The design of a UN multilateral tax cooperation framework

By Dirk Broekhuijsen


At the 77th meeting of the General Assembly of the United Nations, the General Assembly adopted a draft resolution on ‘the promotion of inclusive and effective international tax cooperation at the United Nations’. Most importantly, nations decided to ‘to strengthen the inclusiveness and effectiveness of international tax cooperation through the evaluation of additional options, including the possibility of developing an international tax cooperation framework or instrument that is developed and agreed upon through a United Nations intergovernmental process.’

What could such ‘a tax cooperation framework or instrument’ look like? Here, I aim to explore the outlines of such a framework or instrument.

A managerial framework treaty

In my view, inclusivity and the effectiveness of international cooperation go hand in hand with the development of an international (legally binding) treaty. Indeed, the Assembly’s resolution points at establishing a treaty in which collective action problems of international tax law (e.g., tax arbitrage, tax evasion) are “managed” by means of fair legally binding procedure. It must be distinguished from an instrument that ‘coerces’ states into cooperation and in which some states decide on rules to be implemented by others. Or from an instrument where equal and inclusive cooperation is non-binding or optional.

Such a treaty, which I call a “managerial framework treaty”, enshrines three elements: (i) continuous interaction between participants; (ii) inclusive and equal participation and (iii) the use of legal norms (rather than informal rules or political commitments).

Continuous interaction

In indefinitely iterated forms of cooperation, participants may come to weigh the value of long-term cooperation against short-term payoffs of individual, non-cooperative strategies. Within this tradeoff,[1] states may, in other words, reflect on the benefits of durable cooperation. This may lead to better and deeper cooperative outcomes over time.

International tax law is primarily formed of lasting and interdependent interstate relationships.  Regardless of states’ different interests as regards distributive outcomes, a common interests on cooperating on international tax rules exists. This most predominantly shows in relation to tackling tax avoidance.[2] As a result, international tax law seems well-suited for a procedural framework that ensures continuous cooperation, for instance by having states meet every year and at the same place.

Inclusive and equal participation

It is generally accepted that procedural legitimacy (most importantly: equality and inclusivity in rule making and agenda-setting) enhances participants’ willingness to accept and comply with international law.[3] It means that, from the perspective of cooperation effectiveness, procedural legitimacy must not be ignored.

But there is another argument. States generally come to define successful international agreements by building on concepts that are already “out there”. New norms do not appear out of thin air.[4] States use existing norms, tweak or (slightly) amend them, and use them to reflect new political interests and objectives. Indeed, think about how the Pillar 2 Income Inclusion Rule resembles existing controlled foreign company (CFC) rules. Or how general anti-abuse rules in tax treaties resemble those existing in domestic law systems. Norm development in international (tax) law is, in other words, more related to evolution, than to revolution.

Such evolutionary “processes of norm development” work best in settings where ‘learning’ can take place. As teachers know, learning requires a safe environment, in which students are treated equally and where everyone is included. Likewise, international cooperation requires equal and inclusive discourse, such that knowledge may be gathered and shared, and trust may be built among participants. In this way, problems may be solved by gradually changed norms. And participants may be genuinely persuaded by others rather than coerced.[5]

Legal Norms

But these requirements of procedural legitimacy must not be based on non-binding or political commitment. Instead, it is its binding legal form that matters most. The parliamentary process required to establish legally binding norms conveys important information to other participants about a state’s preferences as regards a norm and about (the reliability of) a state’s level of commitment to that norm. These, in turn, may be scrutinized by others. Moreover, information about a state’s level of commitment may be generalized to a state’s reputation on the international level.[6] Finally, failure to comply with binding rules that apply to it, must be explained.[7] As it is often possible to distinguish good legal argument from bad, it makes legal norms on the international level stronger and more durable than non-binding alternatives.

When tax lawyers think about legally binding international tax rules, they think about material (distributive) tax rules. But the arguments above also hold for procedural legal norms. Clear and fair procedure underlies the legitimacy of international legislative outcomes. Binding rules facilitating inclusive and equal debate, i.e., the process of ‘learning’, may help the cooperative effort.

Cooperation in the long term

So far, the cooperative effort in international tax law has been predominantly technical and of an ad-hoc nature. International cooperation in the international tax field must however be seen in the long term. This requires thinking about the process of international tax cooperation itself, rather than its outcomes. In this respect, the UN draft resolution must be lauded. I am very curious where it leads.


[1] In academic literature, it is called “the shadow of the future”. See R. Axelrod, The Evolution of Cooperation (Basic Books Inc. 1984).

[2] This, in my view, is clearly shown by the widespread adoption of the Principal Purpose Test.

[3] See e.g. I. Mosquera Valderrama, ‘Legitimacy and the Making of International Tax Law: The Challenges of Multilateralism’, 7 (2015) World Tax Journal 344.

[4] E.g. M. Finnemore and K. Sikkink, International Norm Dynamics and Political Change 52 International Organization 887.

[5] E.g. D.W. Downs, K.W. Danish and P.Nl. Barsoom, The Transformational Model of International Regime Design: Triumph of Hope or Experience? 38 (2000) Columbia Journal of Transnational Law 465 and M.P. Cottrell and D.M. Trubek, Law as Problem Solving: Standards, Networks, Experimentation and Deliberation in Global Space 21 (2012) Transnational Law and Contemporary Problems 359.

[6] See e.g. J.L. Goldsmith and E.A. Posner, The Limits of International Law (OUP 2005) p. 91-95.

[7] A. Chayes and A.H. Chayes, The New Sovereignty: Compliance with International Regulatory Agreements (Harvard University Press 1995) p. 116-123.

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