City Research Online

Abstract

Modern attempts to reach international consensus on how to transform the international tax system in order to grapple with the global imperative of digitalisation appear to have made progress. This is in contrast to historical efforts to re-evaluate and alter norms of taxation, which revolved around concepts of physical brick-and-mortar presence and residence. The impetus for such apparent breakthroughs can be linked to the traditional rationale of revenue raising. The need to raise tax revenue to fund public spending has been around since time immemorial, however, the modern mix of digitalisation and globalisation of the economy has created a new focus on tax avoidance and good governance in the area of taxation, and essentially ‘fair’ taxation. This has been spurred on, especially at the EU level, by the need to generate its own resources, specifically in order to ‘support’ the Covid-19 recovery. In the US, changes in the Administration have brought with them significant differences in viewpoints as to the role of the American State and the position of corporations, especially home grown American Multinational Enterprises (MNEs), as part of the economy. However, the EU and US home grown agendas on taxation do not operate in a domestic or regional vacuum. In order to achieve successful implementation of their own local agendas on taxation they need to dominate the transatlantic space. Control over norm promotion practices in international taxation is essential for the system to work in their favour, and for the money to come their way. Or more importantly, for tax revenue not to go in the other direction.

This contribution will consider both EU and US transatlantic agendas on ‘fair’ corporate taxation in a digitalised economy. What will become apparent is that both the EU and the US are trying to ensure that their own transatlantic agendas on taxation become the basis of the new norms of the digital age. We will see the position of the EU in wanting to occupy, and indeed dominate, the transatlantic space and agenda on digitalisation and tax to further EU integration and an idea of European sovereignty. The US is seeking to ensure that changes in its own tax system do not become disincentives, to American MNEs especially, paying tax at home because they differ too significantly from international norms. Both the EU and US transatlantic agendas on taxation therefore demonstrate a desire to harmonise corporate tax to make it ‘fair’ in order to facilitate new norm promotion practices in the digital age, but according to their own agendas. The recent progress in reaching apparent consensus on reforming the international tax system in the face of digitalisation of the economy can be attributed to changes in the US Administration and its views on corporate tax. A renewed focus in the OECD / G20 on the BEPS Inclusive Framework would arguably not have been possible if it was not for American proposals coupled with a strong desire for reform. The EU, however, wishes to “be among the first to implement the recent historic global tax reform agreement” and has already published a proposal for a Directive implementing Pillar Two on the OECD Inclusive Framework. However, this proposal differs from what the US envisaged, in order for the EU to comply with the principles of its own internal market. Which agenda will come to dominate the transatlantic space, and whether harmonisation according to either agenda can be achieved, is still an evolving issue.

What is crystalizing though are efforts on the part of both the EU and the US to attempt to use ‘fairness’ to guide norm promotion practices in the digital age according to their own transatlantic tax agenda. This is problematic because norms of tax fairness theory are an uncomfortable fit with both agendas,

Publication Type:	Book Section
Additional Information:	This is an Accepted Manuscript of a book chapter published by Routledge in The Routledge Handbook of Transatlantic Relations on 31 July 2023, available online: https://doi.org/10.4324/9781003283911
Subjects:	H Social Sciences > HF Commerce H Social Sciences > HG Finance J Political Science > JK Political institutions (United States) J Political Science > JN Political institutions (Europe) K Law
Departments:	The City Law School The City Law School > Academic Programmes
SWORD Depositor:	Symplectic Administrator

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