potentially significant barriers to changing course within the normative assumptions currently informing international tax discourse and practices. Tax cooperation in an unjust world therefore presents two principles that should guide nations in their dealings with each other when it comes to tax cooperation.
The first principle is that nations are entitled to the economic returns to investment in their territories—the entitlement principle. This is a principle already at work in international tax cooperation, but we aim to examine its core assumptions and demonstrate that it is more often than not misapplied in practice.
The second is that each nation is entitled to benefit equally from cross-border cooperation—the equal benefit principle. The equal benefit principle is for the most part violated in international tax cooperation, and our aim in introducing it in this book is to illuminate a more just path forward.
Central to our task is answering the core normative question that has informed cross-border cooperation for the entirety of modern income taxation, namely, which states are entitled to tax what, and the related question of which should prevail if more than one is entitled to tax. Answering these questions in normative terms is one of the main goals of this book; demonstrating the feasibility of moving closer to a more just tax system is the other.
We open the discussion with an introduction of the entitlement principle. In a just world, the principle that nations are entitled to the economic returns generated within their territories is intuitively compelling, but in our unjust world, the principle is conditioned by the need to confront such injustice. We therefore introduce the equal benefit principle as a corollary: the entitlement principle cannot be fully realized unless the equal benefit principle is realized as well.
The two principles follow from a widely accepted conception of international justice that takes the existence of independent states of unequal affluence as morally justified and identifies only a limited set of principles as regulating their interactions. We can readily observe that the entitlement and equal benefit principles are deeply embedded in the ways nations act toward each other, even if each is violated in practice.
In examining these violations, we make two distinct but interrelated normative cases for reform in international tax cooperation. The first of these is that relatively affluent and well-ordered states have duties of assistance to help fulfill subsistence rights abroad, such that any nation’s entitlement to the wealth of its territory is conditional on it having discharged such duty. The second is that even if this first claim is not fully accepted, the existence of subsistence rights deficits has significant implications for what states can rightfully claim as part of their entitlement at all.
The duty of assistance is well explored in the philosophical literature and it is compelling. Yet, we understand that it also leads to perhaps uncomfortable implications with respect to nation’s obligations to one another. Some might reasonably reject the claim or find its implications beyond that which is practically applicable in our present world. In response, we show that even if states are not directly responsible for either the existence or rectification of subsistence rights deficits, this does not mean that they are entitled to all of the gain that is produced as a result of such deficits. In fact, they may be entitled to none of it, depending on the circumstances that produced the gains in question. Much of the book thus stands as a direct challenge to some comfortably embedded yet ultimately incorrect assumptions about national entitlements to wealth.
The book accordingly concludes with a call to action. Going into a third year of a continuously evolving pandemic, the dire consequences of ignoring the suffering from which those with the greatest resources financially benefit has perhaps never been more clear. Relatively affluent states cannot continue to claim their own entitlements to wealth while denying the same to others. The international community must confront the parameters and implications of the entitlement and equal benefits principles, lest the mistakes of the past continue indefinitely into the future.
