Creating a race to the top in global tax governance: the political case for tax spillover assessments

ABSTRACT

‘Reglobalization’ requires global governance mechanisms that can promote norm and normative change constitutive of a ‘post-neoliberal order’. Mitigating the race to the bottom in taxation, which can harm public provision and social mobility, is a specific challenge requiring the creation of new tools. This requires going beyond the current reporting tools of global tax governance to focus more systematically on government policies. We develop a political case for conducting assessments of a phenomenon known as ‘tax spillovers’. These are harmful impacts one country’s tax policies have on other countries, that can also undermine the redistributive capacity of the home tax system. We identify five enabling conditions that give tax spillover assessments political salience, traction and feasibility. Devising and theorizing policy tools that are politically feasible is a pressing task for the reglobalization project that is deserving of scholarly, as well as practitioner, attention.

KEYWORDS:

• Tax spillovers
• global tax governance
• re-globalization
• tax competition

Acknowledgements

The authors would like thank two anonymous reviewers and the editors for comments on an earlier version of this article. Any remaining shortcomings are the authors' responsibility alone.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 BEPS action 5, for example, specifies 6 categories of taxpayer-related rulings on which authorities should exchange information. See https://www.oecd.org/tax/beps/beps-action-5-harmful-tax-practices-peer-review-transparency-framework.pdf. The purpose behind this exchange of information is to increase the set of information that authorities have on the treatment of taxpayers in other jurisdictions, so as to reduce the risk of profit-shifting activity. It is quite limited in scope and intent and is not about assessing the levels of tax competition pursued by a jurisdiction or the consequences of that competition.

2 Much of the evidence presented in this article is a function of the authors being direct and active participants in this new emerging policy field, working closely and engaging in a dialogue with various non-governmental organizations (NGOs) and international organizations (IOs) to produce a new framework for assessing tax spillovers. Our experience in that exercise has informed the political enabling conditions we identity in this contribution.

3 See Murphy (2003). Accounting literatures had been proposing a similar idea since the 1970s.

4 As authors, we were invited to participate in these in March 2019.

Additional information

Notes on contributors

Andrew Baker

Andrew Baker is Professor of Political Economy in the Department of Politics and International Relations at the University of Sheffield.

Richard Murphy

Richard Murphy is Professor of International Political Economy and Practice at City, University of London.