China’s challenge to international tax rules by Martin Hearson and Wilson Prichard ICTD (11/2018)
“States are currently struggling to reach global agreement on the taxation of digital firms such as Apple and Google, suggesting that an international regime characterised by impressive coherence over a century may be beginning to fragment. While work on the politics of the international tax regime is still largely preoccupied with the US, a ‘great power’, this fragmentation largely reflects the US’s inability to prevent other countries from acting.
Perhaps the more significant, but largely untold, story in recent years is the disruptive influence of rising powers, especially China. This is a preoccupation of scholarship on other areas of international economic relations, such as trade, the monetary system and development assistance. Literature appears to be settling on a consensus that China is a cautious reformist rather than a supporter of more dramatic change. The international tax regime differs from these areas, however, because it is a cooperation regime characterised by strong incentives for states to find and follow multilateral agreement. In a new paper, we study how China has destabilised the long-held consensus around the Arm’s Length Principle, which underpins OECD-led international agreement on the distribution of multinational companies’ tax bases through transfer pricing…”
