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The Taxation of Small States and the Challenge of Commonality

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Small States in a Legal World

Part of the book series: The World of Small States ((WSS,volume 1))

Abstract

The starting point for this chapter is to consider small states, and issues that might be specific to them, in the context of international tax law. At the moment, international tax law is a remarkably energised subject, with a great deal of discussion focused on initiatives to tackle challenges surrounding multinational corporations, in particular. The topic of this collection presumes a commonality of interests amongst small states; thus, this chapter seeks to investigate whether this commonality extends to international tax law. As the analysis which follows will seek to demonstrate, this topic raises many questions about the nature of transnational consensus, and of transnational law in general.

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Notes

  1. 1.

    Friedlander and Wilkie (2006), p. 909: The origin of modern tax treaties has been traced to nineteenth century ‘“friendship, commerce and navigation” treaties’.

  2. 2.

    Elfman (1995), p. 177: Addressing the topic of vulnerability (the concept of vulnerability is discussed in greater detail in this chapter), and summarising the position of Walt (1987), pp. 21–31, Elfman writes ‘[s]ince weak states are vulnerable to the aggressive demands of great powers, they will ally with a dominant power in order to avoid immediate attack’. Weak is equivalent to ‘small’ in this observation.

  3. 3.

    Avery Jones (2000), p. 3: ‘[t]he more outrageous the provisions of internal law, the better the starting position for negotiating treaties’.

  4. 4.

    Also note Avi-Yonah (2004), p. 483: ‘Is international tax law part of international law? To an international lawyer, the question posed probably seems ridiculous… [but] once one delves into the details, it becomes clear that in some ways international tax law is different…’.

  5. 5.

    McLean (1985); Charles (1997).

  6. 6.

    Avery Jones (2000), p. 3: ‘[t]he disadvantage of the tax treaty route is that it is self-perpetuating. Treaties are a one-way street; they lead only to more treaties’.

  7. 7.

    Genschel and Rixen (2015), p. 155.

  8. 8.

    Ibid.

  9. 9.

    Guttentag (2001), pp. 548–549.

  10. 10.

    Baker (2015), pp. 85–86: Discussing the history of the OECD’s development of the phrase ‘aggressive tax planning’, beginning with 2002; Panay (2016): The introduction of BEPS is described as ‘[a] realignment of taxation and relevant substance was, therefore, required, as international tax standards had not kept pace with changing business models and technological developments’.

  11. 11.

    Guttentag (2001), pp. 549–550: Discussing the modern challenges of bilateral tax treaties; Avery Jones et al. (2006): Considering the history of the OECD Model Treaty, Avery Jones et al. explain that the OECD Model ‘developed out of the League of Nations Models which were strongly influenced by the treaty practice between the mainland European countries. For that reason, a common law reader coming to the OECD Model for the first time might find it full of unfamiliar expressions’. This article presents the results of a survey of several countries, and their connection to terms and expressions found in the OECD Model tax treaty. It concludes that many of these expressions can be traced to those used in civil law European countries just after the First World War.

  12. 12.

    Genschel and Rixen (2015), pp. 157–158.

  13. 13.

    Calliess and Zumbansen (2010), p. 6.

  14. 14.

    Cotterrell (2012), p. 500.

  15. 15.

    Ibid, pp. 500–501.

  16. 16.

    Ibid, p. 501.

  17. 17.

    Kaiser and Starie (2005), p. 2.

  18. 18.

    Half and Soetendorp (1998), pp. 3–4.

  19. 19.

    Avi-Yonah (2003), p. 5, fn. 1.

  20. 20.

    Ibid.

  21. 21.

    Ibid.

  22. 22.

    Cotterrell (2012), p. 507.

  23. 23.

    Cotterrell (2012), p. 507.

  24. 24.

    Calliess and Zumbansen (2010), p. 6 (supra note 13).

  25. 25.

    Ibid.

  26. 26.

    See for example Danielsen (2005). See also, generally, Likosky (2002).

  27. 27.

    Avi-Yonah (2003), p. 32.

  28. 28.

    Baby (2013), p. 268.

  29. 29.

    Ibid.

  30. 30.

    Ibid: What she describes as ‘international financial institutions’.

  31. 31.

    Ibid.

  32. 32.

    Ibid, p. 289.

  33. 33.

    Ibid.

  34. 34.

    Lahey (2015): The concept of detaxation as discussed throughout this chapter is based upon the definition developed by Lahey in this article.

  35. 35.

    Coates (1924). See also Avery Jones (2013): ‘One would have liked to have been able to say that the 1923 Report was the economic foundation for the future of double taxation relief, or even of tax treaties, but that is not the case…’.

  36. 36.

    Vlcek (2008), p. 4 citing Sharman (2005), p. 317.

  37. 37.

    Avi-Yonah (2001), p. 61.

  38. 38.

    Avi-Yonah (2003), p. 11.

  39. 39.

    Ibid.

  40. 40.

    Ibid.

  41. 41.

    Ibid.

  42. 42.

    Robinson (2004).

  43. 43.

    ‘The modern [US] corporation fits awkwardly into a set of tax principles based on economic and political theories that are drawn largely from a simplified picture of a society in which production is organized by small-scale proprietorships and partnerships…’ per Goode (1951) cited in Bank (2010), p. ix; But compare Harris (2013), s 1.1.3 observing that ‘[i]n an increasingly globalized world, countries are now commonly faced with a multitude of corporate laws, and there is much to be learned from the US approach in this regard’.

  44. 44.

    Koh (2005), p. 749.

  45. 45.

    Cornell Cobb (1998), p. 7.

  46. 46.

    Hampton and Christensen (2002), p. 1660.

  47. 47.

    Hampton and Christensen (2002), p. 1660.

  48. 48.

    Ibid, p. 1663 citing Baldacchino (1993).

  49. 49.

    Genschel and Rixen (2015), p. 154.

  50. 50.

    Ibid.

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Authors and Affiliations

  1. Dickson Poon School of Law, King’s College London, London, UK

    Ann Mumford

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  1. Ann Mumford
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Correspondence to Ann Mumford .

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  1. Faculty of Law, Victoria University of Wellington, Wellington, New Zealand

    Petra Butler

  2. School of Law, Queen Mary University of London , London, United Kingdom

    Caroline Morris

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Mumford, A. (2017). The Taxation of Small States and the Challenge of Commonality. In: Butler, P., Morris, C. (eds) Small States in a Legal World. The World of Small States, vol 1. Springer, Cham. https://doi.org/10.1007/978-3-319-39366-7_5

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