The Financial Crisis, the OECD, and the Politics of International Tax Cooperation
Chapter 2: The dynamics of global governance
The international tax regime that has evolved over the past century poses both governance challenges and opportunities. The sovereignty-preserving nature of international taxation combined with the extent to which it impacts on financial interests provides strong incentives for international regulatory competition in relation to tax matters. At the same time, the magnitude of the financial costs of regulatory arbitrage and the growing threat that international tax evasion poses to national tax systems provide strong incentives to create an international tax regime that will establish a robust foundation for international tax cooperation. In short, the governance of international taxation provides an important case study into the political economy of global economic governance in the twenty first century. Recent developments in international tax governance are of broader significance because they provide insights into the critical question of regime change and evolution. As will be outlined in Chapter 3, the international tax regime has evolved over the course of the twentieth century, with the political commitment to providing effective regulation waxing and waning in concert with changing political and economic circumstances. The period since the last years of the twentieth century in particular has seen significant variation in the commitment to cooperation, from the initial enthusiasm for the OECD’s HTC initiative in the late 1990s and its effective defeat by the Bush Administration and a coalition of financial interests including key secrecy jurisdictions a few years later, to the current drive to enhance international tax transparency that has gained traction during the financial crisis.
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