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Cartelizing Taxes: Understanding the OECD’s Campaign against “Harmful Tax Competition”
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2019
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Optimal TaxationInternational EconomicsCorporate TaxLawTax CompetitionAntitrustEconomic InstitutionsTax IncentiveCorporate TaxationPolitical EconomyGlobal Minimum TaxTax PolicyInternational Tax IssuesAntitrust EnforcementInternational TaxationTax LawEconomicsPublic PolicyMinimum TaxationTax AvoidanceFederal Income TaxCartelEconomic PolicyPublic EconomicsCompetition PolicyOecd ’BusinessTaxationInvestment TaxationInternational OrganizationOecd ProjectPolitical ScienceInternational Institutions
The OECD, founded in 1961 to promote global economic and social well‑being, has evolved from addressing double taxation to restricting tax competition and expanding automatic information exchange, framing tax competition as driven by politicians’ and bureaucrats’ incentives rather than a simple prisoner’s dilemma. The paper investigates why the OECD shifted its policy focus toward combating harmful tax competition. After outlining the OECD’s tax history, the authors examine the harmful tax competition project since the 1990s, analyzing its mechanisms from a public‑choice perspective. They conclude that the project exemplifies the interplay between politicians’ and international bureaucrats’ interests, showing how international organizations shape competition among interest groups.
Formed in 1961 to promote global economic and social well-being, the Organisation for Economic Co-operation and Development (OECD) has become the collective voice of rich countries on international tax issues. After an initial focus on improving commerce through addressing double taxation issues, the organization shifted to a focus on restricting tax competition and increasing automatic exchanges of tax information. In this paper we analyze the reasons for this shift in policy focus. After describing the history of the OECD’s work on taxation, we examine the OECD’s project against “harmful tax competition” as it has played out since its launch in the 1990s. We analyze the mechanisms behind the project from a public choice perspective. While typical economic models portray tax competition as a prisoner’s dilemma between governments, a more powerful perspective is of the incentives of politicians and bureaucrats. We conclude that the project against tax competition is an example of the interplay between the interests of politicians and international bureaucrats. The OECD project illustrates the role that international organizations play in competition among interest groups.