Transboundary Taxation: ‘Cinderella’ of International Law Who Dreams to Become a Queen

Abstract

Over the century international law presence in the tax field has been limited by double taxation conventions only. In contrary with international trade regime embracing the GATT and the WTO or with the financial stability regime leaded by the IMF, in the tax sphere there was no multilateral treaty between substantial number of jurisdictions. State tax measures could be challenged only in international courts belonging to the other regimes: trade (WTO DSB), human rights (ECtHR), investment protection (investment tribunals). The case began to change in the wake of the financial crisis 2007–2009: in 2014 the OECD plan on addressing tax base erosion and taxable base shifting was approved (Addressing BEPS). It has been serving as an ‘umbrella’ which covers almost all international tax initiatives. Established by OECD and G-20 Inclusive Framework with the substantial number of participating jurisdictions has become a site not only for elaborating soft law recommendations on the amendment of the national legal orders but also as a body for treaty drafting. The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting has been elaborated and signed in short terms by 100 jurisdictions. The unique international law mechanism of this convention ensured amendment of 2000 double taxation agreements. More than 140 jurisdictions signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters which in fact created a global tax transparency regime. And at last Inclusive Framework on BEPS in 2021 announced that an agreement on the global tax reform was reached. Due to widely promoted digital services this reform changed the century based approach of the taxation of multinational enterprises in the places where they carry on business including permanent establishment. This approach is substituted by taxation of incomes derived from the marketing jurisdiction irrelative to factual presence. These changes as well as introducing the minimum corporate tax rate of 15 % shall be included in the new multilateral convention. All these novels prove a launch of the major reform in the transboundary taxation which will bring it to greater engagement with international law.