Tax Havens and the Transparency Wave of International Tax Legalization, Robert T. Kudrle

ABSTRACT

Tax havens have posed an increasingly important challenge to the world economy, yet they receive little attention in the interna-tional economic law and policy literature. This relative neglect springs largely from taxation’s tangential connection with the ma-jor structures of international economic governance. But a highly developed treaty regime has been in place for decades. The first wave of legalization aimed at relief from double taxation grew from an influential template for bilateral tax treaties promulgated by the League of Nations and the OECD. Developments outside that regime, particularly the growth of tax havens, generated the need for a second wave that began with a 1998 OECD report pro-posing cooperative action to combat both tax avoidance and eva-sion. Since that time, and particularly since the global financial cri-sis, this second transparency wave has developed beyond anyone’s forecast. Although little can be done to prevent the competition-driven erosion of the tax itself, the OECD at the behest of the G-20 is now coordinating efforts to reduce the role of tax havens in cor-porate tax avoidance through greater cooperative action. The U.S., the OECD and the G20 are also jointly fashioning cooperation to decrease tax evasion. These efforts will likely succeed and will reduce the role of the traditional tax haven very substantially