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Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International

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Publication Date

Spring 2021




University of Pittsburgh School of Law




Tumultuous times can be particularly difficult for the vulnerable. That may be no less true in the international tax context than it is elsewhere, but disruptive change can also open the door to greater participation by, and rewards for, those long treated as outsiders. With international tax cooperation's first golden age receding into history, new priorities have begun to take root. Unprecedented challenges buffet the international tax regime, suggesting that its future may depend less on its capacity to shield businesses from taxation than on its ability to find common ground among very different states.

International tax cooperation has long held a potent appeal even for states with outsized influence and power.' Resting on a patchwork quilt of mismatched national tax systems, international tax rules have drawn strength from states' willingness to make generous concessions to one another. When an investment or a business spans a border, two sovereigns could assert competing tax claims on the resulting profits.2 Surprisingly often, they have not. Precisely the reverse can be true, with states treating the right to tax like a hot potato.

In the wake of the Great Recession that followed the 2008 financial crisis, the once-robust neoliberal consensus that sustained that cooperative approach began to fray.5 The reciprocal deference to the claims of other states that once delighted scholars and served as a boon to international commerce has come to seem anachronistic.' As the enormous subsidies it delivers to multinationals have come into focus, the call for shared sacrifice to produce collective benefits through economic growth ring increasingly hollow.

International tax cooperation's longstanding success came because of--not despite-its lofty aspirations. The question of why states obey international law can be a puzzle. Legitimacy-and the compliance pull it exerts over states-offers one answer that explains the perseverance of the international tax regime.8 Simply put, influential states harnessed legal instruments with sterling pedigrees to contain a compelling threat to the world's collective welfare. 9 Fueled by the legitimacy generated by states' formal embrace of its pursuit of collective benefits, international tax cooperation grew strong.

Over the last two decades, shared sacrifice has yielded to centralized authority.10 The dawn of a new golden age of international tax cooperation will require more, a higher purpose worthy of the vast shared undertaking it represents. One path forward would be to shape international tax rules to deliver benefits principally to the least well-off states. Such an approach Tax Sparing 2.0-would revive a proud history of mission-driven international tax cooperation, helping to restore its lost legitimacy.

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