The Financial Crisis, the OECD, and the Politics of International Tax Cooperation
Chapter 1: Governing international taxation: problems and challenges
In their seminal work on the impact of economic integration Keohane and Nye (1977) argued that a condition of complex interdependence characterised world affairs. States may have retained formal sovereignty and remain key actors in the global economy and world politics, but with the rapid internationalisation of markets, systems of production and corporations, the political authority of states is either being challenged or is in decline. In the absence of formal political authority above the level of the state, and given the inherently anarchical nature of the international system, effective governance in a ‘globalised’ world requires institutions and practices capable of enhancing and sustaining cooperation and providing order in international economic relations. Nowhere is this need for effective global governance based on cooperation and shared decision-making more apparent than in relation to international taxation issues. Even within the European Union, and despite calls for closer fiscal integration dating back to the 1960s, there has been a distinctive lack of supranationalism as states have been extremely reluctant to cede their sovereign authority in relation to managing their domestic tax affairs (Cohen 1977; Radaelli and Kraemer 2008). In an era of transnational production and global capital markets national tax systems are highly interdependent – changing tax policies and practices in one country can have profound impacts on the tax systems of their neighbours. The extent of this interdependence has led commentators such as Radaelli (1997, 176) to conclude that ‘international taxation is a governance problem in search of institutionalization’.
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