Table of Contents

Tax, Law and Development

Tax, Law and Development

Edited by Yariv Brauner and Miranda Stewart

Comprising original essays written by top legal scholars, this innovative volume is the most comprehensive collection to date of independent academic work exploring the relationship between tax, law and development. Contributors cover a range of tax issues, drawing on economic, political, social, and institutional perspectives to offer a comprehensive view of how tax laws affect and are affected by human economic development.

Chapter 5: Tax sparing: a reconsideration of the reconsideration

Luís Eduardo Schoueri

Subjects: development studies, law and development, economics and finance, public finance, law - academic, law and development


Tax sparing has traditionally been included in the debate concerning tax and development. Such a traditional approach derives from ideas based on the existence of an ‘international tax law of development’ providing for the rules for the ‘proper solidarity between developed and less developed states’. In such context, it is not surprising that when, on 23 October 1997, the OECD Council approved a report issued by the Committee on Fiscal Affairs on ‘Tax Sparing: A Reconsideration’ (‘OECD Report’), the aim was to reflect member countries’ more reluctant position vis-à-vis the adoption of tax sparing. The purpose of this chapter is to examine the main issues presented in the OECD Report, in order to investigate whether the arguments presented therein can be deemed to be strong enough to convince countries to reject negotiating tax treaties with tax sparing clauses. After having defined ‘tax sparing’ and ‘matching credit’ (in section II), this chapter reviews the main arguments presented in the OECD Report and offers some reasons to show their lack of consistency (section III). Finally, the idea itself that tax sparing and matching credit are mechanisms appropriate only to tax treaties between developed and developing countries will be challenged, since the author argues that there are good reasons for applying these mechanisms in all tax treaties, under the assumption that each contracting state should respect the other contracting state’s sovereign decision as to how to exercise their tax policy (section IV). This chapter concludes that the OECD tax sparing (re)consideration has taken a paternalistic approach

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