Lammers - The Spirit of International Tax Law

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The spirit of international tax law

From fiscal virtue to mission-oriented moon-shot
Lammers, J.M.
Publication date
2023
Document Version
Final published version
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Lammers, J. M. (2023). The spirit of international tax law: From fiscal virtue to mission-
oriented moon-shot. [Thesis, fully internal, Universiteit van Amsterdam].
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Download date:14 Jun 2023

The Spirit of International Tax Law
Jeroen Lammers
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Copyright © 2023 by Jeroen Lammers. All rights reserved. No part of this thesis may be
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ACADEMISCH PROEFSCHRIFT
ter verkrijging van de graad van doctor

aan de Universiteit van Amsterdam
op gezag van de Rector Magnificus
prof. dr. ir. P.P.C.C. Verbeek
ten overstaan van een door het College voor Promoties ingestelde commissie,
in het openbaar te verdedigen in de Aula der Universiteit
op woensdag 21 juni 2023, te 14.00 uur
door Johannes Martinus Lammers

geboren te Emmen
3
Promotiecommissie
Promotor: prof. dr. S. van Weeghel Universiteit van Amsterdam
Copromotor: prof. dr. A. Christians McGill University
Overige leden: prof. dr. O.C.R. Marres Universiteit van Amsterdam

prof. dr. D.M. Weber Universiteit van Amsterdam
prof. mr. dr. S.C.W. Douma Universiteit van Amsterdam
prof. S. Shay Boston College Law School
dr. C.A.T. Peters Tilburg University
prof. dr. T. Dagan Oxford University
Faculteit der Rechtsgeleerdheid
4
Acknowledgements
I am honoured to present my PhD thesis on the Spirit of International Tax Law. Writing this
thesis has been a challenging and rewarding experience, not in the least because it signifies
an important turning point in both my private and professional life. I would, therefore, like
to express my heartfelt gratitude to those who made it possible for me to complete this
journey.
First and foremost, I am deeply grateful to my promotor and co-promotor, Stef van Weeghel
and Alisson Christians, for their guidance, encouragement, and insightful feedback
throughout the research process. Your support has been invaluable. I have thoroughly
enjoyed our discussions on the subject (and well beyond the subject) and know that they
have made my thesis much better for it.
I am very appreciative of the University of Amsterdam for providing me with the necessary
resources and opportunities to complete my research. I am also deeply thankful to the
Copenhagen Business School, especially to the wonderful faculty and staff at CBS LAW for
welcoming me as a visiting scholar. In particular, I would like to thank Andrej Savin, Thomas
Zamiri Sørensen, Christel Sølvsten, Susie Lund Hansen, and Pernille Brandt for their support.
The generous hospitality of CBS has been instrumental in completing this project.
I would like to express my deepest appreciation to my friends and my colleagues who have
supported me during my academic journey and who have found time to provide many
helpful comments, or at least endured my rambling on about the project. Special thanks go
out to Rogier Werschkull, Talitha Koek, Robert Russell, and Peter Koerver Schmidt. Your
encouragement and insights have been crucial. I am extremely grateful for your help and
guidance.
Finally, I would like to express my gratitude for the constant love, moral support and
understanding of my family throughout the entire project. Without you this achievement
would not have been possible.
I am proud to have been able to contribute to the field of International Tax Law. I hope that
my research will inspire others to continue exploring this fascinating field of study.
5
Abstract

The premise of this study is that there is a fundamental Babylonian confusion surrounding
the concept of the spirit of international tax law. In addition, the study supposes that a
better understanding of the spirit of international tax law is important to design an
international tax system that is fair and just, that is robust enough to keep up better with
the rapidly changing world economy while it also can deal with competing claims of
jurisdictions for a fair share of the tax base.
However, there is a lack of comprehensive research regarding the concept of the spirit of
international tax law. While most appear to assume that the spirit should be equated with
the intention of the legislator or purpose of the law, there are many examples where
(corporate) taxpayers act within object and purpose of positive law but where the end result
still does not sync up with shared expectations in society of what is fair.
This study aims to define the spirit of international tax law, as well as to propose how the
spirit of international tax law can contribute to making the international corporate tax
system more robust. To achieve this, the study takes a multidisciplinary approach. It
analyses the relation of morality to the concept of law as it has been debated in legal
philosophy, and it considers from several perspectives how morality might affect the
interpretation of legal rules. Furthermore, it reflects on how the work of the OECD/G20
Inclusive Framework and the development of political morality regarding international tax
law relate to each other. Lastly, a discourse analysis substantiates the abovementioned
considerations. This discourse analysis consists of (i) an analysis of official publications by
the OECD and EU, (ii) a media analysis of several European newspapers, and (iii) an analysis
of Google Trends data.
This study demonstrates that the concept of the spirit of international tax law takes on
three distinct meanings in the public debate: (i) the intention of the legislator or purpose of
the law, (ii) the changed political morality that has not yet crystalised in positive law, and
(iii) personal moral preferences. These findings can serve to increase awareness regarding
the types of arguments used in the public debate, as well as help to assign a certain
objective weight to these arguments.
The study concludes that, the spirit of international tax law is best considered as the
boundary between law and non-law. This is where new (ideological) legal principles are
being formed concurrent to how political and doctrinal morality is changing, while, at that
6
precise moment in time, these budding legal principles do not quite have enough
institutional support to be considered legally enforceable yet.
Moreover, the study suggests that economic efficiency and tax revenue effects are currently
the dominant policy concerns regarding changes in international tax standards, while
concerns about fairness are routinely placed in the background. This underlying hierarchy of
policy concerns is pervasive in international tax standards designed by the OECD. It is
contended that this underlying hierarchy in policy concerns effectively blocks fundamental
tax reform. Subsequently, it is concluded that a repurposing of the spirit of international tax
law that transforms it from an implicit and abstract notion of fairness and fiscal virtuous
behaviour to a driver of explicit, concrete, and ambitious policy goals of the international tax
system, could lift such a blockade.
7
Samenvatting

Het uitgangspunt van deze studie is dat er een Babylonische spraakverwarring bestaat rond
het concept van de geest van het internationale belastingrecht. Bovendien veronderstelt de
studie dat een beter begrip van de geest van het internationale belastingrecht belangrijk is
om een internationaal belastingstelsel te ontwerpen dat eerlijk en rechtvaardig is, dat
robuust genoeg is om beter gelijke tred te houden met de snel veranderende
wereldeconomie, terwijl het ook kan omgaan met concurrerende claims van rechtsgebieden
voor een eerlijk deel van de belastinggrondslag.
Het ontbreekt echter aan fundamenteel onderzoek naar het concept van de geest van het
internationale belastingrecht. Hoewel velen van mening lijken dat de geest van de wet moet
worden gelijkgesteld met de intentie van de wetgever of het doel van de wet, zijn er veel
voorbeelden van belastingplichtigen die handelen binnen object en doel van positief recht,
terwijl de uitkomst van deze handelingen niet overeenkomt met wat de breed gedeelde
verwachting in de samenleving is van wat een eerlijk en rechtvaardig resultaat zou zijn.
Deze studie heeft tot doel te definiëren wat de geest van het internationale belastingrecht
is, en om voor te stellen op welke manier de geest van het internationale belastingrecht kan
bijdragen aan het robuuster maken van de internationale winstbelasting. Om dit te bereiken
heeft de studie een multidisciplinaire aanpak. De relatie tussen moraliteit en het concept
van het recht wordt geanalyseerd, zoals dat wordt besproken in de rechtsfilosofie. Ook
wordt vanuit verschillende perspectieven beschouwd hoe de interpretatie van rechtsregels
wordt beïnvloed door moraliteit. Voorts wordt nagegaan hoe het werk van het OESO/G20
Inclusive Framework en de ontwikkeling van de politieke moraal zich tot elkaar verhouden.
Ten slotte is een discoursanalyse uitgevoerd om bovenstaande verder te onderbouwen.
Deze discoursanalyse bestaat uit (i) een analyse van officiële publicaties door de OESO en de
EU, (ii) een media-analyse van verschillende Europese kranten en (iii) een analyse van
Google Trends data.
Deze studie toont aan dat in het publieke debat het concept van de geest van het
internationale belastingrecht drie verschillende betekenissen heeft: (i) de intentie van de
wetgever of het doel van de wet, (ii) de veranderde politieke moraal die nog niet is
vastgelegd in positief recht, en (iii) persoonlijke morele voorkeuren. De bevindingen van
deze studie helpen het bewustzijn van alle stakeholders te vergroten met betrekking tot het
soort argumenten dat in het publieke debat wordt gebruikt. Daarbij kunnen de bevindingen
helpen om objectief gewicht toe te kennen aan de gebruikte argumenten.
8
De studie concludeert dat, aan de hand van hoe het vooral in het publieke debat wordt
gebruikt, de geest van het internationale belastingrecht het best kan worden gezien als de
vage grens tussen recht en niet-recht. Dit is waar nieuwe (ideologische) rechtsbeginselen
worden gevormd in lijn met de veranderende politieke en doctrinaire moraal, terwijl juist op
dat moment deze ontluikende rechtsbeginselen nog niet voldoende institutionele steun
genieten om al als juridisch afdwingbaar te worden beschouwd.
De studie suggereert verder dat economische efficiency en effecten op belastinginkomsten

momenteel de dominante beleidsoverwegingen vormen met betrekking tot veranderingen
in internationale belastingnormen. Overwegingen met betrekking tot eerlijkheid worden in
over het algemeen achtergesteld. Deze fundamentele hiërarchie in beleidsoverwegingen is
duidelijk herkenbaar in de internationale belastingnormen die door de OESO zijn
ontworpen. De studie stelt dat deze onderliggende hiërarchie in beleidsoverwegingen
fundamentele belastinghervormingen van het internationale belastingsysteem effectief
blokkeert. Vervolgens wordt geconcludeerd dat een benadering waarbij de geest van het
internationale belastingrecht wordt gezien als de drijvende kracht achter expliciete,
concrete en ambitieuze beleidsdoelen in plaats van een impliciete en abstractie notie van
eerlijkheid en fiscale deugdzaamheid, deze blokkade zou kunnen opheffen.
9
10
Table of Contents
Acknowledgements 5
Abstract 6
Samenvatting 8
1 Introduction 16
1.1 Research Questions 18
1.2 Methodology 19
1.3 Overview of the Study 20
Part I Defining the Spirit of International Tax Law 27
2 Morality in the Concept of Law 28

2.1 Vague Concepts and Philosophy 29
2.2 The Concept of Law 32
2.2.1 Legal Theories in Legal Philosophy 33
2.2.1.1 Natural Law Theories 35
2.2.1.2 Legal Positivism 38
2.2.1.3 Dworkin’s Theory of Law 45
2.3 Intermediate Conclusions 50
3 Perspectives on Morality in Political Philosophy 54

3.1 Utilitarianism 55
3.2 John Rawls’ Theory of Justice 58
3.3 Robert Nozick’s Anarchy, State and Utopia 62
3.4 Closing Remarks 65
4 Morality in Legal Interpretation 66

4.1 The Interpreter’s Moral Values 68
4.1.1 Understanding Moral Language Through Metaethics 72
4.1.1.1 Moral Facts Do Not Exist 73
4.1.1.2 Moral Facts Exist 74
4.1.2 Moral Convictions and the Concept of Law 76
11
4.1.3 Morality in General Principles of Law 77
4.1.3.1 Principles of Tax Law 80
4.1.3.2 Reconciling Competing Legal Principles 82
4.2 Converging Legal Cultures 85
4.2.1 Civil Law and Common Law Cultures 86
4.2.1.1 Different but Similar 87
4.2.1.2 Tax Law Is Statutory Law 93
4.2.1.3 Globalisation and Digitalisation 95
4.3 Legislative Intent and Purpose 98
4.3.1 Intentionalists versus Purposivists 103
4.3.2 The Assumption of Reasonable Intent 105
4.3.3 The Fiction of Remedial Effect 107
4.3.4 A Practical Experiment: Fairness in Parking Regulations 112
5 Morality in International Tax Law 121

5.1 International law 121
5.2 International Tax Law 123
5.3 Sources of International Tax Law 125
5.3.1 International Conventions 126
5.3.2 International Custom 130
5.3.3 General Principles of Law Recognised by Civilised Nations 136
5.3.4 Subsidiary Means for the Determination of Rules of Law 138
5.4 The Holistic Approach 139
5.4.1 International Tax Policy versus National Tax Revenue 147
5.4.2 Should States Consider Justice and Fairness? 152
5.4.2.1 Statist versus Cosmopolitan Viewpoints 153
5.4.2.2 Between Statism and Cosmopolitanism 156
5.4.2.3 Views on How to Distribute Between States 157
5.4.3 Justice for All 160
5.4.4 Mechanisms Blocking Socially Optimal Outcomes 164
5.4.4.1 International Tax Neutrality 166
6 Defining the Spirit of International Tax Law 172
Part II Discourse Analysis 183
7 Introduction 184
8 Analysis of Official OECD and EU Publications 186

8.1 International Exchange of Information 186
8.1.1 OECD Standard Magnetic Format 187
8.1.2 Model Agreement on Exchange of Information on Tax Matters 188
8.1.3 The U.S. Foreign Account Tax Compliance Act 188
8.1.4 Automatic Exchange of Information at OECD 189
12
8.1.5 Automatic Exchange of Information in the EU 192
8.1.5.1 Mutual Assistance Directive 192
8.1.5.2 The EU Savings Directive 193
8.1.5.3 Directives on Administrative Cooperation (DAC1-DAC7) 193
8.2 Harmful Tax Competition 198
8.2.1 The EU Code of Conduct for Business Taxation 203
8.2.1.1 Extending the Code’s Application Beyond the EU 206
8.2.1.2 Reforming the Code of Conduct 207
8.3 OECD/G20 Base Erosion and Profit Shifting Project (BEPS) 209
8.3.1 The OECD/G20 BEPS Action Points 212
8.3.2 The EU Anti-Tax Avoidance Actions 219
8.4 Addressing the Challenges of the Digitalised Economy 227
8.4.1 Addressing Tax Challenges of the Digitalisation of the Economy in the EU 237
9 Media Analysis 248

9.1 Theories on Newsworthiness 248
9.2 Theories on Media Strategies 250
9.3 Overview of Media Coverage of Tax Avoidance 252
9.4 Analysis of Media Coverage of Corporate Tax Avoidance 255
9.4.1 Pre-BEPS (2004-2012) 256
9.4.1.1 Reporting on Government 257
9.4.1.2 Reporting on NGOs 259
9.4.1.3 Reporting on Business 262
9.4.1.4 Concluding Observations on the Pre-BEPS Period 264
9.4.2 Designing BEPS (2013-2015) 266
9.4.2.4 Concluding Observations on the Designing BEPS period 281
9.4.3 Post-BEPS and BEPS 2.0 (2016-2021) 282
9.4.3.4 Concluding Observations on the Post-BEPS and BEPS 2.0 period 299
9.5 Google Trends data 301
9.5.1 Concluding Observations on the Google Trends Data 306
10 Conclusions from the Discourse Analysis 308
Part III Conclusions and Recommendations 315
11 Conclusions and Recommendations 316

11.1 The Spirit of International Tax Law Defined 318
11.2 The Discourse on The Spirit of International Tax Law 319
13
11.3 The Spirit of International Tax Law and Future Tax Reforms 321
11.3.1 Recalibrating the Political Narrative 325
11.3.2 From Inter-Nation Equity to a Mission-Oriented Moon-Shot 325
11.3.3 From Effective Tax Rates to Achieving an Actual Level-Playing Field 329
11.3.4 From Tax Mix to Tax Incidence 330
11.4 In Closing 333
References 336
Appendix - Selected Newspaper Articles per Year 369
14
15
1 Introduction
Over the course of the last 20 years, discussions about how profits of multinational
corporations should be taxed in the international tax system have more and more become
part of the public debate. In this public debate, it is often mentioned that multinational
corporations are not paying their fair share in tax. This is not because they are breaking the
rules but because they are using the rules to game the system.1 This is possible because the
international tax system is made up of separate national tax regimes. Multinational
corporations can use the disparities between these national tax regimes as well as the
differences in the national implementation of international tax standards to eliminate or
reduce their tax burden.2
Multinational corporations typically maintain that they comply with both the letter and the
spirit of all applicable rules and regulations of the countries where they are active.3 This is
likely true, as exploiting such opportunities might not, per se, violate any domestic tax rules.
Even so, from a more holistic point of view, one could argue that such behaviour is still
inconsistent with the objectives of those domestic rules and the underlying international tax
standards.4
Moreover, the international tax debate on whether a fair share has been paid usually is
about two aspects that are closely connected but have different focuses. The first aspect
concerns the question of how much tax is paid. This refers mostly to the comments above,
suggesting that using the gaps between national systems would be contrary to the spirit of
international tax law. This raises questions of whether there is a spirit of international tax
law and whether such a spirit actually imposes any legal obligation on taxpayers or states.
The second aspect concerns the question of where taxes are paid. In fact, it appears that
commentators that claim that multinational corporations do not pay their fair share
1
See for instance, Gelepithis, M., & Hearson, M. (2022). The politics of taxing multinational firms in a digital
age. Journal of European Public Policy, 29(5), 708-727, at p.717; Devereux, et al. (2020). Taxing Profit in a
Global Economy. Oxford University Press, at p. 14; European Commission. (2018b). A Fair Share – Taxation in
the EU for the 21st century. Brochure. Luxembourg: Publications Office of the European Union, 2018, at p. 4.
2
OECD. (2013a). Addressing Base Erosion and Profit Shifting. OECD Publishing, Paris, at p. 5.
3
For examples see Sections 9.4.1.4, 9.4.2.3 and 9.4.3.3.
4
OECD (2013a), at p. 5.
16
typically imply that a fair share has not been paid in a specific jurisdiction.5 This suggests
that, based on fairness, there is a certain amount of tax revenue that any given jurisdiction
is entitled to.6 This raises the question of whether the objectives of domestic rules and the
underlying international tax standards aimed at allocating taxing rights align with the notion
of what a fair share of each eligible jurisdiction should be.7
These two aspects are closely connected. If the tax base is shifted away from country A to
country B through tax avoidance structures, country A would likely claim that the tax base
rightfully belonged to country A. However, when a multinational corporation does not
engage in any form of tax planning or tax avoidance, the global tax base of that company
still needs to be allocated across jurisdictions. In that case, country A might still claim that,
based on fairness, country A’s share should have been greater than what the current
international tax standards allocate in taxing rights to country A.
Because these two aspects are so closely connected, in practice, they tend to bleed into
each other. In the public debate, this tends to happen to a point that they are almost
indistinguishable from each other. This study will attempt to examine both aspects
separately and shed light on if and, if so, to which extent an international holistic view on
tax avoidance behaviour and the allocation of taxing rights exists as well as how this relates
to the concept of the spirit of international tax law.
The overall aim of the study is to contribute to the debate on designing the international tax
system in a way that it is fair and just, so that it is robust enough to keep up better with the
rapidly changing world economy and so that it can deal with competing claims of
jurisdictions for their fair share of the tax base. For this purpose, the study aims to define
what the spirit of international tax law is, examine its development for the past 20 years, as
well as suggest how the spirit of international law can be used more effectively to give the
international tax system more purpose and how this can be helpful in making the entire
system of international tax law better.
Currently, one could argue that the international tax system does not thrive in all of these
aspects just yet. As we can observe from the commentaries of both experts and non-experts
in international tax, the current international tax system has issues dealing with greater
societal and economic developments such as digitalisation, globalisation, and the high
degree of vertical integration of value chains in recent times.
5
See also Section 9.4. References in the public debate to the spirit of the law of fair share are often made in
relation to a national setting rather than in an international view. In general, such references always were
meant in some sort of corrective manner, to express disagreement about taxpayer behaviour that might be
(just) within the confines of the law, but that based on its effect, the taxpayer’s behaviour should be—if not
legally wrong—deemed morally wrong. Also see Hongler, P. (2019). Justice in International Tax Law, A
Normative Review of the International Tax Regime. IBFD, at pp. 16-18.
6
For an opposing view see Brunschot, F. v. (1995). De Wet van de Fiscale Jungle. Weekblad voor Fiscaal Recht,
141, at p. 141.
7
Marres, O. (2012). Eerlijk delen in de fiscale jungle. (Oratiereeks; No. 439). Universiteit van Amsterdam, at p.
45-46; Van Brederode, R. F. (2020). Introduction: Why Ethics Matter in Taxation. In Ethics and Taxation (pp. 1-
19). Springer, Singapore, at p. 12; Valente, P. (2018). International-Spirit of Tax Law and Tax (Non-)
Compliance: Reflections on Form and Substance. European taxation, 58(1), 14-21.
17
Moreover, fixing the international tax system to fit the rapidly changing economic reality,
typically, has involved stacking ingenious technical solutions on top of the already complex
architecture of the international tax system. However, this invariably means that the system
is becoming more and more complex and that the international tax rules are more difficult
to apply for both taxpayers and governments. There are already signs that less advanced
economies lack the domestic capacity to keep up with all the changes.8 Subsequently, this
added complexity often causes new problems, could have unforeseen consequences, or
even create new opportunities to game the system.
The danger of such a recursive cycle of ad-hoc, pin-point repairs to the existing system is
that it slowly but inevitably erodes the principles on which the international corporate
income tax system is built. Given that the tax system fundamentally derives its authority
from these principles,9 the measures that are supposed to fix the international tax system
could — on a more fundamental level — also be putting enormous strain on the entire
international tax system. Moreover, these repairs might not always satisfy the concerns for
how tax revenue is allocated between countries, which could increase the strain on the
system even further. This raises the questions of whether and, if so, to which extent the
international tax system can rely on ever-more intricate, technical solutions, or if continuing
on this path eventually will lead to a system that still is technically sound but does not make
much sense any longer.
Therefore, a better understanding of the spirit of international tax law is important for the
long-term sustainability of the international tax system. Between the bricks of the
international tax system, there needs to be something that is strong enough to hold up the
entire structure while also being flexible enough to withstand the inevitable storms that will
hit it. The spirit of international tax law should bind the whole system together so that
national tax systems can connect seamlessly, and it should give the whole system a purpose
that both ensures and justifies a distribution of the tax base that each jurisdiction would
consider fair and equitable. In doing so, the spirit of international tax law can give the whole
edifice its structural integrity as well as inspire both taxpayers and governments to adhere
to it.
1.1 Research Questions
This study is concerned with exploring the concept of the spirit of international tax law to
better understand its nature. It also means to shed light on how different actors
(colloquially) use the concept of the spirit of international tax law in the public debate on
corporate income tax and corporate tax avoidance as well as how it affects the positions
that they take in the debate. Finally, this study aspires to provide recommendations as to
how the concept of the spirit of international tax law could help to promote improvements
and enhance robustness of the international corporate income tax system.
8
See for example, Cooper, J., et al. (2017). Transfer pricing and developing economies: A Handbook for policy
makers and practitioners. World Bank Publications, at p. 9 on that many developing economies lack effective
transfer pricing regimes, typically due to inappropriate transfer pricing legislation and insufficient
administrative capacity to effectively implement international tax provisions. As a result, these countries might
be losing significant tax revenue due to intentional and unintentional transfer mispricing.
9
Compare section 2.3.
18
The study will therefore address the following research questions:
1. How should the spirit of international tax law be defined?

2. Can the development of the discourse on the spirit of international tax law over the
last 20 years shed light on which specific issues could hinder future reform of the
international tax system?
3. Under which conditions can the spirit of international tax law improve and promote
the robustness of the international tax system?
It is recognised that the concept of the spirit of international tax law is not limited to
corporate income tax or the taxation of cross-border income. However, in terms of
international tax policy discussions, legislative activity and media attention, the primary
focus has been very much on international profit taxation. Additionally, the extent of
international cooperation and the rules regulating the interaction between states and their
national corporate income tax regimes seems much more extensive than what is the case
with other types of taxes such as value added tax or inheritance tax. The scope of the study
is thus limited to international corporate income tax. The findings might, however, also be
relevant for other international tax regimes.
Furthermore, it is acknowledged that the United Nations and, specifically, the United
Nations’ Committee of Experts on International Cooperation in Tax Matters is an important
body in the development of international tax policy and international tax standards as well
as for international tax cooperation.10 However, for the practical reason that the OECD/G20
Inclusive Framework has much rather been the focal point for both (European) legislative
activity and media attention as well as the generally somewhat different focus of the UN Tax
Committee on financing for development, this study will not include the work of the UN Tax
Committee in a comprehensive manner.
1.2 Methodology
Given the aim and research questions of this study, the methodology must go beyond the
formal logical analysis of law.11 As evidenced by the public debate, the issues surrounding
the international tax system go beyond tax technical issues, as they also concern questions
on matters such as fairness, morality, economics, and politics. Moreover, these questions
regarding the complex societal problems of the international tax system are — at least in
part — the result of new technologies. This combination of factors makes international tax
law very suitable for an interdisciplinary approach.12
10
See for further information on the work of the United Nations Committee of Experts on International
Cooperation in Tax Matters, United Nations, UN Tax Committee. Retrieved from
https://www.un.org/development/desa/financing/what-we-do/ECOSOC/tax-committee/tax-committee-home.
11
Compare Hongler (2019), at p. 23; Peters, C. A. T. (2013). The faltering legitimacy of international law.
Tilburg: CentER. Center for Economic Research, at p. 20.
12
National Academy of Sciences, et al. (2005). Facilitating Interdisciplinary Research. Washington, DC: The
National Academies Press, at p. 40.
19
Certainly, elements of legal dogmatic research such as the concept of law, its legal principles
and its interpretive techniques are of great importance to understand the spirit of
international tax law. Particularly, Part I of this study will focus on several of these elements,
and, therefore, the legal dogmatic research methods will primarily feature in this part of the
study.
However, a dogmatic analysis on how the law must be applied in certain cases will not
suffice. The reason for this is succinctly incapsulated in the following quote: “We are not
accusing you of being illegal; we are accusing you of being immoral.”13 Accordingly, a purely
dogmatic approach would not give the needed insight into why different opinions exist on
how international tax law ought to be applied or how such different opinions can support an
interpretation that could be contrary to what the law says (or appears to say). Nor would it
sufficiently highlight the role that arguments on principles of morality, fairness, justice, and
legitimacy play in the development of these legal rules.
This study shows that these arguments have had a significant impact on the development of
international tax standards in, particularly, the OECD/G20 Base Erosion and Profit Shifting
(BEPS) Project. An assessment on how morality and justice are to be viewed in relation to
legal rules, therefore, form an inherent and integral part of this study.
Moreover, given how international tax standards and rules are made, this study also covers
considerations relating to politics, economics, public finance, and public opinion and take
into account how these play a major role in the debate on the international tax system for
profit taxation. As a result, reference to (political) philosophy is made to understand moral
theory and, thus, appreciate the different manners in which the debate on international tax
law can be framed. Moreover, Part II of the study consists of a discourse analysis to
understand how the discussion on corporate tax avoidance has developed following the
perspectives of various actors in this regard. Subsequently, it is considered how this
development might have impacted the concept of the spirit of international tax law.
The following section gives a brief overview of the main structure of the book, and discusses
the aim of the different approaches as they are applied in each of the chapters.
1.3 Overview of the Study
Following the structure of the research questions, this study consists of three parts. Part I
examines whether the spirit of international tax law exists and how it should be defined.
Part II consists of a discourse analysis of official publications of the OECD and the EU and a
media analysis of the public debate on the international tax system and corporate tax
avoidance. Finally, Part III aims to give conclusions and recommendations based on the
findings in Part I and Part II.
13
Quote by Margaret Hodge, Chair of the Committee on Public Accounts in Committee of Public Accounts
Committee (2012), Nineteenth Report, HM Revenue and Customs: Annual Report and Accounts, Minutes of
Evidence, 12 November 2012. Retrieved from
https://publications.parliament.uk/pa/cm201213/cmselect/cmpubacc/716/121112.htm.
20
Against this background, chapter 2 discusses the concept of law and particularly where the
boundary between law and non-law may lie. Firstly, the chapter focuses on how philosophy
in general considers vague concepts and then goes on to examine several views in legal
philosophy on natural law theories, legal positivism and Dworkin’s theory of law as well as
these theories’ relation to morality. The goal with this chapter is to discover whether
morality is generally considered to be a part of the concept of law or not. This is relevant,
because if morality is not part of law, the assumption is that it should not be able to trigger
legal rights and obligations. It is argued that, in each branch of legal philosophy, there is
evidence of a strong connection between law and morality, but that does not mean that
every moral consideration is automatically a legal one.
Chapter 3 gives a brief overview of several perspectives on morality in political philosophy in

order to discuss where normative ideas on justice and fairness come from and why they are
widely held to be valid. The chapter does not aim to be exhaustive but rather to give several
normative reference points to differentiate the basics of moral thinking, which appear in a
number of seminal works. In particular, the difference between the approaches of
protecting the rights of individuals versus safeguarding collective interests is highlighted. In
the following chapters of this study, these reference points are applied to illustrate how
moral considerations can be applied differently depending on whether they concern a
national situation or issues on an international level. Additionally, the reference points are
used to help to better understand some of the fundamental design choices of the
OECD/G20 BEPS Project.
In chapter 4, it is discussed how morality is part of the interpretation of law. The chapter
particularly focuses on identifying and examining factors that might influence the outcome
of an interpretation from one interpreter to the next. This chapter aims to identify factors
that could be helpful in distinguishing moral convictions that are generally considered to be
part of law from moral convictions that should be deemed to be personal preferences. The
chapter starts out by examining if moral arguments can be objectively true. It discusses
views on where moral language originates from based on insights from the field of
metaethics. Moreover, it considers how moral considerations are part of legal principles,
how competing legal principles can be reconciled, and whether a distinction between
structural legal principles and ideological legal principles could aid in separating legal moral
considerations from personally held preferences. Furthermore, even though legal culture is
important with regard to different manners of interpretation of law in general, several
arguments are considered as to why such differences appear to have less of an impact with
regard to the interpretation of international tax law. Finally, the importance of the intention
of the legislator and the purpose of the law are considered. Following a comparison of the
Canadian Interpretation Act to other Interpretation Acts across different commonwealth
countries, it is considered that there is a risk that intentionalist or purposivist
interpretations are influenced by personal moral preferences. Moreover, it is argued that
these approaches to interpretation do not fully take into account the development of
political morality in law, in particular, with regard to situations where the legislator might
not have expressed an intention or where the purpose of the law did not include a certain
situation. The latter, for example, could be due to the legislator not expressly considering
such a specific situation, or it could be due to certain technologies that did not exist at the
time of the law’s enactment. Subsequently, it is proposed that introducing a fiction of
21
remedial effect could be helpful in separating out personally held moral convictions in the
interpretation of (international tax) law as well as a way to ensure a more just and fair
interpretation that would likely reflect a greater measure of institutional support.
In chapter 5, the focus of the study shifts from more general considerations on the spirit of
the law to considerations on the spirit of international tax law in particular. The aim of this
chapter is to investigate the role that morality plays in international tax law. The chapter
demonstrates that international law is a legal system in its own right, and that international
tax law is a part of this legal system. The different recognised sources of international tax
law are considered in relation to the development of international tax law. In particular, it is
examined how the ongoing work of the OECD/G20 Inclusive Framework might directly or
indirectly impact these sources. Furthermore, it is examined what this could mean for how
international tax standards are to be understood. Generally, scholars agree that the
agreements of international organisations are not part of the recognised sources of
international law. This study confirms this viewpoint in principle. However, the study also
finds that the impact that the ongoing work has on the development of political and
doctrinal morality, as well as new (domestic) legislation has grown enormously. This means
that the question of whether the OECD work is, in and of itself, a source of international tax
law almost becomes a moot point. More so, considering the fact that over the last years the
EU has shown that it not only transposes OECD/G20 Inclusive Framework agreements into
EU directives relatively quickly, but it also already uses much of the OECD/G20
argumentation in official EU communications leading up to the formal adoption of such
directive proposals.
The chapter also discusses how several scholars argue that international tax law takes a
much more holistic view as a result of the OECD/G20 BEPS Project. This holistic view, which
is in part based on considerations of fairness, materialises through the concept of full
taxation. This study argues that considerations of fairness and morality that lead to a holistic
view in international tax law focus primarily on correcting taxpayer behaviour. A similar
holistic view in international tax law does not encompass questions of sharing national tax
revenues or the allocation taxing rights. Several reasons for this difference between
international tax policy and national tax revenue considerations are explored, and the
section argues that the generally held importance of tax neutrality and its connected self-
evidently held truths about the effects of the international tax system on cross-border trade
could be a very important reason as to why a more holistic approach with regard to the
allocation of taxing rights and sharing of tax revenue has been so difficult to achieve in
designing international tax policy.
Chapter 6 concludes Part I and considers based on the findings in the previous chapters,
that the concept of the spirit of international tax law revolves around the question of where
the boundary between legal norms and non-legal norms lies. The definition of the spirit of
international tax law can thus be viewed in two ways. The first way of viewing it is by
defining the spirit of international tax law based on the concept of law as it exists as a fixed
quantity, while the other way of viewing it is by defining the spirit of international tax law
based on the concept of law as a continuously evolving discourse.
22
The main difference between the two approaches is that the first approach – contrary to the
second approach – does not fully consider that (the concept of) law is subject to continuous
change. This also means that the first approach does not fully consider that the boundary
between legal and non-legal norms can move over time. This dynamic attribute of law in
general and the spirit of international tax law in particular is usually left rather implicit in the
debate on the international tax system. In this study, however, it is argued that this dynamic
attribute is central to how the spirit of international tax law is used colloquially in the
debate on international tax law. It refers to the fuzzy boundary between law and non-law,
which is where new (ideological) legal principles are being formed concurrent to how
political and doctrinal morality is changing, while, at that precise moment in time, these
budding legal principles do not quite have enough institutional support to be considered
legally enforceable yet.
Part II builds on the conclusions in chapter 6 by analysing the public discourse on corporate
tax avoidance. Its aim is to assess how the different actors position themselves in the
debate on the international tax system and how they utilise the concept of the spirit of
international tax law and/or its constituent parts in the debate to argue for necessary
changes to the international tax system. In doing so, it identifies areas of the debate that
could form important bottle necks with regard to a future reform of the international tax
system.
Discourse analysis is a methodological framework that allows for a multitude of ways to

conduct a study. The chosen method in this study is aimed at analysing the form, structure,
content and reception of the discourse. It does not challenge legal dogmatics in the search
for correct interpretations of law but looks to explain how cultural and social values are
reflected in the perception of law and its interpretation with regard to the issue of
corporate tax avoidance.14 In short, it assesses the underlying ideologies present in
discourse. The aim of applying discourse analysis in this study, therefore, is to ascertain the
changes over time in political and doctrinal morality with regard to corporate tax avoidance
as well as to better understand the dynamic that drives changes in political and doctrinal
morality. Consequently, a good understanding of this dynamic should serve to better
understand the meaning of the international tax standards that are central to the
international corporate income tax system as well as to provide for an understanding of
how important these tax standards are perceived in relation to each other.
To achieve this, a longitudinal analysis over a period of almost 20 years has been conducted.
The analysis is conducted in three parts: (i) a comprehensive analysis of official publications
by the OECD and EU, (ii) an analysis of several European newspapers with regard to how the
subject of corporate tax avoidance has been reported on, and (iii) an analysis of Google
Trends data to gage how political discourse and media discourse has been received by the
general public.
Chapter 7 is a short introductory chapter bridging Part I and Part II, and chapter 8 covers the
analysis of official OECD and EU publications. For practical reasons, the analysis has been
14
Niemi-Kiesiläinen, et al. (2007). Legal Texts as Discourses. In Exploiting the Limits of Law. Swedish Feminism
and the Challenge to Pessimism (M. Davies, Å. Gunnarsson & E.M. Svensson (eds.)). 69-88, at p. 84.
23
linked to four major developments in international tax policymaking that are also briefly
described in chapter 6. These developments show that states are progressively putting more
weight on the collective interests of the global community when designing national and
international tax policies as well as international tax standards. These developments
concern (i) international exchanges of information, (ii) harmful tax competition, (iii) the Base
Erosion and Profit Shifting Project, and (iv) addressing tax challenges concerning the
digitalisation of the economy. Across all four developments, the analysis covers documents
that were published between 1977 and early 2022. The analysis suggests an overall
hierarchy in policy concerns that were instrumental in the argumentation throughout these
official publications. The analysis indicates that the different policy concerns concerning
inter-taxpayer equity and inter-nation equity have received an increasing amount of
attention over time. However, policy concerns regarding national tax revenue receipts and
economic efficiency concerns consistently appear to be the most prominent. This means
that, overall, the hierarchy of policy concerns can be observed to be fairly stable throughout
the entire examined period. Additionally, the analysis suggests that there has been a general
development and increased use of a shared taxonomy and terminology over the examined
period. The tone of voice in EU publications, however, is typically more outspoken than in
OECD publications.
The media analysis in chapter 9 covers more than 9,400 newspaper articles that were
published between 2004 and 2021 in six different newspapers in three different countries:
the Netherlands, the UK and Germany.15 These countries were selected, as they have been
prominent actors in and subjects of the international tax debate. For instance, the
Netherlands is often referred to as a major hub for foreign investors and, as a consequence,
as an enabler of corporate tax avoidance. The UK is often shown in the media as a country
that, on the one hand, is leading the fight against tax avoidance but, on the other hand, is
aggressively competing for foreign investments with other countries. Finally, Germany has
been a strong driving force behind the adoption of EU legislation aimed at preventing
corporate tax avoidance as well as the OECD BEPS Project.16
The media analysis includes a quantitative analysis of the prominence of the subject of tax
avoidance in general as well as an overview of the number of articles dealing specifically
with international corporate tax avoidance per year in each separate media outlet.
Moreover, a qualitative analysis of the content of the newspaper articles on international
corporate tax avoidance has been conducted, which highlights how the perspectives of
different stakeholders (such as government, business community and NGOs) are portrayed,
how each of the stakeholders discusses the subject of the spirit of (international) tax law
and how these relate to each other as well as how both the argumentation and the tone of
voice has developed over the examined period.
Finally, the findings from the media analysis are cross-referenced with Google Trends data
on search interests with regard to topics relating to corporate tax avoidance in the
examined countries. The aim of this exercise is to find empirical evidence as to which extent
15
The Guardian https://www.theguardian.com/; Financial Times https://www.ft.com/; Telegraaf
https://www.telegraaf.nl/; de Volkskrant https://www.volkskrant.nl/; Financieele Dagblad https://fd.nl/; and
Frankfurter Allgemeine Zeitung https://www.faz.net/aktuell/.
16
See examples throughout section 9.4, and, in particular, in sections 9.4.1.3, 9.4.2.3 and 9.4.3.3.
24
the international political discourse on corporate tax avoidance has lined up with the
development of the political morality in the examined countries. The Google Trends data
are not conclusive, but there are some interesting trends that would suggest that there are
differences in the national political discourses, which could point to the fact that generally
specific national political discussions could generate more search interest than overarching
international political developments.
For practical reasons, it was elected not to include a comprehensive discourse analysis,
media analysis or a Google Trends data analysis of non-EU countries such as the U.S.
Instead, it is suggested that this could be interesting for further research. Where relevant,
this section does include references to several newspaper articles from other countries—in
particular the U.S. — as well as references to other studies that have a primary focus on the
U.S. These references are indicative of similar patterns in the U.S as compared to the results
of the media analysis and Google Trends data analysis in this study.
Chapter 10 brings the insights from the discourse analysis together and reflects on whether
there are signs of a discourse within the discourse. To this aim, the chapter considers that
the discourse analysis demonstrates that the position of the OECD as the international body
that sets the international tax standards has been growing over the years. The public
opinion and changing political morality with regard to corporate tax avoidance has, in this
respect, helped to further cement this position. More importantly, this stronger position has
led to an almost global dissemination of the international tax standards and their underlying
argumentation, as they have been developed by the OECD. The positive side of this
development is that this promotes a more consistent application of international tax rules
across borders. However, this development also implies that the international tax standards’
underlying hierarchy of policy concerns is, equally, widely exported. This means, on the one
hand, that the traditional discourse in international taxation that endorses a more statist
position is more or less imposed on (and endorsed by) countries that might benefit from a
more cosmopolitan view on global revenue sharing. On the other hand, this means that the
likelihood of fundamental international tax reform will reduce further as opposed to further
incremental changes to the existing architecture of the international tax system. The
margins for developing countries to secure a significantly larger share of the global
corporate tax revenue are thereby also diminished further.
Finally, Part III brings the insights from Part I and Part II together to formulate conclusions
and recommendations on how the concept of the spirit of international tax law can improve
the internal cohesion of the international tax system for profit taxation. It is hereby
considered how the spirit of international tax law can promote future development of tax
policy and the application of international tax standards in a way that can reduce the lock-in
effect that is described in chapter 10. The chapter argues that this could be possible by
reconsidering the political narrative with regard to the policy concerns driving changes to
the international tax system with regard to corporate tax avoidance.
The assertion is that a recalibration of the political narrative could achieve a mission-
oriented long-term view on international tax policymaking that explicitly connects the
allocation of taxing rights to the aim of building a stronger sustainable tax base in less
advanced economies. Such a mission-oriented strategy could harness the self-interests of
25
countries to incentivise levels of cooperation aimed at helping the economies of developing
countries to catch up with more advanced economies. By carefully tilting the playing field
towards a common purpose and concrete policy goals, both advanced economies and
developing countries could share in the risk and reward of a fairer tax system in the long
run. Moreover, by explicitly imbuing the international tax system with an international spirit
aimed at a purpose that promotes and furthers the collective interests of all countries
involved, it is possible to pull the discussion on the spirit of international tax law out of the
relatively vague realm of what is the most widely accepted political morality, and makes it
clear that behaviour (by both states and taxpayers) that defeats this purpose is in conflict
with the (spirit of the) international tax system.
26
Part I
Defining the Spirit of International

Tax Law
27
2 Morality in the Concept of Law
In order to lay the foundation to come to a definition of the spirit of international tax law at
the end of Part I of this study, this section will consider several perspectives with regard to
the concept of the spirit of the law from a general perspective and not limited to
international tax law.
The laws, given by the legislator, ought to be relative to the principle of

government. As these laws should instil a love of the republic; [which is] a
sensation, and not a consequence of acquired knowledge; a sensation that may be
felt by the meanest as well as by the highest person in the state. When the
common people adopt good maxims, they adhere to them steadier than those we
call gentlemen. […] The love of our country is conducive to a purity of morals, and
the latter is again conducive to the former. 17
The core part of the following analysis of legal philosophy discusses the relationship
between law and morality with the aim of answering the question of whether morality is a
part of the concept of law. Before considering this question in detail, the study looks to
philosophy to determine a frame of reference in order to understand and discuss the
boundaries of vague concepts in general. The reason is that, besides law, there are also
other normative systems that use rules and norms to control human behaviour, such as
social norms or ethics.18 In practice, it is difficult to draw an exact line of where law ends,
and these other normative systems begin. Because the precise boundary of the concept of
law is not clear, law can be considered as a representation of a sorites paradox or as a vague
concept.19 For the purpose of this study, the boundary between law and not-law is
particularly relevant. For, if morality is not a part of the concept of law, it should not be able
to trigger legal rights and obligations.
17
Baron de Montesquieu, C.L.S. (1748). The Complete Works, vol. 1 The Spirit of Laws, 4 vols. (London: T.
Evans, 1777), at p. 73-74.
18
See for more on other normative systems than legal systems, Bicchieri, C. (2005). The grammar of society:
The nature and dynamics of social norms. Cambridge University Press.
19
See Section 2.1.
28
2.1 Vague Concepts and Philosophy
This section will consider a class of paradoxical arguments known as the sorites paradox, or
the little-by-little arguments. The aim of this is to branch out the subject matter and
establish a philosophical framework by which to define the boundaries of a concept that
lacks clear boundaries.
The sorites paradox gets its name from the Greek word for heap (σωρός). The paradox
assumes that if you have 10.000 grains of sand, most people would consider this a heap, and
if one grain was taken away, most people would still consider this a heap. However, as more
grains are being taken away, one grain at a time, the question arises: at which point will the
collection of grain no longer be considered a heap? The sorites paradox concludes that, if
10.000 grains are considered a heap, one grain must also be considered a heap.20
The sorites paradox comes in many forms. A man without any hairs on his head is
considered bald. However, if he has just one hair on his head, he still is considered bald. So,
at what point is he no longer considered bald? If he has 10, 100 or 100.000 hairs? The point
is that concepts such as a heap, baldness, tallness, age, etc. lack sharp boundaries, and, as
such, these concepts are comparable to the concept of law. The inherent vagueness of
these concepts leads to the paradox that, from obviously true premises and uncontroversial
reasoning, follows a conclusion that clearly is false.
In the case of the concept of law, where does law end and not-law begin? Is this only the
literal meaning of black letter law? Or does law include the intention of the legislator? And if
so, at which point do these considerations become so far removed from the literal meaning
that they can no longer be considered part of law? What about the moral principles that
apply in general, but which never were part of the legislator’s considerations? The question
that arises is if it is possible to clearly define a concept that is inherently vague, or, if a
concept cannot clearly be delineated due to its inherent vagueness, how can it still be
discussed in a manner that avoids the fallacy that the sorites paradox presents? This is
relevant because, the ultimate outcome of the paradox is that simultaneously anything as
well as nothing could be considered part of law. This clearly would be an untenable
outcome, as the concept would become impossible to define and discuss.
There are at least three conditions that need to be met to form a sorites paradox:
(i) There must be a gradual scale.
(ii) The values on the gradual scale must only be gradually different.
(iii) The predicate must be true for the first value on the gradual scale and false for the
last.21
For the purpose of this study, it will be presumed — based on the considerations above —
that the concept of law fulfils these three conditions.
20
Hyde, D. (2008). Vagueness, Logic and Ontology (Ashgate New Critical Thinking in Philosophy). Ashgate
Publishing Group, at p. 8; Sorensen, R. (2001) Vagueness and contradiction. Clarendon Press, at p. 1-5; Hyde,
D., & Raffman, D. (2018) Sorites Paradox. In The Stanford Encyclopedia of Philosophy (Summer 2018 Edition) (E.
Zalta (ed.)). Retrieved from https://plato.stanford.edu/archives/sum2018/entries/sorites-paradox/.
21
Hyde & Raffman (2018), at para. 3.
29
This raises the question how one may reconcile the paradox. According to Hyde and
Raffman, there are, by and large, four ways to deal with sorites paradoxes: (i) deny that the
paradox exists, (ii) reject the major premise of the paradox, (iii) deny that the major premise
of the paradox is valid, and (iv) embrace the paradox. These four approaches are briefly
discussed below.
(i) There is no paradox

This approach is part of the ideal language doctrine. This doctrine relies on language
precision. Vague terms are simply to be deleted. They are a defect to language and
have no place in it. As vague terms do not exist, logic can have no influence on them.
In current philosophical thinking, this approach is not very popular.22 Modern
philosophy considers that vague expressions in everyday language are inevitable.
Therefore, denying the paradox is not a satisfactory response.
(ii) There is no vagueness

Vague terms do have sharp boundaries. We just do not know where they are, as the
data points needed to determine them are infinite.23 This means that the boundaries
will remain concealed, but that does not mean that they are not there. Vague terms,
therefore, are not vague at all. The problem, however, is that this epistemic
approach is difficult to apply in practice.
(iii) There is no boundary

The semantic approach accepts that vagueness is an inherent part of language,
which only concerns a certain range of (borderline) cases that exist around the
blurred boundaries of a vague term. For many of these borderline cases, the
meaning of the vague term is still clear. However, the closer one comes to the
border, it becomes harder to determine whether a proposition regarding a vague
term is true or false. For those situations ‘on the border’, it is accepted that they can
be both true and false at the same time. Within the semantic approach, some accept
three-value-truth (true, false, and indefinite), 24 while others recognize an infinite
number of degrees of truth (also referred to as infinite-valued or fuzzy logic).25 Some
have suggested that vague terms are, in fact, boundaryless,26 while others have
proposed a multi-range theory, where one would get a number of ranges of values
of what different persons consider to be true or false. One could say this could lead
to a wisdom-of-crowds-type of outcome. The multi-range approach provides a
number of ranges (or values) that are helpful to determine whether the application
of a vague term is to be considered mostly true or mostly false.
To illustrate, in an empirical study of individuals’ perception and the multi-range
22
Hyde (2008), at p. 37.
23
Williamson, T. (1995). Definiteness and knowability. The Southern journal of philosophy, 33(Supplement),
171-191, at p. 184-186; Williamson, T., & Simons, P. (1992). Vagueness and ignorance. Proceedings of the
Aristotelian Society, Supplementary Volumes, 66, 145-177, at p. 177.
24
Tye, M. (1994). Sorites paradoxes and the semantics of vagueness. Philosophical perspectives, 8, 189-206, at
p. 194.
25
Smith, N. (2008). Vagueness and Degrees of Truth. Oxford University Press, at p. 10; Hyde (2008), at p. 197.
26
Sainsbury, R. M. (1990). Concepts without boundaries. Inaugural lecture published by the King’s College
London Department of Philosophy. Reprinted, at p. 11.
30
approach,27 respondents were shown an object which hue was changed from red to
orange in a number of sequential steps. The respondents were asked to determine
when the object was red and when it was orange. The result was—as one might
expect—that there was no clear cut-off point that demarcated the colour change.
However, the experiment yielded more. In colour series from clear red to clear
orange, there might be a range that is ambiguously red or orange, which also means
that there should be a last unambiguously red colour (or a first unambiguously
orange colour).28 However, the experiment also did not reveal a clear cut-off point
for the last non-ambiguously red shade. Thus, the experiment yielded a number of
(partly) overlapping ranges for unambiguously true, ambiguously true and borderline
cases.
(iv) The paradox is not a paradox

Even though the sorites paradox as such is unsolvable, another option is to simply
accept that the conditional reasoning in the sorites paradox is sound.29 However,
then the question is rather whether a vague term can still hold any meaning. This
seems problematic, as a sorites paradox can both have both a positive and a
negative version. This means that, by accepting the validity of the argument, one
ends up with a situation where all values are true and false at the same time. This
clearly is an untenable position, as it would mean that vague terms apply to anything
as well as nothing at once.
Therefore, it is logically impossible to embrace the negative and positive versions of

the sorites paradox simultaneously. Also, it is problematic to embrace only the
positive version, as that would mean that a vague term always applies to everything.
For, any number of grains (even zero) would then make a heap, etc.. Conversely,
commentators have suggested that embracing only the negative version does not
lead to major logical trouble.30 One can safely accept that there is no heap, or that
baldness or tall people do not exist. Through this line of reasoning, it can be avoided
to resort to either just deleting the vague term all together (as under 1.) or having to
accept that there are no boundaries to the vague term (as under 3.). The ultimate
effect of partially embracing the paradox, though, is that vague terms apply to
nothing. So, it is questionable if this approach is really of any practical use.
The four approaches to the paradox show that there is no easy answer to defining a concept
that has no clear boundaries. Also, they make it clear that the described philosophical
‘coping mechanisms’ all have in common that the boundaries of vague concepts still lack a
clear definition. Both the denying as well as the embracing of the paradox present us with
the problem that these approaches really offer no solution at all.
The first leaves one with the problem that vague language and vague terms simply exist and
that denying this fact simply is not very helpful. The latter leads to the conclusion that vague
terms apply to anything and nothing at the same time, which, thus, makes them
27
Égré, P. (2009). Soritical series and Fisher series. In Reduction: Between the mind and the brain, 12. 91-115.
28
Égré (2009), at p. 107.
29
Hyde & Raffman (2018), at para. 3.4.
30
Unger, P. (1979). There are no ordinary things. Synthese, 117-154, at p. 145.
31
meaningless.
Looking at the international tax debate, neither of these approaches seem to be a relevant
part of the discourse. For instance, no one simply appears to deny the existence of the
concept of the spirit of the law or to suggest that the term should be deleted from the
debate. It is, however, of note that the vague term the spirit of the law, as such, does not
appear in any of the official OECD publications.31 This could be indicative of the fact that the
OECD consciously is avoiding the use of vague terms to limit the problems accompanying
the fallacy. In that sense, the OECD may not exactly deny the existence of the vague term
but is actively attempting to keep vagueness out of the discourse.32
Comparably, no one in the international tax debate argues that the spirit of the law is a
concept that simultaneously can apply as well as not apply to every action of taxpayers.
Such a quantum-mechanical view of the world would effectively render the discussion
meaningless. Rather, in the debate, the concept of the spirit of the law is often used to
describe situations in which taxpayers exploit opportunities that arise because national tax
systems do not perfectly connect. While this might not, per se, violate any legal tax rules
directly, from a more holistic point of view one could argue that such behaviour is
inconsistent with the objectives of these domestic tax systems and the underlying
international tax standards.33 Accordingly, this implies that one should be able to determine
rather precisely that a proposition is either true or false. In practice, however, one can
observe that commentators can agree on parts that clearly are within the scope of the law
or clearly are in violation of the law. However, they do not seem to be able to agree on the
precise point where (the spirit of the) law ends and where not-law begins.
The second and third approaches appear to be more helpful to answer the question of
where the boundaries of a vague term can be located. However, by rejecting the major
premise of the paradox, one is left with the unsatisfactory result of knowing that there is a
clear cut-off point, but that this is (and will remain) hidden from us. Denying that the major
premise of the paradox is valid, at first glance, seems to lead to a somewhat less obscured
view of where the boundaries of a vague concept are. However, even though, this approach
seems to be the most concrete in zooming in on where the boundaries lie, this approach
also yields the result that a certain proposition still can be true and false simultaneously, or,
that there is a range of positions for which the statement that a proposition is either true or
false can overlap to a certain degree.
2.2 The Concept of Law
To connect the philosophical approaches regarding vague terms and how these approaches
are relevant to defining the spirit of international tax law, it is necessary to look to the field
of the philosophy of law. At the heart of defining the spirit of international tax law lies the
31
See the discourse analysis of official OECD publications throughout chapter 8.
32
Also see section 8.5. on that the European Commission is much less reluctant in using vague terms in their
official publications.
33
OECD (2013a), at p. 5.
32
question of what law precisely is and where its authority comes from. This question has
been highly debated by legal philosophers.
Firstly, it is important to make further clarifications: namely, the difference between the law
and law and how these terms are used in this study. The difference between the law and
law is also pointed out in Dworkin’s seminal work Law’s Empire (1986). The distinction is
made between (i) empirical and (ii) theoretical disagreements about the law. The first deals
with propositions of law, i.e. what the law of some system permits or requires people to
do.34 Dworkin states that an empirical disagreement about what the law says is not very
mysterious. This is about when people disagree about what the words are in the statute
books and/or when they disagree about a matter of fact.35
The theoretical disagreement is much more fundamental. It deals with the question of what
should be considered part of the system of rules that we call ‘law’ and what should not. The
theoretical disagreement is a disagreement on the law’s grounds. This means that people
disagree about what law really is, even if they agree upon the statutes that have been
enacted and what legal officials have said and thought about these statutes in the past.36
Therefore, the theoretical disagreement is about what law is as opposed to what the law
means. Further on in this dissertation, it is also emphasized what the meaning of the legal
statutes is and what the intention behind those statutes might have been, but the sections
about legal philosophy below rather mean to zoom in expressly on the question of what law
is. The purpose of this is to better understand the concept of law and its exact dimensions
as well as to examine whether the spirit of the law could fit somewhere within these
dimensions.
2.2.1 Legal Theories in Legal Philosophy
This section focuses on how the concept of law has been discussed in recent legal
philosophical literature. The aim is to determine whether there is an intersection of the
reasoning behind the different legal theories and if such an intersection could be helpful in
finding the cut-off point between law and non-law—or, at least, if this insight can limit the
range of values in which this cut-off point supposedly lies as much as possible.
There are roughly three categories into which the topics of legal philosophy fall: (i) analytic
jurisprudence, (ii) normative jurisprudence, and (iii) critical theories of law.37 Here, the focus
is on the category of analytical jurisprudence, as this is the most relevant category for the
purpose of this book, while this category of legal philosophy concerns itself with providing
an analysis of the essence of law. This also means that it attempts to find out what
separates law from not-law.
34
Hart, H. L. A. (2012). The Concept of Law (J. Raz & P. A. Bulloch, eds.; 3rd ed.). Oxford University Press, at p.
247.
35
Dworkin, R. (1986). Law's Empire. Harvard University Press, at p. 5.
36
Dworkin (1986), at p. 5.
37
See for instance Kelsen, H. (1941). Pure Theory of Law and Analytical Jurisprudence, Harvard Law Review
55(1), 44-70, at p. 44.
33
The basic idea is that only a rule that is legally valid can be a legal rule, and that only a valid
law can be law, while invalid laws are not-law.38 It is important to note that this does not
mean that there cannot be other normative systems. For instance, ethics is a system of
norms. Such a system is just not a legal system, and its rules are not law.
Within analytical jurisprudence, one can find divisions between different conceptual
theories of law. A traditional way of dividing these theories is by examining whether they
either confirm or deny that there is a connection between law and morality. Below, three
conceptual theories of law—natural law theories, legal positivism, and Dworkin’s theory of
law—are very briefly characterised by their stance towards morality. These conceptual
theories of law will then be further examined in how they can be helpful in ultimately
defining the spirit of international tax law.
(i) Natural law theories

The term natural law refers to both a type of moral theory and a type of legal
theory.39 Natural law moral theory points to a system of law that is derived from
values that are intrinsic to human beings. The moral values are always present and
knowable, and these rules apply even if they have not been formally laid down in any
law.
In contrast, natural law legal theory suggests that the grounds of the law, the
authority of the laws, and the legal standards in place lie in the moral merits of those
rules. For instance, Thomas Aquinas focused on the overlap between natural law
moral and legal theories and suggested that “the laws that govern human action are
expressive of reason itself.”40 In extremis, natural law legal theories claim that only
morality is relevant to determine if a (legal) rule is to be considered law. In general,
though, natural law theories contend that, when a legal rule can be interpreted in
different ways, the morally superior explanation is the accurate statement of law.41
In natural law theories, the grounds of law thus lie in morality—it is where law
derives its authority from.
(ii) Legal positivism

Legal Positivism came up as a reaction to natural law theories. Legal positivism holds
that law is made - it is posited - by the legislator or judiciary, and not derived from
some ‘outside’ source such as morality. Legal positivism, effectively, accepts the law
as it is. As long as formal criteria for the enactment of law are followed, norms are to
be considered law. It does not imply any ethical justification for the content of the
rule, nor does it require such a justification. The grounds of law therefore lie in the
act of enacting the law and the formal procedures and safeguards that surround that
38
See for instance, Raz, J. (1979). The Authority of Law, Essays on Law and Morality. Oxford University Press;
Kelsen (1941), at pp. 50-54; and Raz, J. (1972). Legal Principles and the Limits of Law. The Yale Law Journal,
81(5), 823-854, at p. 824.
39
Soper, P. (1983). Legal theory and the problem of definition. The University of Chicago Law Review Vol. 50
(3), 1170-1200, at p. 1173; Murphy, M. (2019). The Natural Law Tradition in Ethics. The Stanford Encyclopedia
of Philosophy (Summer 2019 Edition). E. Zalta (ed.), at para. 1.
40
Aquinas, T. (1981). Summa Theologiae, translated by Fathers of the English Dominican Province,
1948. Reprint, Westminster, Christian Classics, Maryland, at Q90.1, p. 3657.
41
34
process.42
(iii) Dworkin’s Theory of Law

As legal positivism is a response to natural law theories, Dworkin’s theory of law is a
response to legal positivism. Dworkin argues that legal validity of rules does not only
stem from social facts, such as the procedures of enacting legislation, but that the
courts (also) decide on cases by invoking moral principles. Dworkin states that, even
though these moral principles are instrumental in determining what law is, they do
not derive their legal authority from the social criteria that are contained in what
Hart calls ‘a rule of recognition’.43 Therefore, Dworkin states that not all that is law
flows from agreed upon legal rules and procedures, and, even if that is the case, that
law does not (only) derive its authority from these procedures but also from legal
principles that provide the best moral justification to show the law in its best light.44
Dworkin coins this search for and application of principles (by the courts) interpretive
constructivism. Building on these principles also makes Dworkin’s approach more
focused on the legal rights and obligations that flow from legal rules and their
validity. In addition, it makes it possible for law to have a certain temporal
relativity,45 as the interpretive aspect helps law retain its authority even if the legal
paradigms might change over time. All this puts Dworkin’s third theory of law in
terms of its stance towards morality somewhere in between natural law theories and
legal positivism.
2.2.1.1 Natural Law Theories
The classical view on naturalism, as it was promoted by, for instance, Thomas Aquinas is
that there are four types of law: (i) eternal law, (ii) divine law, (iii) natural law and (iv)
human law.46 Eternal law makes up all the scientific rules that determine our physical
universe, so essentially the rules that govern physics and mathematics. Divine law can be
defined by the set of standards that a human being has to fulfil to be welcomed in the
afterlife and in order to escape having to face eternal damnation. Human law points to the
set of rules that have been enacted by men. Finally, natural law consists of the intrinsic
moral values of human beings.
However, there is an overlap between natural law and human law, as the classical view on
the intrinsic moral values of human beings is that good and evil are objective values and
those values are absolute and apply the same everywhere. This means that there is a set of
rules that is made by men and a set of rules that is universal, which is also active at the same
time. These sets of rules might be at odds with each other on specific issues. The question
which then arises is which rule will prevail. In natural law theories, the answer is that a
human law can only be legally valid if the human law does not go against these intrinsic and
universal moral values of good and evil.
42
Kelsen, H., & Trevino, A. J. (2017). General theory of law & state. Routledge, at p. 114.
43
Dworkin, R. (2013). Taking Rights Seriously. A&C Black, at p. 38 et seq.
44
45
Dworkin (1986), at p. 104.
46
Aquinas (1981), at L.91.C1, p. 3665.
35
A tyrannical law, through not being according to reason, is not a law, absolutely
speaking, but rather a perversion of law; and yet in so far as it is something in the
nature of a law, it aims at the citizens' being good. For all it has in the nature of a law
consists in its being an ordinance made by a superior to his subjects, and aims at being
obeyed by them, which is to make them good, not simply, but with respect to that
particular government.47
Accordingly, in order for a human law to have any legal authority, it has to overlap with the
morality that governs all humans. This means effectively that legal rules cannot conflict with
natural law. Therefore, the authority of human laws directly stems from natural law.48
This does not mean that natural law theory puts any limitation on the laws that man can
make. Laws just need to be in line with morality to be valid law. This means that there is also
plenty of room for legal rules that solve legal problems, whereas morality might not play
such a big role. Legal rules can, for instance, also play a role in organising society in a more
hygienic sense, e.g., rules that entail choices to make sure the society can function without
problems. For instance, rules on what can be used as valid payment methods, or rules on
whether to use the metric or the imperial system, or rules on which colours the traffic lights
should be. The idea is that morality is important in determining which rules that are valid
law, and not that morality prescribes which laws there can be.
More contemporary legal philosophers, such as John Finnis and Lon L. Fuller, take a different
view to natural law than the one described above. Finnis, for instance, believes that the
classical naturalists were not really trying to determine the legal validity of enacted rules.
They were rather trying to explain where the moral force of the law comes from and how
states are able to enforce rules:
[T]he principles of natural law explain the obligatory force (in the fullest sense of
‘obligation’) of positive laws, even when those laws cannot be deduced from those
principles. And attention to these principles […] justifies regarding certain positive
laws as radically defective, precisely as laws, for want of conformity to these
principles.49
According to Finnis, it is also false to assume that positive law is just a copy—or a
codification—of natural law.50 He contends that unjust laws are still valid law but that these
unjust laws cannot be justifiably enforced by a state. He points to the fact that law has both
a directive as well as a coercive function and that particularly the coercive force of law must
be rooted in justice rather than only in effectiveness.51 In other words, unjust laws can be
legally valid and thus legally binding but still not be law in the fullest sense of the word. They
are not fully law, while they—based on the principles of natural law—fail to provide the
moral reason for a state to enact and enforce these laws.52 A state, therefore, needs to
47
Aquinas (1981), at L.92.C2, pp. 3683-3684.
48
Blackstone, W. (1979). Commentaries on the Law of England. The University of Chicago Press, at p. 41-42.
49
Finnis, J. (2011a). Natural law and natural rights. Oxford University Press, at p. 23-24.
50
Finnis (2011a), at p. 28.
51
Finnis (2011a), at p. 260.
52
Finnis (2011a), at p. 352.
36
show why it is justified to enact and enforce a certain rule for it to be backed up by the
moral force of law. Thus, the moral test does not lie in the legal validity of the rule but in the
justification for and, thus, the ability of a state to enforce that rule.
Lon L. Fuller’s view is also different from classical natural law theory. He contends that law
must adhere to a form of procedural morality. Like Finnis, Fuller agrees that the content of a
valid legal standard does not always have to conform with morality.53 However, Fuller goes
another way to determine what a valid legal standard is. He argues that the law is a
functional system that is meant to “subject human conduct to the governance of rules.”54
The purpose of a legal system is to safeguard social order by enacting rules that guide
human behaviour. Consequently, Fuller sees law as the means to achieve an end. He argues
that the law should always be remedial, and, as a result, he views law not as something that
is but as something that you do. Accordingly, law is the action of law making that is aimed at
guiding human behaviour, and a legal system is thus the product of that activity.55
Therefore, he argues that the act of making law should be subject to certain principles of
legality, which are explained below.
According to Fuller, eight minimal conditions have to be met.56 These conditions are meant
to act as principles to promote efficiency and effectiveness as well as to act as principles
that reflect moral ideals of fairness. As a result, satisfying all conditions would constitute an
inner morality to law that imposes a minimal degree of fairness and promotes the rule of
law. Also, if these principles are adhered to, the end product will not only be a legal system
that is made up of valid legal rules, but this legal system will have a moral standard of
respect, fairness and predictability that is built in and thus integral to that system.
The principles of legality are as follows:

1. Rules must apply broadly; they have to be expressed in general terms.
2. Rules must be known; they have to be published.
3. Rules must affect only future behaviour; they have to be prospective.
4. Rules must be understandable; they have to be in terms that are clear and
intelligible.
5. Rules must make up a consistent legal system; they may not be contradictory.
6. Rules must be possible to obey; they have to regard a subject’s own actions only.
7. Rules must be relatively constant; people need to be able to rely upon them.
8. Rules must be administered in a way that is in line with their apparent meaning; they
have to make sense.
Fuller contends that these principles of legality constitute the conditions for the existence
for law. If any one of these conditions is not met, a body of rules cannot be a legal system,
53
Perelman, C. (1965). The morality of law. By Lon L. Fuller. (New Haven: Yale university press, 1964. Pp. VIII,
202. $5.00). American Journal of Jurisprudence, 10(1), 242–245, at p. 242.
54
Fuller, L. L. (1969). The Morality of Law (Revised Edition). New Haven and London: Yale University Press, at p.
74.
55
Fuller (1969), at p. 146.
56
Fuller (1969), at pp. 38-39.
37
and its individual rules are thus not law.57 Additionally, as Fuller considers these (moral)
principles as conditions for the existence of law, it is apparent that he confirms that there is
a conceptual relation between law and morality. But, contrary to other natural law
theorists, Fuller does not consider the content of law to be constrained by morality. Rather,
he places moral constraints on the procedural mechanisms on how law is enacted and
enforced. Therefore, Fuller’s principles do not look at the morality of the law from an
external perspective but work effectively as internal safeguards to ensure the morality of
the end product.58
2.2.1.2 Legal Positivism
In principle, legal positivists deny that there is a conceptual relation between law and
morality. The grounds of law lie in the act of enacting the law as well as the formal
procedures and safeguards that surround that process. This means that the authority of the
law stems from the procedures and safeguards that make up the process of enacting the
law. In that sense, one might argue that there is an overlap with Fuller’s principles of
legality. However, there is one major difference in the legal positivist view and that of Fuller.
Fuller’s principles of legality are fixed and are not just procedural requirements, but they are
also expressions of moral ideals of fairness. For a legal positivist, the procedure of law
making is not a predetermined set of rules, and these rules do not represent some
preconceived moral standard. Instead, what we consider law is the result of social facts, that
are based on social convention. These notions of law therefore have no overlap with
morality. In the legal positivists’ view, a legal rule is a valid law if that law has been made in
accordance with the agreed upon rules on how to make laws, regardless of its content.59 Or,
in other words, a legal system is a collection of rules that is also built on rules.
Hart’s Rule of Recognition

Before the 18th century throughout western Europe, a sovereign was something external to
society and was set above it. The sovereign made the law.60 Law was not something
fundamental and eternal, but it was the will of the state: the command of the reigning
sovereign. For, the sovereign might reign under God but certainly not under the rule of law.
This idea that the will of the sovereign was the source of law stems from Byzantine times.61
Additionally, according to Hobbes, “the legislator is he, not by whose authority the laws
57
Fuller (1969), at p. 39.
58
See Fuller (1969), at p. 153. Fuller nuances this point by stating: “In presenting my analysis of the law's
internal morality I have insisted that it is, over a wide range of issues, indifferent toward the substantive aims
of law and is ready to serve a variety of such aims with equal efficacy […] But a recognition that the internal
morality of law may support and give efficacy to a wide variety of substantive aims should not mislead us into
believing that any substantive aim may be adopted without compromise of legality.” There are, therefore, still
external moral forces that might challenge the morality of law even if the principles of legality are abided by.
59
For a contrary view see Green, L. (2008). Positivism and the Inseparability of Law and Morals. NYUL Rev., 83,
1035.
60
Pound, R. (1921). The Spirit of the Common Law. Transaction Publishers, at p. 78.
61
Pound (1921), at p. 65.
38
were first made, but by whose authority they now continue to be laws.”62 This means that
the legal validity of laws is dependent on the sovereign’s will, and that there are no limits to
their law-making power.
Hart, however, contends that it is not the sovereign that makes the rules, but the rules that
make the sovereign.63 The sovereign derives their powers from the law. Hart argues that the
sovereign is not the source of (all) law. According to Hart, this cannot be the case, as that
would mean that the existence of a sovereign is a prerequisite for the existence of law—
quod non. There would have been law, even if there were no sovereign.64
Following this reasoning, if the sovereign is not the source of all law, there must be some
kind of rule that grants the sovereign the power and authority to make laws. And by
extension, a rule that also puts legal restrictions on the sovereign’s power to legislate. Hart
thus concludes that “[t]he legal validity of a rule is therefore dependent on whether or not
the legislator, the sovereign, was qualified to legislate based on an existing rule.”65 The limits
of the power of the sovereign, therefore, do not come from some external force, such as
God or natural law. Existing rules within the legal system itself limit the power of the
sovereign. Hart calls this the rule of recognition.
According to Hart, there are two minimum conditions for the existence of a legal system:66
(i) Its rules of behaviour, which are valid according to the system’s ultimate criteria of
validity, must be generally obeyed; and
(ii) its rule of recognition specifying the criteria for legal validity must be effectively
accepted as a common public standard for official behaviour by its officials.67
The first point makes it clear that the rules in place have to be part of some kind of social
convention. In general, people must subscribe to the rules in place and must be willing to
follow these. Hart argues that even though people can follow the rules for any kind of
reason, in a healthy society, it will be customary that these rules are accepted as a common
standard of behaviour and, possibly, they will be accepted as objectively making sense.68
Regarding the second point, Hart argues that “the situation that a social group habitually
obey the orders backed by threats of the sovereign, who themselves habitually obey no-one,
does not make for a legal system.”69 Accordingly, there is also a need for a rule that
62
Hobbes, T., et al. (1651). Leviathan, or, The matter, forme, & power of a common-wealth ecclesiasticall and
civill. London: Printed [by William Wilson] for Andrew Crooke, at the Green Dragon in St. Paul's Church-yard, at
p. 164; Hart (2012), at p. 63.
63
Shapiro, S. (2009). 9. What Is the Rule of Recognition (And Does It Exist)?. In The Rule of Recognition and the
U.S. Constitution, (M. Adler & K. Himma (eds)). Oxford University Press, at p. 1.
64
Hart (2012), at p. 68.
65
Hart (2012), at p. 70.
66
Hart (2012), at pp. 115-116.
67
With the term officials Hart means all types of law-applying government agents, including judges. The rule of
recognition therefore binds all officials.
68
Hart (2012), at p. 116; Green (2008), at pp. 1047-1054.
69
Hart (2012), at p. 100. In the endnotes (pp. 291-292) Hart explains that the rule of recognition is – in part –
based on Kelsen’s conception of a basic norm, and Salmond’s conception of ultimate legal principles. See
Kelsen & Trevino (2017), at p. 113 et seq.; and Salmond, J. W., & In Williams, G. (1957). Salmond on
jurisprudence (11th edition). London: Sweet & Maxwell, at para. 41.
39
determines which rules that are binding. A rule about rules that allows normative questions
of what law is, to be resolved without having to engage in deliberation, negotiation, or
persuasion.70 These rules are first and foremost to be observed by the public officials, as
they proceed in making rules that people in general must observe. The rule of recognition,
therefore, is the concept that, in essence, means that every legal system must contain rules
constituting its foundation.71
The most important distinction between a regular legal rule and a rule of recognition is that
the rule of recognition is an ultimate rule. Its existence is secured simply due to an
accustomed acceptance of it being a common public standard of official behaviour set by
public officials. In contrast, none of the other rules in a legal system are ultimate. In fact,
they only exist by the virtue of the rule of recognition. As such, the rule of recognition
validates but is not itself validated.72
Hart recognises that law has an open texture and that there will be disagreement on what
the law says, or even what the law is. The legislator cannot be expected to foresee any and
every (future) action. Therefore, legal rules often have an open character. Moreover, the
legislator is not infallible. Disputing legal rules must have a central part in a healthy legal
system. Therefore, there is need for the discretion of courts and other officials when
clarifying initially vague standards, resolving uncertainties of statutes, or developing and
qualifying rules. In doing so, courts will have to strike a balance between competing
interests of stakeholders that will vary in weight on a case-by-case basis.
This also means that the courts sometimes have to make new rules. According to Hart, the
courts should be well equipped to deal with this and, under the rule of recognition, have the
power and authority to either make new rules or explain the legislator’s intention behind
the existing rule. These rule-making powers of the courts are also included in the rule of
recognition, as it is the exercise of delegated rule-making powers. 73 In common law
systems, however, courts are typically hesitant to claim such a rule-producing function. They
rather point to the fact that their efforts to clarify vague standards as well as in developing
and qualifying rules are, in reality, a search for the intention of the legislator of the rule that
already exists.74 This approach seems somewhat forced, as the legislator might not have
expressed an intention with the rule, since the legislator might not have had one concerning
the specific situation or was not even aware that a specific situation might arise.
The point that courts have delegated rule-making powers under the rule of recognition also
raises a different question. There might be a dispute over a particular legal rule, that which
Dworkin calls an empirical disagreement about the law.75 However, there might also be a
theoretical disagreement about the law. The former would be a dispute about the meaning
of a regular legal rule, while the latter would be a dispute about the rule of recognition. The
70
Shapiro (2009), at p. 3.
71
72
73
Hart (2012), at p. 134.
74
Hart (2012), at p. 135.
75
40
question then is whether the courts’ delegated rule-making powers also extend to the
latter.
Hart suggests that it does, and thus that the courts can also answer questions on the rule of
recognition. He states that, at first sight, it might seem paradoxical that courts have the
authority to both create rules and decide on which rules that are valid law and which that
are not. Hart argues that the paradox is solved by realising that the fact that “every rule
might be doubted at some point, does not mean that every rule is open to doubt on all
points.”76 He appears to argue that, in practice, the question of whether a rule is to be
recognised as valid law is not a binary one, and that the uncertainty on what is to be
designated valid law or not-law takes place only on the fringes of the fundamental rules,
which specify the criteria of legal validity.77 Ultimately, this means that the courts have the
inherent power to rule on these questions as well.
As this part of the study tries to define the spirit of international tax law, the problems that
take place on the fringes of the rules are, by their nature, the fundamental issue, and one
could argue that Hart takes a bit of a shortcut here. However, his argument underlines the
points made earlier regarding the sorites paradox. The outside boundaries of vague
concepts are very difficult to define. In fact, Hart appears to take the multi-range approach
with regard to the vagueness of the boundaries of where the law ends and the non-law
begins. He recognises that, on the fringes, the rule of recognition determining whether a
rule is valid law simultaneously can be either true or false, or mostly-true or mostly-false,
which means that there is no clear cut-off point. Rather, Hart ultimately leaves it up to the
courts to decide based on their “prestige gathered […] from their unquestionably rule-
governed operations over the vast, central areas of the law.”78
One rule to rule them all

Shapiro makes a compelling argument that the rule of recognition as Hart views it, in fact,
does not exist.79 He argues that, while everyone agrees that there are second order rules in
place on which legal systems rest, one can have a problem with the idea that Hart proposes
that there is one unitary rule that does everything: It defines the content of the legal
system, imposes duties, confers powers and solves disagreements about its content.80
This might be worsened by the fact that Hart only explains what the rule of recognition is
and never elaborates on how such a rule should look or how it is exactly supposed to
function. It is unclear from Hart’s account whether it is one single normative rule or whether
it is meant as a test of legality.81 According to Shapiro, the latter does not fit in Hart’s own
framework, which says that a legal system can only consist of power-conferring or duty-
imposing rules.82 However, the option of a single normative rule runs into several
objections:
76
Hart (2012), at p. 152.
77
Hart (2012), at p. 152.
78
Hart (2012), at p. 154.
79
Shapiro (2009), at pp. 32-33.
80
81
82
41
Firstly, Hart’s rule of recognition might not specify all legal rules that belong to a legal
system, while, at the same time, it might also specify legal rules that do not belong to that
system. According to commentators, such as Finnis,83 present day legal systems are
inherently too complex, too interconnected and have too many legislative actors to all be
captured in one unitary rule. To prevent both overkill and underkill, one would need
multiple rules of recognition for each legal system.
Secondly, Hart’s rule of recognition states that officials (only) have to follow the accepted
law-making procedures. Critics, such as Dworkin,84 state that this is too indefinite and
vague. There should not only be an observable social fact, but it should also be clear that
this social fact should be based on a normative rule. For, only normative rules are able to
actually impose duties on these officials to follow.
Thirdly, in Hart’s view, the rule of recognition derives its content from a consensus between
the legislator and the judiciary. As pointed out above, it appears paradoxical to assume that
the courts can answer the question of whether something is recognised as law or not based
on their vast experience with the law. Shapiro points out that there can be disagreement on
criteria of legal validity solely based on how one interprets the law, for instance, by applying
a static or dynamic interpretation. It follows from Hart’s view that if the courts cannot agree
on a correct way for interpretation, then there is no correct way. Thus, Shapiro argues that
Hart’s approach is tantamount to “political chicanery, confused thinking or both.”85
Shapiro’s suggestion to overcome these objections is, in essence, to see the rule of
recognition not so much as one unitary rule but as a shared plan for the governance of a
legal system.86 This suggestion seems to be supported by others. For example, Raz states:
There is no reason to suppose that the rule of recognition refers to all the criteria of
validity of a legal system, and it is clearly wrong to think that it determines them all.
[…] [T]here is no reason to suppose that every legal system has just one rule of
recognition. It may have more. [T]here may be two or more rules of recognition that
provide methods of resolving conflicts. […] It is the fact that a set of laws of
recognition are maintained by the practice of the same law-applying organs that
indicates that they are all part of one legal system.87
According to Shapiro, this shared plan should regulate collective activities by guiding and
organising the shared activity of officials. It should include rules to settle questions on
political morality by determining the goals and values of that system and the principles that
underpin it. It should allocate power and authority to safeguard trust, and it should delegate
responsibilities to bodies, such as courts, to fill in and clarify the (system’s) shared plan over
time.
83
Finnis (2011b), at p. 430.
84
Dworkin (1986), at pp. 34-35.
85
86
Shapiro (2009), at p. 18
87
Raz (1979), at pp. 95-96.
42
One might argue that Shapiro’s and Raz’ views might not be so radically different from
Hart’s view. They could be regarded as a clarification of how we should look at the concept
of a rule of recognition. It stands to reason that very complex legal systems, such as those
that exist today, might not lend themselves very well to one single rule to determine what is
law and what is not. This clarification takes little away from the idea behind the concept that
a legal system consists of primary rules (that govern the behaviour of people) and secondary
rules (that prescribe the governance of the legal system), and that legal positivists see these
secondary rules as the basis for legal validity.
For the purpose of this study, it is sufficient to conclude here that the general view amongst
legal positivists is that these secondary rules exist and that they are there to govern the
legal system. Shapiro’s interpretation as to what these secondary rules should govern could
consequently be very interesting in terms of how the concept of the spirit of the law might
be defined. For, if there can be secondary rules that describe the values, goals and
underpinning principles of a legal system, these secondary rules could also be helpful to
guide interpretive methodologies and give some indication as to what moral considerations
that are part of the legal system, even if legal positivists are loathed to think that legal
systems could be constrained by such considerations.
Morality and legal positivism

The previous paragraph raises the question of if, and if so to which degree, moral
considerations can constitute a secondary rule. A strict legal positivist would argue that legal
systems are possible without any moral restraints. Accordingly, outside the formally
adopted legal statutes, there can be no rules of recognition, moral or otherwise. However,
there are also inclusive or soft legal positivists that consider that legal systems can have
moral restraints.88 This leads to different approaches to morality within legal positivism:89
(i) One can consider that a legal system must rest on a sense of moral obligation, as it
cannot exclusively rest on mere power of man over man. However, this does not
mean that nothing can be acknowledged as legally obligatory unless it is accepted as
morally obligatory.
(ii) The law of every modern state shows the influence of both socially accepted
morality and widely developed ideas of morality. These influences enter the legal
system by way of the legislator or the judicial process. This connection between law
and morality helps to ensure the stability of legal systems. Morality, however, does
not supersede it.90
(iii) The interpretation of legal statutes is often guided by an assumption that the
purpose of the rules is a reasonable one, so that the rules are not intended to
promote injustice or meant to offend settled moral principles. Judicial decisions
especially involve weighing out different moral values in an effort to do justice
88
See for instance, Soper, P. (1996). Searching for Positivism, Michigan Law Review. Vol. 94 (6). 1739-1757, at
p. 1743; Green (2008), at p. 1055; Gardner, J. (2001). Legal Positivism: 5 1/2 Myths. Am. J. Juris., 46, 199, at p.
204; Mitrophanous, E. (1997). Soft positivism. Oxford J. Legal Stud., 17, 621, at p. 612 et seq.; and Raz, J.
(1984). Hart on moral rights and legal duties. Oxford Journal of Legal Studies, 4(1), 123-131, at p. 129.
89
Hart (2012), at pp. 202-211.
90
Also see in this regard, Pound, R. (1945) Law and Morals - Jurisprudence and Ethics, 23 North Carolina Law
Review, 185, at p. 187-188; and Gardner (2001), at p. 223.
43
between competing interests. It is very unlikely that, in cases where the meaning of
law is in doubt, morality always has a clear answer to offer. Judiciaries consider
these principles as part of a legal argument to arrive at an informed and impartial
decision.91
(iv) One could consider that a moral decision does not have to apply or obey grossly
unfair or morally reprehensible rules, even though these have been enacted in a
valid legal manner. Therefore, one could argue that there can be room for a society’s
rule of recognition to incorporate moral constraints on the content of law. However,
this cannot mean that rules that are thought morally offensive can be simply
removed from law, as this would lead to arbitrary results. The major problem with
such a society’s rule of recognition, therefore, lies in defining its boundaries of when
it can be applied.92
According to Mitrophanous, these considerations can, in essence, mean two things: that
soft positivists believe that the existence of law can depend on moral criteria or that the
existence and content of the law can be determined by the morality in the law. The
difference is explained as that the former might demand that the rule of recognition is in
line with principles of morality, while the latter also demands that the content of the
primary rules are in line with the principles of morality.93
Mitrophanous rejects both soft positivistic approaches based on four arguments:94

(i) They are inconsistent with the function of law to identify the legal standards of the
system with certainty.
(ii) They cannot clearly differentiate between complete and incomplete law.
(iii) The incorporation of morality cannot be contained.
(iv) Morality is not a social rule in the positivist sense.
Interestingly, all the arguments presented appear to home in on one specific aspect, namely
the vague boundary between which morality considerations that are to be considered law
and which morality considerations that are to be considered not-law.
It appears, as such, that because morals on the law side of the boundary are too hard to
differentiate from morality concerns on the non-law side, Mitrophanous favours the option
of completely rejecting soft positivism and excluding morality altogether from the concept
of law. One might wonder whether this is more of an argument of practicality than of
principle. The question is then if there is a way to “offer a reasoned basis for distinguishing
the morality which can safely be incorporated into law and which cannot.”95 Such a
reasoned basis may alleviate the objections of strict positivists to the point where morality
considerations would be an acceptable part of the concept of law. In this regard, Gardner
expresses a very clear view:
91
Also see Section 4.3.2.
92
Also see Section 4.1.1.
93
Mitrophanous (1997), at p. 627.
94
Mitrophanous (1997), at pp. 627, 629, 637 and 639.
95
Mitrophanous (1997), at p. 641.
44
Apparently legal positivists believe [that] there is no necessary connection between law
and morality. This thesis is absurd and no legal philosopher of note has ever endorsed it
as it stands. After all, there is a necessary connection between law and morality if law
and morality are necessarily alike in any way. And of course they are. If nothing else,
they are necessarily alike in both necessarily comprising some valid norms. But there are
many other necessary connections between law and morality on top of this rather
insubstantial one, and legal positivists have often taken great pains to assert them.
Hobbes, Bentham, Austin, Kelsen, Hart, Raz, and Coleman all rely on at least some more
substantial necessary connections between law and morality in explaining various
aspects of the nature of law (although they do not all rely on the same ones).96
2.2.1.3 Dworkin’s Theory of Law
As legal positivism is a reaction to natural law, Dworkin’s theory of law is similarly a reaction
to legal positivism. For, Dworkin does not accept that everything that should be recognised
as law can be found by looking at the rule(s) of recognition. Dworkin believes that courts
should have an interpretive approach to law. He observes that judges often look to moral
principles in deciding cases. In fact, this appears to happen particularly in difficult cases
pertaining to theoretical disagreement on what law is. Moreover, he observes that the legal
authority of those principles, on which judges (partly) base their decisions, does not come
from the already present secondary rules in the law.97 However, since judges do – and,
arguably, are also supposed to – consider moral principles in their decisions, these principles
do not follow from a rule of recognition, and they cannot be characterised as one.98 As
Dworkin put it:
[W]e cannot adapt Hart’s version of positivism by modifying his rule of recognition to
embrace principles. No test of pedigree, relating principles to acts of legislation, can be
formulated, nor can his concept of customary law, itself an exception to the first tenet
of positivism, be made to serve without abandoning that tenet altogether. […] If no
rule of recognition can provide a test for identifying principles, why not say that
principles are ultimate [rules], and form the rule of recognition of our law? […] This
solution has the attraction of paradox, but of course it is an unconditional surrender. If
we simply designate our rule of recognition by the phrase ‘the complete set of
principles in force’, we achieve only the tautology that law is law.99
Dworkin, therefore, argues that there is law that does not fall under the rule of recognition.
Based on this argument, he concludes that not all law derives its authority from these
secondary rules. This particularly pertains to the importance of legal principles. Dworkin
believes that the legal authority of such principles comes from the contribution of the
principle to arrive at the best moral justification for a society’s legal practice as a whole. This
is the case if the legal principle can meet two conditions: (i) the principle is consistent with
existing legal standards, and (ii) applying the principle leads to the morally best solution.
96
Gardner (2001), at p. 223.
97
98
99
Dworkin (2013), at pp. 61-62.
45
Raz argues that Dworkin’s point that courts rely on so-called “sourceless considerations”
does not necessarily contradict legal positivism.100 Raz goes on that Dworkin is right to draw
attention to possible gaps between law and judicial jurisdiction, as, if courts can make legal
arguments without these being based in law, this needs further examining. Simply put, it is
one thing to say that not all law comes from the rule of recognition, but it is quite another
to then answer the next question: if not from there, then where does law come from?
Interpretive constructivism
An important part of the Hart’s argument is that the true grounds of law lie in the
acceptance of it by the community as a whole. For, when deciding on the meaning of the
law, if a proposition of law is true or false, one should look at social conventions that
represent a broad acceptance of that rule.101 It is difficult to imagine that this idea of social
acceptance is meant in a static sense – that this social acceptance only has to exist in the
moment of the law being created – as social conventions and social norms change
continuously. So, of course, the law has to be accepted as such at the moment that it was
created, but then what happens later? By stating that social convention and acceptance are
important to recognise what law is, one invites the idea that this should always hold true,
even as social norms continue to evolve.
In this regard, Dworkin says that one might argue that “[a]ll members of a society assess
their willingness in both the maintaining of and participating in that social convention. One
would not just look at whether they agreed with the convention in the first instance, but
rather assess their agreement every day.”102 He, therefore, clearly finds that law must be
accepted as such on a continuous basis, that its justification lies therein. According to
Dworkin, a workable theory of law must take this into account. Therefore, Dworkin views it
as a constructive interpretive exercise:
General theories of law […] are constructive interpretations: they try to show legal
practice as a whole in its best light, to achieve equilibrium between legal practice as
they find it and the best justification of that practice. So no firm line divides
jurisprudence from adjudication or any other aspect of legal practice.103
This means that when there is a theoretical disagreement on what law is, this disagreement
has to be solved through interpretive means.104 The question then is what do courts and
lawyers base their interpretations on? Dworkin explains that, if one looks to how legal
culture develops over time, there is a myriad of influences that determine how legal
professionals interpret the law. These influences depend, in large, on what happens to be in
vogue at that moment in time. Moreover, these influences can come from within and from
without the legal doctrine, and, as paradigms change, so too changes the interpretation of
law. Dworkin, therefore, does not see a dividing line between legal philosophy and the
interpretation of the law by legal professionals. In fact, Dworkin states that “any judge’s
100
Raz (1979), at p. 59.
101
See Dworkin (1986), at p. 34; and Hart (2012), at p xxvii
102
103
104
46
opinion is itself a piece of legal philosophy, even when the philosophy is hidden, and the
visible argument is dominated by citation and lists of facts.”105
Law and legal practice, by its nature, are argumentative. And, thus, a theory of law must
consider the structure of the legal argument.106 In exploring this, Dworkin looks at the
problem from the viewpoint of judges and lawyers rather than taking an external point of
view, such as of the sociologist or the historian.107 Dworkin explains that lawyers and judges
look at law in the same way using the same criteria in their argumentation. They share the
same language to explain what law is.
However, even though the common language exists, lawyers and judges still can have
theoretical disagreements on the meaning of the law. Since the rules for this common
language are not precise and exact, it turns out that, often, people do not speak the same
language at all, or at least not exactly. This is most pronounced in penumbral (or borderline)
cases.108 So, lawyers and judges may see different meanings in the statute of the law, even
though they use a common language. This is because each of them, in fact, uses a slightly
different version of the underlying rule. In other words, even though there is a shared
language, it is still very difficult to determine the exact boundaries of all the terms in that
language. All this becomes even more evident, of course, when there is no real shared
language to begin with. Or worse, when one party to the debate has some sense that there
is a shared language, while the other side does not.
Moreover, not all legal disagreements are simply Babylonian speech confusion. There is a
difference between borderline cases that call for (arbitrary) lines to be drawn to mark out
the boundary of the law and pivotal cases where the actual fundamental principles of the
law are tested.109 The latter category implies that there might not be a shared language at
all. In fact, that, for some cases, a shared language is yet to be developed, or at least that
lawyers and judges do not always use the exact same factual criteria to determine what law
is.
However, the cut-off point itself between what Dworkin calls borderline cases and pivotal
cases might not be very clear. For instance, Raz says in this regard:
Terms are vague in this sense if besides cases on the borderline between the area
covered by the concept and that which it does not cover there are borderline cases
between those covered by the term and those which belong to the borderline and
there are borderline cases between those to which the term does not apply and those
on the borderline, and so on indefinitely. With respect to a vague term of this kind
one is on occasion uncertain whether a case is a borderline case or not.110
105
106
107
Dworkin (1986), at pp. 14-15.
108
109
110
Raz (1979), at p. 73.
47
Rules of interpretation are certainly not useless in solving problems of interpretation that
originate from terms that are vague or indeterminate.111 It is, however, easy to imagine that
the discussion on what a certain statute means can evolve into the discussion on what law
is. Or, as Dworkin puts it: “[I]f two legal professionals use different criteria, then each must
mean something different from the other when he says what [the] law is.”112
It is the common view that judges both apply and develop the law.113 Dworkin, however,
takes a distinctly different approach from Hart’s approach in saying that law is also created
through other practices than the social facts that make up law-making procedures. Of
course, Hart has explained that the judiciary’s interpretation can make law and that this has
to be viewed as a derogation of the rule of recognition. However, as has been commented
earlier, it might be a bit of a shortcut to argue that the courts are both the possible source
of law and the decider on what law is.114 In essence, Dworkin attempts to resolve this
paradoxical position of the courts by identifying that there has to be something else than
just the rule of recognition that is the source of the authority of the law, i.e. the interpretive
pathways on which courts base their decisions in cases where there is a theoretical
disagreement of law.
Hart also sees his theory of law as “a radically different enterprise from Dworkin’s
conception of legal theory.”115 In fact, Hart views the approach of seeing the basis for the
interpretive discourse as part of the legal theory itself as a serious error.116
In his opinion, Dworkin’s theory is not to be viewed as a legal positivist theory. Dworkin sees
the central task of a legal theory to be interpretive, and this means that it consists of “the
identification of the principles that best ‘fit’ or cohere with the settled law and legal practices
of a legal system and also provide the best moral justification for them, thus showing the
law ‘in its best light’. For Dworkin the principles thus identified are not only parts of a [legal]
theory but are also implicit parts of the law itself.”117
In turn, Dworkin argues that legal positivism as a theory is not able to properly consider the
concept of legal rights. He argues that the most general point of law is “to show why a
political decision in the past to enact a certain piece of legislation is the basis and the
justification for a state to exercise the coercive power that flows from that legislation in all
the moments following that political decision.”118
In doing so, Dworkin draws the discussion about the relation between law and morality out
of the conceptual sphere. In both natural law theories and legal positivism morality is
viewed as an external force (even though in legal positivism that external force does nothing
to validate or invalidate legal standards). Dworkin’s approach, however, aims to make
morality part of the interpretive debate on the validity of legal rights over time. In other
111
Raz (1979), at p. 74.
112
113
Raz (1979), at pp. 49-52.
114
See Section 2.2.1.2 on Hart’s assertion that the courts are able to decide what falls under the rule of
recognition and what does not.
115
Hart (2012), at p. 240; Dworkin (1986), at p. 102.
116
Hart (2012), p. 243.
117
Hart (2012), at p. 240; Dworkin (1986) at p. 90.
118
48
words, it makes it clear that law must have a certain “context-sensitivity”119 for the law to
retain its authority, as legal paradigms change over time.
Alternatively, one might argue that, for law to retain its authority, it must have an inherent
degree of temporal relativity.120 In fact, one should look at the concept of law and
differentiate between the questions of whether a law’s inception is valid or not, and how
one should look at its meaning, its purpose, its role in sound legal reasoning, its effects and
its social functions.121 There is more to the concept of law than how a certain legal rule is
enacted. In fact, its continued life after this singular point in time is arguably much more
important and interesting.
Such a view allows one to deal with situations where a historically properly enacted but
morally questionable law is not to be enforced. As political morality changes over time, a
compelling overriding (moral) principle can be used to interpret the questionable legal rule
in question in its contemporary context. This avoids having to resort to the semantic trick
that, in hindsight, this morally questionable rule never was (fully) valid law to begin with, as
both natural law and legal positivist theories would insist.
To justify the use of coercive state powers, more is needed than just the fact that the law
has been made some long time ago, and that this means that fair warning has been given
that, if anyone is not willing not keep to that rule, the state will intervene.122 Instead, legal
rights and obligations stem from the enacted laws in a legal system, not only because their
rules have been made in a correct way, but also because they follow from and continue to
be supported by the principles of personal and political morality that underpin these
rules.123 This continued support in moral thinking, in turn, strengthens the legitimacy of the
legal system as a whole and, thus, the authority of its rules. Even though this might appear
to be a circular argument, it does connect to the fair play principle:124 if someone has
received benefits under a standing political system, then they have an obligation to bear the
burden of that political system as well.125
To further ensure that the interpretive constructivist approach connects throughout the
system and, thus, acts to support the justification as mentioned above, lawmakers should
make sure that the entire set of rules in the legal system is morally coherent, and the courts
that resolve conflicts about these rules should view these laws as coherent in that way.126 A
legal system with this kind of inherent integrity should also promote rules that rely on both
justice and fairness. Moreover, this should enable and support the development of political
and legal paradigms and secure the future integrity of the system by keeping it anchored in
119
Dworkin (1986), at p. 104; Raz (1979), at p. 49.
120
Compare to the concept of cultural relativity that cultural norms and values derive their meaning from and
should be understood in the context of a person's own culture, rather than be judged against the criteria of
another.
121
Gardner (2001), at p. 223.
122
Dworkin (1986), at p. 117.
123
124
Dworkin (1986), at pp. 193-194.
125
In fact, similar argumentation also lies at the heart of the benefit principle that serves as justification for
states to exercise taxing rights.
126
Dworkin (1986), at p. 225.
49
its underpinning principles. In this regard, Dworkin describes law as chain novel. Each next
chapter is built upon the last, while the integrity of the whole novel continuously has to be
safeguarded.127
[It] begins in the present and pursues the past only so far as and in the way its
contemporary focus dictates. It does not aim to recapture […] the ideals or practical
purposes of the politicians who first created it. It aims rather to justify […] that
present practice can be organized by and justified in principles sufficiently attractive
to provide an honorable future.128
2.3 Intermediate Conclusions
There are vast differences between the different legal theories that have been discussed
above. Moreover, the above is, admittedly, all but enough to scratch the surface of the
fierce debate that has been going on between these theories. However, even though the
account here is incomplete, it shows there are intersections and overlaps in each of the
theories. From these commonalities, conclusions can be drawn as to the outer dimensions
of the concept of law that could find support in each of the theories of law.
One conclusion is that, even though the different theories all have a different stance
towards morality, none of them discounts morality all together. Morality is a factor that
helps to stabilise legal systems. Even though strict legal positivists disagree with the idea
that morality in and of itself could (in)validate a legal rule, there can be little questioning of
the fact that contemporary legal positivists consider it important that the legal system
somehow reflects the moral standards of society. Hart even goes as far to consider that
there might be room for a society’s rule of recognition to incorporate moral constraints on
the content of law, even though he discounts the practical applicability of such a society’s
rule of recognition.
Another supposition is that even ultimate rules need to be based on something. Hart made
the argument that all primary rules derive their authority from the rule of recognition. This
means that the rule of recognition validates but is not itself validated.129 Raz argues that this
assertion is not necessarily wrong, but he states that this does not mean that an ultimate
rule, such as the rule of recognition, does not have a source. In fact, Raz argues that the
relation between primary rules and their sources (the procedures on which they are based)
must be different from the relation between ultimate rules and their sources.130
Another perspective to consider in determining possible commonalities between the

opposing theories is the stance of morality towards legal rules. In other words, should
morality be considered as an external force that looks on a legal system, its rules and their
validity from without? Or should morality rather be viewed as an integral part of a legal
system, its rules and their validity? Dworkin certainly takes the latter view. In his reasoning,
for the legal system and its rules to retain their authority over time legal principles and
127
Dworkin (1986), at p. 229.
128
Dworkin (1986), at p. 227-228.
129
130
Raz (1979), at p. 69.
50
moral considerations should be an integrated part of the system. In fact, Dworkin appears to
think that the connection between political morality and legal principles becomes more
important for the sustained authority of legal rules as they mature and develop over time.
Moreover, Gardner makes similar points to Dworkin in this regard.131
In the view of natural law theorist Fuller, morality also is an integral part of legal rules. He,
therefore, positions morality as a force from within. By adhering to the ‘principles of
legality’, the legal rules will have built-in moral standards of respect, fairness, and
predictability, and they are thus integral to that system. Admittedly, Fuller takes a different
approach to the issue of morality than most naturalists. However, if one looks to the views
of the more contemporary Finnis, the notion of an internal perspective does not need to
stand in the way of determining whether a certain rule is backed up by the moral force of
law. For, in Finnis’ view, the moral test lies not in the legal validity of the rule but in the
justification for a state to enforce that rule. Even if an integral procedural morality of legal
rules as Fuller describes is not enough justification in the eyes of Finnis, it is hard to imagine
that it could not be an important contributing factor to explain why it is justified for a state
to use its coercive force to impose that legal rule.
Hart views the approach to see the basis for the interpretive discourse as part of the legal
theory itself as a serious error.132 Therefore, for legal positivists, it likely is quite a leap to
accept morality as an internal and integral factor of law. However, Hart does accept that a
legal system, as such, cannot rest only on mere power of man over man as well as the fact
that legal systems are influenced by socially accepted notions of morality and wider moral
ideas. Also, Hart accepts that the interpretive practices of the courts are an important
contributor as to how moral considerations become part of the legal system through the
judicial process. Finally, Hart accepts that interpretation should be from the starting point
that law is a remedial tool. Laws are meant to offer a reasonable legal solution to a problem
that considers all relevant interests. Accordingly, the assumption is that the intention
behind every legal statute is a reasonable one. Of course, legal positivists argue that, if the
law does not provide a clear and unequivocal answer to a legal question, it is unlikely that
morality could do any better. Besides, even if morality’s judgement could be more
unambiguous than the corresponding legal rule, that does not mean that morality
supersedes the procedures (and this also includes safeguards) of law-making and, thus, can
set the legal rule aside or even nullify it.
Shapiro, on the other hand, makes the case that the singular rule of recognition as Hart
views it does not exist. He considers that, even though Hart presented the rule of
recognition as a rule, it might be more like a test. Moreover, Shapiro notes that the
complexity of a legal system and all its rule-producing features need more than just one rule
of recognition but rather a shared plan for the governance of a legal system.133 He also
notes that this shared plan should include rules to settle questions on political morality by
determining the goals and values of that system and the principles that underpin it. This
notion also seems to be congruent with Raz’ claim that just knowing what law is based
purely on the social facts (the procedures by which law is made) does not answer the
131
See Section 2.2.1.2.
132
Hart (2012), at p. 243.
133
51
question of whether or not those procedures endow it with any moral merit.134 There seems
to be a case to be made that, also in legal positivism, there should be some moral criteria of
legal validity in legal systems.
By viewing Hart’s rule of recognition as a shared plan, a set of rules (or better yet, a set of
principles) that make up the governance of a legal system, there may be room to see
morality as an integral part of that shared plan. For, the notion of a shared plan with
multiple principles of recognition precludes the necessity that one should automatically
have dominance over the other—the idea being that there is a difference between
principles and rules. This is a logical distinction as rules and principles differ in the direction
they give. Rules apply in an all-or-nothing manner in the sense that rules can never really be
in conflict with another. If two rules apply at the same time, one must take precedence over
the other to maintain coherence and consistency of the legal system. However, the same
does not apply to principles. Principles always have to be able to apply simultaneously,
while they give the legal system meaning, as they contain its values. When two principles
are conflicting or give conflicting outcomes, there is a need to consider which of the
principles that should be given the most weight. However, whatever the end result of this
consideration might be, both principles have to be upheld.135
There appears to be no reason to assume that secondary rules could not be made up of
principles (too). Thus, an approach where the rule of recognition is viewed as a combined
set of rules and principles that make up the governance of a legal system can accommodate
both the pure legal positivists’ convictions and a concept of internal morality, so that both
can occupy the same space without being mutually exclusive.
These conclusions are not meant to be exhaustive, and they do not presume to tie together
these competing legal theories in all aspects. The sole intent is to explore whether
connecting lines could be drawn across the different legal theories in order to make the
dimensions to the concept of law more tangible and to see if those dimensions could also
allow for space for morality. Considering all these theories carefully, it appears that an
approach to morality as an external force that can validate or invalidate legal statutes
provides for very little common ground to build on further.
However, there is a plausible narrative for internal safeguards based on legal and moral
principles that ensure the fairness, impartiality, and predictability of law – by way of a sort
of moral backbone – that may find resounding notes in the competing theories of law.
Moreover, such a narrative might attempt to include all the values that underpin a legal
system in order to make both a comprehensive set of normative rules and something that is
to be adhered to and justifiably enforced by a state, as can be found in all theories of law.
134
Raz (1979), at pp. p38-39.
135
Happé, R. H. (2011). Belastingrecht en de geest van de wet. Een pleidooi voor een beginselbenadering in de
wetgeving, Tilburg: Prismaprint, Tilburg University, at p. 36; Gribnau, J. L. M. (2011). Fiscale ethiek:
wederkerige verantwoordelijkheid voor de integriteit van het belastingrecht. Geschriften van de Vereniging
voor Belastingwetenschap, (243). Kluwer, at p. 13; Also see Section 4.1.3.
52
In other words, moral values seem to be not only present in all theories of law but go
beyond the merely conceptual.136 In the discussed theories of law, one can find footholds
that point to moral values being, at least, central practical values—if not always expressly
constitutive. More importantly, if one looks beyond the singular point of enactment of laws
and towards the continued development of these legal rules, morality acts as an anchoring
force within the entire legal system and, as such, promotes and strengthens the sustained
authority of the legal system in society. This means that a shared narrative pointing a set of
‘principles of recognition’ could form a stable enough platform to continue the search for a
workable definition for the spirit of international tax law.
From the section on the concept of law above, one could get the impression that there is
only one concept of law and one legal system that has to be dealt with and of which the
boundaries need to be determined. Everyday reality, of course, is much more complicated.
For, in practice there are many legal systems that interact and interconnect when one tries
to apply the law. Moreover, legal systems do not only exist next to each other, as different
jurisdictions and regions even have different systems. Legal systems also exist on top of
each other, as there can be local, national, European and international systems that are all
applicable at the same time. In fact, Van Hoecke makes the point that the vagueness that
we have to deal with comes not only from the idea that a legal system consists of its
positivistic rules, its principles and moral values and the context in which these rules are
applied, the boundaries of the concept of law are also difficult to determine due to the
three-dimensional playing field of legal systems that can apply simultaneously.137
Looking specifically at the intricate systems that govern the taxation of profits of
multinational corporations, this layering of legal systems certainly is a reality. Indeed, over
the last two decades, the development of international corporate income tax law and
international tax policy has become nothing less than a global endeavour. For corporations,
this means that in addition to having to deal with complex local and/or national legislation
and national court rulings in all the jurisdictions which they are active, they are (often) also
subject to EU law, ECJ case law and bilaterally agreed upon tax treaties in combination with
competing Model Conventions by the OECD the UN. The endeavour to find the exact
boundaries of one single concept of law in combination with one clearly delineated spirit of
the law that encompassed both national and international tax law is a challenge to say the
least. Conversely, any new tax policy designs that are to stand any chance to be robust,
applicable in practice, and politically tenable have to factor in this three-dimensionality of
the international tax system. One has to account for the fact that different legal systems
have to interact with each other at different levels in a comprehensive and coherent
fashion.138 In fact, this is exactly what makes it relevant to explore the nature of the spirit of
136
Vega, J. (2018). Legal philosophy as practical philosophy. Revus (34) [Online], at paras. 39-41.
137
Van Hoecke, M. (2014). Do “Legal systems” exist? The concept of law and comparative law. In Concepts of
law : comparative, jurisprudential and social science perspectives (S. Donlan & L. Heckendorn (eds.). 43–57.
Farnham, England: Ashgate Publishing Limited, at pp. 56-57.
138
See also section 5.4.
53
3 Perspectives on Morality in Political Philosophy
The previous section concluded that there is a strong relation between law and morality and
that morality as such can be part of the concept of law. The next step is to understand and
define the spirit of international tax law as well as to this in the light of political philosophy.
It is not enough to understand that morality can be part of the concept of law alone, it is
also necessary to understand where normative ideas about fairness and justice come from
and why they are widely held to be valid. Further, it is necessary to understand how these
ideas on fairness and justice might be considered differently at a national versus
international level. Specifically, this latter point of how justice and fairness can be
understood at an international level is discussed in more detail later in this study.139
This chapter will primarily serve to mark a number of normative reference points and to
distinguish how the basics of moral thinking appear in some of the major works on political
philosophy. To this end, three major influences in political philosophical thinking will be
discussed briefly: Bentham’s and Mill’s utilitarianism, Rawls’ A Theory of Justice and Nozick’s
Anarchy, Utopia and State.
Comparable to legal philosophy, one could argue that natural law as the source of moral
thinking became less prominent over time in political philosophy. In fact, the elite at the
beginning of the 19th century thought it possible to rely on logic to formulate several fixed
and self-evident principles that together would make up a robust, stable and fair legal
system. It was just up to (legal) minds to find these principles and to the legislator to put
them onto paper.140 In fact, Kant’s ethical theory largely replaced natural law theory with
respect to moral thinking in this period.
Regarding a fair society, Kant considered that something is a universal law if it allows
everyone the freedom of will, as long as this is consistent with everyone else’s freedom of
will: “Act only in accordance with that maxim through which you can at the same time will
that it should become a universal law.”141
139
See sections 5.4.2, 5.4.3 and 5.4.4.
140
Pound (1921), at p. 146.
141
Kant, I. (1998). Groundwork of the Metaphysics of Morals (Gregor, M., ed.). Cambridge University Press, at
p. 25.
54
Kant called this the categorical imperative. It goes to that there are propositions that
everyone would affirm regardless of their consequences. Thus, if one would choose
something from every conceivable standpoint, this should have the standing of moral law:
Morality consists, then, in the reference of all action to the lawgiving by which alone
a kingdom of ends is possible. This lawgiving must, however, be found in every
rational being himself and be able to arise from his will, the principle of which is,
accordingly: to do no action on any other maxim than one such that it would be
consistent with it to be a universal law, and hence to act only so that the will could
regard itself as at the same time giving universal law through its maxim.142
From this thinking, several different branches of political philosophy emerged, which looked
to find the principles upon which a just and fair society could be built. One important
discussion between these different branches concerns the question of how to find the right
balance between preserving the individual freedom to act and having legal rules to guardrail
that freedom in a non-discriminatory manner. In other words, if the categorical imperative
is to mean that the legal system should provide equal opportunities to everyone in society
without unwarranted “artificial or extrinsic handicaps”,143 then, to which extent could or
should the rights of the individual be restricted for the good of society as a whole?
3.1 Utilitarianism
Utilitarianism, as first described by Jeremy Bentham144 and later by John Stuart Mill,145
attempts to answer this question by stating that, morally, right actions are those actions
that secure the greatest amount of good for everyone. Utilitarianism’s principle of greatest
happiness or greatest good holds that “actions are [morally] right in proportion as they tend
to promote happiness, [and] wrong as they tend to produce the reverse of happiness.”146 In
principle, in utilitarianism, everyone’s utility is the same, and, thus, the moral thinking
following from utilitarianism is a form of consequentialism: morality is understood only in
terms of the consequences it produces. The roots of utilitarianism predate Bentham’s and
Mill’s works,147 but Bentham and Mill are generally viewed as the classic utilitarians.
Further, utilitarianism was one of the most persuasive moral theories throughout the 19th
century.
142
Kant (1998), at p. 42.
143
Pound (1921), at p. 147.
144
Bentham, J. (2000). An Introduction to the Principles of Morals and Legislation. Jeremy Bentham 1781.
Kitchener. Batoche Books.
145
Mill, J. S. (2001). Utilitarianism 1863. Kitchener, Batoche Books.
146
Mill (2001), at p. 10.
147
See for instance, Hume, D. (1896). The Treatise Concerning Human Nature (L.A. Selby-Bigge, ed), Oxford
Clarendon Press.; Hutcheson, F. (1753). An inquiry into the original of our ideas of beauty and virtue: in two
treatises. R. Ware.; and Sprague, E. (1954). Francis Hutcheson and the moral sense. The Journal of
Philosophy, 51(24), 794-800.
55
However, since Bentham thought there were no qualitative differences between the nature
of happiness, the notion was much criticised as being too hedonistic of an approach.148 It
was the general thought that people would seek simple pleasures, and this would have to
be considered morally right, as it would increase utility as Bentham saw it. If taken far
enough, hedonistic utilitarianism would lead to morally problematic outcomes.149 Bentham,
of course, disagreed with the notion of utilitarianism as just some hedonistic indulgence, as
he thought wider public interests were also to be considered in this regard. For instance,
Bentham wrote:
By utility is meant that property in any object, whereby it tends to produce benefit
[…] to the party whose interest is considered: if that party be the community in
general, then the happiness of the community: if a particular individual, then the
happiness of that individual. […] The interest of the community is one of the most
general expressions that can occur in the phraseology of morals: no wonder that the
meaning of it is often lost. When it has a meaning, it is this. The community is a
fictitious body, composed of the individual persons who are considered as
constituting as it were its members. The interest of the community then is, what is
it? — the sum of the interests of the several members who compose it.150
Mill built on Bentham’s work on the nature of happiness and considered that, when there
are competing pleasures, one should consider the difference of quality in these pleasures.
Moreover, the utilitarian standard in this regard should not be the agent’s own happiness
but the greatest amount of happiness altogether. Mill’s underlying claim with this was that
intellectual pleasures were of a higher value than more carnal pleasures. When applying the
utilitarian standard, one should then “be as strictly impartial as a disinterested and
benevolent spectator.”151 Additionally, this should allow one to weigh all of the good and
bad effects in various scenarios to then decide which scenario on balance that produces the
most utility for everyone. In practice, this should permit the maximum of free individual
actions, as long as this is in line with and/or promotes the general interest.152
However, in trying to differentiate in the qualitative worth of competing pleasures, Mill ran
into what is known as the grounding problem: the problem of determining what might be
the basis for such judgments and from where they derive their authority.153 Moreover,
these traits, which the benevolent spectator should have to make such judgements on the
quality of competing pleasure, look very similar to those in the ideal observer theory, as
148
See Tännsjö, T. (1998). Hedonistic Utilitarianism. Edinburgh: Edinburgh University Press, at chapter 1; also,
see Mill (2001), at p. 11.
149
A regularly featured example in this regard is the ‘transplant surgeon objection’. The example describes a
surgeon that decides to kill a healthy homeless man, so that his organs can be transplanted into several of his
patients that supposedly would be of greater value to the community than the homeless man. Purely based on
utility, killing the homeless man to save these several other lives his would be the correct moral choice.
However, most would intuitively say killing a healthy man is not fair, even if it saves the lives of others.
150
Bentham (2000), at pp. 14-15.
151
Mill (2001), at p. 19.
152
Pound (1921), at p. 159.
153
See section 4.1.1 on metaethics for further explanation.
56
described further on in this study.154 Accordingly, this raises the question of whether or not
utilitarianism suffers from a similar problem of circularity in reasoning as the ideal observer
theory.
Mill points out that critics of utilitarianism believe that it is too much to ask of people to
always act in a manner that serves best for society as a whole. However, this argument is
pushed aside by Mill. He states that it is a “misapprehension of the Utilitarian mode of
thought” to think of utility as something that should always reference the whole of society,
the whole world.155 He argues that the reference group could — and, in most cases, should
— be much smaller than that. Only if it is likely that one’s actions would influence the whole
world, the effects on the entirety of society should be taken into account.156 This seems to
be a persuasive argument, as it is likely to assume that one’s actions would not have global
effects very often. One might also agree that it is arguably easier to weigh the good and bad
implications of such more localised effects.
However, Mill omits to explain, if one were in a situation where an action would impact the
whole world, how one then would be able to weigh the pros and cons of such an action.
Arguing that this might not happen very often does not really contradict the criticism that
the utilitarian standard might be too high of a standard to apply for when it does happen.
Moreover, there is the question of whether Mill’s argument would make it possible to
justify almost any action. Simply by manipulating the reference group, utility could reveal
itself as little more than justified opportunism. It is even conceivable that this would happen
in good faith. As the long-term effects of decisions might often not be known, or even
knowable at the time of the decision, it could well be that this would lead to a genuinely but
imperfectly selected reference group. Arguably, in the case of international taxation, the
whole world might be affected by the decisions of a very limited number of (public or
private) actors, even unintentionally.
Regarding how much legal rules should be allowed to limit one’s freedom of will, it is of note
that Bentham (and later also Mill) were much concerned with legal and social reform. Laws
that were not producing any good were to be considered morally wrong.157 For instance,
Bentham argues that, even though every man should perform those actions that could
benefit the whole community, the legislator should not compel him to perform every such
act. Conversely, everyone should refrain from actions that are disadvantageous to the
community as a whole, but the legislator should also not attempt to prohibit all these
actions legally. Further, he goes on that legislation should only interfere through
punishment. In this regard, he argues private ethics should be put over legislation where (i)
punishment would be groundless, (ii) punishment would be ineffective, (iii) punishment
would be unprofitable, or (iv) punishment would be needless.158 This means that, even if
154
Also, see Firth, R. (1952). Ethical absolutism and the ideal observer. Philosophy and Phenomenological
Research, 12(3), 317-345, at pp. 333-345.
155
Here, Mill does not consider that this could also mean that something affects society as a whole on the
longer term, or that this could happen at some unknown point in the future. Consider the emissions of
greenhouse gasses. The negative effects of these emissions could effectively manifest themselves on the other
side of the globe, 50 years from now.
156
Mill (2001), at pp. 20-21.
157
See, for instance, Pound (1921), p. 158.
158
Bentham (2000), pp. 227-231.
57
there is a person acting in bad faith, punishment can still be unprofitable and, thus, the
legislator should refrain from interfering. This would, for example, be the case when the
danger of detection is so small that it makes the punishment uncertain. To be effective, the
punishment should consequently be raised such that the “evil of the remedy outweighs the
evil of the disease” under the utilitarian standard.159 Moreover, punishment would also be
unprofitable if the legislator is not able to define the guilty action to be “clear and precise
enough to guard effectively against misapplication.”160
Bentham particularly saw a potential danger of misapplication in places where the legal
description of an act is too vague. It comes down to “the use which the legislator may be
able to make of language; partly upon the use which, according to the apprehension of the
legislators the judge may be disposed to make of it.”161 As a result, Bentham advocated for a
shared taxonomy — particularly in an international context — in order to prevent too vague
language in legal articles or arbitrary interpretations of these articles by the courts. There
should be “words that are appropriated to the subject of law, […] that in all languages pretty
exactly correspond to one another, which comes to the same thing nearly as if they were the
same.”162
This shared taxonomy should originate from what law is as well as what law should be.
Therefore, a combination of looking backwards to the historical development of law and
looking forwards to how the art of legislation is best performed across nations. Implicitly,
though, Bentham seems to argue that, in absence of such a shared taxonomy, the legislator
should step back and let private ethics govern the question of whether one’s actions could
either benefit or harm the community as a whole. Thus, in such an absence, the rights of the
individual should not legally be restricted even if it meant that the utilitarian principle could
not be applied to its full extent.
3.2 John Rawls’ Theory of Justice
John Rawls is probably the most influential philosopher of the late 20th century. As stated
above, there has been much criticism on utilitarianism before Rawls, but Rawls succeeded in
presenting an alternative that effectively took utilitarianism’s place as the working theory of
morality and justice.
Rawls’ theory was designed to fill in the gaps that utilitarianism left. In essence, this was
achieved by replacing the idea that something should give the greatest utility with the idea
that the question of morality is about dividing resources in an optimal manner. This made it
possible to shift away from deciding on how much pleasure people might gain from
something and rather focusing more on the resources that they should have at their
disposal to realise those pleasures. Moreover, this solves the (grounding) problem in
situations where there are competing pleasures. In this regard, one could objectively come
to a distinction between (i) basic resources that should be divided equally while everyone’s
159
Bentham (2000), at p. 230.
160
Bentham (2000), at p. 230.
161
Bentham (2000), at p. 231.
162
Bentham (2000), at p. 235.
58
needs for them are more or less equal and (ii) resources that could be allocated unevenly to
create more equal opportunity for everyone in society. In other words, while it is hard to
qualify the value of pleasure for different individuals, this is possible for the relative value of
resources.163 In essence, Rawls changed the narrative from a focus on output to a focus on
input.
All social values—liberty and opportunity, income and wealth, and the social bases of
self-respect—are to be distributed equally unless an unequal distribution of any, or
all, of these values is to everyone’s advantage.164
Rawls’ main idea – to achieve that everyone would receive the input that they would need –
is that one would devise a hypothetical social contract based on principles of justice. This
means that, in Rawls’ view, injustice consists of if inequalities exist that do not benefit
everyone.
[T]he guiding idea is that the principles of justice for the basic structure of society are
the object of the original agreement. They are the principles that free and rational
persons concerned to further their own interests would accept in an initial position of
equality as defining the fundamental terms of their association. These principles are
to regulate all further agreements; they specify the kinds of social cooperation that
can be entered into and the forms of government that can be established. This way of
regarding the principles of justice I shall call justice as fairness.165
Rawls’ theory of justice does not necessarily lead to a certain distributive outcome or end-
result. Instead, it operationalises a mode of comparing what the better outcome would be.
Moreover, it does so by applying a thought experiment within which Rawls asks the
question that, if one were to design a whole new social order—a society in the broadest
sense of the word—how would one do this this fairly and equitably?
Rawls proposed that everyone who would be responsible for designing this new society
would start off in an original state. Rawls called this original state “the circumstances of
justice.”166 With this, Rawls meant that everyone had the same rights in the procedure to
choose which principles and conditions that should apply to the new society. Each could
make proposals and argue why these should be accepted.167 However, an essential feature
in the design is that these proposals would have to be made behind a veil of ignorance.
This means that, in the original state, no one has any particular information about
themselves. They do not know their “class position or social status, nor does any one know
[their] fortune in the distribution of natural assets and abilities, [their] intelligence, strength,
and the like.”168 The veil of ignorance, therefore, is an expository device meant to ensure
that no one’s choices can be biased to improve their own position. Moreover, this should
163
This solves the transplant surgeon objection, see Section 3.1.
164
Rawls, J. (1999a). Theory of Justice, Revised Edition. The Belknap Press of Harvard University Press, at p. 54.
165
Rawls (1999a), at p. 10.
166
Rawls (1999a), at p. 109.
167
Rawls (1999a), at p. 17.
168
Rawls (1999a), at p. 11.
59
lead to a situation where no one is advantaged or disadvantaged in the choice of principles.
A fair agreement or bargain should, under these conditions, lead to principles of justice.169
In this sense, Rawls’ theory of justice is an articulation of Kant’s views on justice and
fairness, and it operationalises the decision process of what are to be considered categorical
imperatives. The veil of ignorance forces one to think about society as a whole, and it lets
one come to conclusions on what the best social rules are for everyone regardless of who
they turn out to be:
The veil of ignorance is so natural a condition that something like it must have
occurred to many. The formulation in the text is implicit, I believe, in Kant’s doctrine
of the categorical imperative, both in the way this procedural criterion is defined and
the use Kant makes of it. Thus when Kant tells us to test our maxim by considering
what would be the case were it a universal law of nature, he must suppose that we
do not know our place within this imagined system of nature.170
Rawls’ theory of justice is comparative in nature. The theory does not reason from a first-
principle idea or from an end-state notion of what Rawls thinks society should be. The
suggestion is that any rational person would choose these principles of justice over the
going alternative, i.e., utilitarianism. The mode of reasoning is that Rawls’ principles of
justice, which are chosen from behind the veil of ignorance, do better than the (first
principle) ideas of other philosophies or moral theories. Moreover, Rawls’ principles of
justice would also do better if other principles of justice were to be selected. Consequently,
Rawls seems ready to give his principles of justice up if someone else can come up with
better ones.
Rawls proposes two principles of justice that he assumes everyone would agree to:
First: each person is to have an equal right to the most extensive scheme of equal
basic liberties compatible with a similar scheme of liberties for others.
Second: social and economic inequalities are to be arranged so that they are both (a)
reasonably expected to be to everyone’s advantage, and (b) attached to positions
and offices open to all.171
These principles can then be applied from behind the veil of ignorance by determining
whether the most adversely affected person would still agree with these principles. While if
the most adversely affected person would still choose this principle over the going
alternatives, then, presumably, anyone else would do so as well.172 To Rawls, this means
that the standpoint of justice overlaps with the standpoint of the least advantaged person
or group. While if you were the least advantaged person and would still choose this
169
Rawls does state that this is under the assumption that those who in the original position chose these
principles, are rational beings that have a reasonable sense of self-interest – so they are not willing to sacrifice
their interests for others for no reason – and are capable of a sense of justice (at p. 18). Moreover, parties
have roughly similar needs and interests, or needs and interests are in various ways complementary, so that a
mutually advantageous cooperation between them is possible. Finally, Rawls assumes that the society of those
in the original position exists in a world of moderate scarcity (at p. 110).
170
Rawls (1999a), at p. 118, footnote 11.
171
Rawls (1999a), at p. 53.
172
Rawls (1999a), at p. 71.
60
principle, it would be a universalisable principle. Accordingly, this is similar to the Kantian
categorical imperative, as it is something anyone would choose regardless of consequences.
To make this more concrete — especially with reference to the second principle — from
behind the veil of ignorance, no one would choose a system that structurally benefits one
group over another. Because, in the original state, you would not know whether you would
belong to the advantaged or disadvantaged group after the veil of ignorance had been
lifted. Thus, if no one would choose such a system, such as system would be illegitimate
under Rawls’ theory of justice.
In this regard, one could consider, for instance, the gender pay gap. On average, women in
the EU earned about 14,1% less than men in the same or comparable occupations in
2020.173 Such a systematic difference does not appear to offer fairness of opportunity as
meant in Rawls’ principle of justice 2(b). Therefore, presumably, no one would choose such
a system from behind the veil of ignorance, which would make such a system illegitimate.
Another example could be the rules that govern the international system of profit taxation.
It appears that developing countries systematically benefit less from this system in terms of
collected tax revenue compared to advanced economies. The question following from
Rawls’ theory of justice would then be if the least advantaged group, i.e., developing
countries, would choose this system over all other going alternatives.174
Of course, following principle of justice 2(a), it could be that, despite the social and
economic differences, the system as a whole would still benefit everyone enough, so that
developing countries still would choose the current international tax system over other
alternatives. They might consider that, even though they are worse-off in the current
system, their share is still bigger than in other alternative scenarios. Therefore, they would
affirm a system in which the minimum share is as big as it can be. This is, in essence, a
criterion from welfare economics: maximin. This underlying idea of this criterion is that
welfare is maximised when the minimum share is maximised. Rawls, however, refers to this
criterion as ‘the difference principle’.175
The difference principle, therefore, operationalises the notion that social values should be
distributed equally “unless an unequal distribution of any, or all, of these values is to
everyone’s advantage.”176 As such, there can be differences in how much everyone benefits.
Differences in opportunity, in and of themselves, do not render a system illegitimate.
However, these differences must then also meet the difference principle. If this is not the
case, developing countries would likely not choose this system of international profit
173
European Commission. (2020h). The gender pay gap situation in the EU, 2020. Retrieved from
https://ec.europa.eu/info/policies/justice-and-fundamental-rights/gender-equality/equal-pay/gender-pay-
gap-situation-eu_en.
174
For this to be a fair example, one has to reconcile the fact that Rawls’ theory of justice reflects on fairness
and justice within a national society, while the international tax system concerns ideas of fairness and justice
between nation states. In section 5.4.2, et seq., these international elements are further examined. Here, the
example serves only to question whether the veil of ignorance would prohibit rational actors to choose a
system that systematically favours one particular group in a system over another.
175
Rawls (1999a), at pp. 72-73.
176
Rawls (1999a), at p. 54.
61
taxation. In that case, the current international tax system would not comply with the
standpoint of justice and, thus, should be considered illegitimate.
A caveat should be made here, as it could be that maximising the minimum share would
come at great cost to the shares of those in the middle. Rawls acknowledges that this type
of situation could lead to strange outcomes but is not deterred by this. He believes that, if
the difference principle is satisfied, everyone would likely still benefit from it because of a
chain connection. He supposes that “inequalities in expectations are chain-connected: that
is, if an advantage has the effect of raising the expectations of the lowest position, it raises
the expectations of all positions in between.” Based on this supposition, he simply concludes
that “those who are better off should not have a veto over the benefits available for the least
favored. We are still to maximize the expectations of those most disadvantaged.”177
Therefore, much more than utilitarianism, Rawls’ theory of justice looks towards the public
interest in determining the right balance between preserving the individual freedom to act
as well as guard-railing that freedom. Rawls uses the position of the least advantaged
person in society as the yardstick to determine when violating one’s individual rights might
be morally justified. Moreover, Rawls’ expository device of the veil of ignorance solves a
fundamental problem in many of the going alternatives in political philosophy: it acts as a
great equaliser. It does not only take away the possibility to bias the system that is to be
designed in one’s favour. Rawls’ expository device also ensures that each of the actors’
starting positions in designing the system is (more) equal, as each actor is forced to consider
all possible positions in society to come to an equitable and fair system. This does not mean
that inequalities cannot grow within a system of equal opportunities but just that the
opportunities to realise one’s potential are more equal.
3.3 Robert Nozick’s Anarchy, State and Utopia
If Rawls’ A Theory of Justice was a response to utilitarianism, Nozick’s Anarchy, State and
Utopia is very much a direct response to Rawls’ work.178
The central idea in Nozick’s book is to question how much the state and its officials are
morally allowed to restrict an individual’s rights. The book involves an important thought
experiment similar to Rawls’, as Nozick essentially asks: if the state did not exist and one
would create and design the state today, what would that state ideally look like? The
outcome of this thought experiment would then provide a standard to which one could
compare existing institutions within existing states. In essence, Nozick’s approach is a search
for a normative ideal based on a hypothetical social contract, which is designed to evaluate
institutions that exist in the real world. In that sense, Nozick is different from earlier
philosophers such as Locke and Hobbes. Where they referred to an actual social contract,
Nozick is looking to design a hypothetical one. Consequently, Nozick’s theory is of a
comparative nature much like Rawls’ theory is.
177
Rawls (1999a), at p. 70. Rawls justifies this reasoning by claiming that there is a chain connection which
essentially means that other groups in society will experience positive spin-off effects from benefitting the
least advantaged group.
178
Nozick, R. (1974). Anarchy, state, and utopia. New York: Basic Books.
62
Nozick starts out by asking if one would even need a state.179 He considers that the no state
scenario would be highly impractical and reasons that, to protect property, an ultra-minimal
state would emerge, as there is a natural monopoly on coercive force that would be
organised at state level. With regard to individual liberty, he says:
[T]here is no social entity with a good that undergoes some sacrifice for its own
good. There are only individual people, different individual people with their own
individual lives. Using one of these people for the benefit of others, uses him and
benefits others. Nothing more. What happens is that something is done to him for
the sake of others. Talk of an overall social good covers this up.180
Margaret Thatcher appeared to share much of this view, as she stated the following in a
1987 interview:
I think we have gone through a period when too many children and people have
been given to understand “I have a problem, it is the Government's job to cope with
it!” or “I have a problem, I will go and get a grant to cope with it!” “I am homeless,
the Government must house me!” and so they are casting their problems on society
and who is society? […] But it went too far. If children have a problem, it is society
that is at fault. There is no such thing as society. There is living tapestry of men and
women and people and the beauty of that tapestry and the quality of our lives will
depend upon how much each of us is prepared to take responsibility for ourselves
and each of us prepared to turn round and help by our own efforts those who are
unfortunate.181
Nozick, however, goes on to consider that such an ultraminimal state, in practice, would not
be enough. The reason for this is that, even though coercive force is a natural monopoly,
there would still be those within society that would not agree with or recognise this coercive
force. Nozick calls these independents.182 He also considers that it is impossible to let these
independents just be, because their existence would violate the rights of the non-
independents, as they would experience fear. Without assimilating these independents, one
cannot be certain that they would not engage in, so-called, risky acts that would
disadvantage those who do consent to the rules of the minimal state. There is, therefore, a
need to force independents to accept the authority of the state. Nozick, thus, contends that
the operators of an ultraminimal state are morally obliged to form a nightwatchmen state,
or minimal state.
In Nozick’s view, the minimal state would also be the only legitimate state.183 Nozick resists
the idea of redistribution of income and wealth to be legitimate and, as a result, believes
the welfare state to be illegitimate, as it violates people’s rights. To illustrate the problem,
179
Nozick (1974), at p. 3.
180
Nozick (1974), at pp. 32-33.
181
Keay, D. (1987). No such thing as society, Interview Margaret Thatcher for Woman’s own. Retrieved from
https://www.margaretthatcher.org/document/106689.
182
Those who do not recognise the coercive monopoly of the ultraminimal state.
183
Nozick (1974), at pp. 52-53.
63
Nozick argues with income redistribution that the only possible way to retain the
distributive pattern of the starting point would be if a state continuously intervened by
taxing the extra gains and redistributing them.184 He, therefore, contends that income
equality should not be an end-state ambition. The sort of thinking in end-result distributive
justice patterns would always violate the rights of those involved, as it is very improbable
that everyone in society would agree to such an end-state.185 In this regard, the plurality of
values thus means that the state cannot legitimately engage in redistribution of income and
wealth.
Moreover, income equality as an equal opportunity starting point makes very little sense to
Nozick, as market forces will just disrupt this starting position. To illustrate this point, he
gives the example of a contract signed by Wilt Chamberlain.186 Chamberlain would receive
$0.25 of every sold admission ticket in each home game. Over a number of games, this
arrangement would mean that Chamberlain collects a huge income, as more and more
people voluntarily would part with a relatively small portion of their income. This should be
considered a just outcome. The example means to show that whatever distributive justice
model or pattern one would pick as a starting point, the voluntary choices of individuals will
always upset this distributive pattern over time. Therefore, if one were to start with perfect
equality, the dynamic of free choice would eventually change this state of perfect equality.
As such, he contends that, if the starting conditions are considered just and all the
subsequent choices and transfers are voluntary, the eventual outcome would also have to
be just.
Critics point out that Nozick might incorrectly assume that markets would be allowed to run
indefinitely without regulation, as well as that it might be wrong to measure fundamental
aspects of human life in market terms.187 Thus, this means that Nozick’s argument, that
each underlying voluntary choice that upsets the distributive pattern would automatically
mean that the resulting distributive pattern is also morally just, might not always be true.
Another point of criticism might be that Nozick’s argument against the welfare state is not
consistent. Nozick asserts that that unanimous consent for the minimal state is not
necessary and that it is legitimate to assimilate the independents. To allow for such a
violation of the rights of the independents, Nozick argues that there should be
compensation to the independents that would still leave everyone better off. In fact, the
compensation does not actually have to be paid.188 Nozick argues from a concept of welfare
economics that, if a hypothetical compensation to the independent could be found where
everyone would still be better off, then it would be justified to force the independents to
comply.189 Of course, this argument is meant to only pertain to the (natural) monopoly of
coercive force. However, it is hard to see how a similar argument could not be made to
184
Nozick (1974), at pp. 161-164.
185
Nozick (1974), at pp. 167-174.
186
Wilt Norman Chamberlain was an American professional basketball player and is widely regarded as one of
the greatest players in history. See also https://www.basketball-reference.com/players/c/chambwi01.html.
187
See, for instance, Coleman, J. S., et al. (1976). Robert Nozick's anarchy, state, and utopia. Theory and
Society, 3(3), 437-458, at p. 447.
188
Nozick (1974), at p. 87.
189
Referring to the concept of Kaldor-Hicks efficiency, suggesting that a change in the allocation of resources
would produce more benefits than costs.
64
move from a minimal state to a welfare state. One may consider a situation where people
decide to alleviate their fear of the risk unemployment by having a collective form of
unemployment insurance. Moreover, in this situation, those who would rather internalise
the risk of unemployment than pay to this collective insurance might be viewed as
independents. One could subsequently justify forcing these independents to comply by
working out a hypothetical compensation for the violation of the rights of these
independents, that would leave everyone – including the independents – better off than
without the collective unemployment insurance.
Nozick’s arguments for compensation seem problematic, as they either do not justify the
creation of a minimal state, or they also could be used to justify a state that goes beyond
the minimal state. Thus, by not requiring explicit unanimous consent for a legitimate state,
the welfare state might be just as morally legitimate as the minimal state.
3.4 Closing Remarks
As stated in the beginning of this chapter, the aim of this section is to provide a number of
normative reference points on normative ideas about fairness and justice as well as what
these concepts are based on. Throughout this study, some of the points from this chapter
will be further elaborated. Particularly, in section 5.4.3, Rawls’ difference principle and
Nozick’s arguments with regard to compensation will be considered in more detail in
relation to the international tax system and the possibility for a global distribution of tax
revenue.
65
4 Morality in Legal Interpretation
In the previous sections, it has been argued that morality is a pervasive element across legal
philosophies. Moreover, even though natural law theories see law as a fact, and legal
positivism views law as a norm,190 it can be said that moral principles and values give law
meaning and purpose. Morality anchors the concept of law in reality, and it helps to assure
consistency throughout legal systems. This is particularly true for when a legal rule has been
around for some time, as the legal rule’s meaning, purpose and its place in legal reasoning
have become more settled.191 From such a perspective, it becomes clear that morality
perhaps becomes more important with regard to interpreting the law over time than just at
the point of the enactment of that legal rule.
To paraphrase Hart, it is not uncommon for both black letter law and morality to struggle to
give a ready answer to all of the legal questions that could arise.192 Regardless of whether
the legislator is nature manifesting God’s absolute will or man seeking to regulate human
behaviour through norms, both kinds of legislators struggle to produce legal texts that are
able to answer all of the legal questions that could arise while simultaneously conveying
exact and unequivocal meaning. Even in cases where the meaning of law is completely clear,
some would still say that a measure of interpretation is always necessary.
It is a familiar rule that a thing may be within the letter of the statute and yet not
within the statute, because not within its spirit, nor within the intention of its
makers.193
The interpretation of the meaning of the law, however, is also something that legal scholars
tend to approach in different manners. This is demonstrated by the apparent lack of
agreement amongst legal scholars on how we should look at legal doctrine. This
disagreement starts at a very fundamental level. For example, one could look at legal
190
Kelsen, H. (1960). What is the Pure Theory of Law? Tulane Law Review 34, 269-276, at p. 269.
191
192
Hart (2012), pp. 202-211.
193
Church of the Holy Trinity v. United States, 143 U.S. 457 (1892), at p. 459.
66
doctrine as a hermeneutic discipline, an empirical discipline, an explanatory discipline, an
axiomatic discipline, a logical discipline or a normative discipline:194
o The hermeneutic approach looks at the meaning of a text from the text’s perspective
(including generally accepted argumentation to support the interpretation).
o The empirical approach looks for interpretations that are backed up by objective
reality. This could be through a verification of what interpretations that are followed
in judicial practice (i.e. case law), a verification based on the empirical retrieval of
natural law, or a verification through empirical research based on a mix of traditional
legal doctrine and legal sociology, or—even broader—through sociological,
economical or socio-psychological data.
o The explanatory approach seeks to explain why a legal rule is valid in a certain
society based on historical, economical, sociological, psychological and legal internal
logic. It therefore looks to the existence of underlying values and principles and/or a
larger network of legal rules and principles.
o The axiomatic approach considers that legal doctrine shows a legal rule to be self-
evidently valid, as it has intrinsic merit and fits in a logic of legal concepts as well as
in the whole of law.
o The logical approach views legal doctrine as a means of logically and systematically
organising the law and/or the logical legal reasoning and scientific structuring of
legal data.
o The normative approach views legal doctrine not just to describe and systematise
the legal norms and values, but it also considers that legal scholars should actively
take up normative positions and make choices about the weight that should be
attributed to certain values and principles relative to others. These choices and
normative statements can be based on the internal logic of the law, but also on
considerations outside of legal doctrine such as philosophy, psychology, history,
morals, ethics, sociology, economics and/or politics.
These different approaches also materialise in several methods in legal interpretation,

notably, textualism, intentionalism, purposivism and pluralism. Textualists rely on the
enacted text to determine its meaning and resist the idea that legal history, the legislator’s
intention or the purpose of the law could lead to a different interpretation. Statutory
interpretation is, most of all, textual analysis.195 Intentionalists look for the intention of the
legislator through legislative history.196 Purposivists look to interpret the meaning of a legal
article based on the overall purpose of the law. This purpose can (also) be based on the
intention of the legislator and/or an idealised idea of what reasonable persons would have
had as a reasonable purpose.197 Finally, pluralists rely on different sources and modes of
reasoning by effectively combining textualism and purposivism with forward-looking
194
See Van Hoecke, M. (2011). Methodologies of legal research: which kind of method for what kind of
discipline?, Bloomsbury Publishing, at pp. 4-11 for a more extensive review on the differences between these
viewpoints on legal doctrine.
195
See Eskridge Jr, W. N. (1989). The new textualism. UCLA l. Rev., 37, 621, at p. 690; Manning, J. F. (2006).
What Divides Textualists from Purposivists?, Colum. L. Rev 106 (99), 70-111, at pp. 102-103.
196
Alexander, L. (2013). Originalism, the Why and the What. Fordham L. Rev., 82, 539, at p 539 et seq.
197
Hart, H. M., & Sacks, A. M. (1994). The legal process: Basic problems in the making and application of law.
Westbury: Foundation Press, at pp. 1373-1374.
67
elements with regard to political and legal developments as well as moral values, fairness,
and justice.198
As a starting point for the analysis in this section, it is assumed that most people would
agree that legal rules are commonly drafted in a general manner and that, by only
considering the text of the legal rule, one runs the risk that the interpretation of the legal
rule is overinclusive or underinclusive with regard to specific cases.199 It will further be
assumed that the hermeneutic or textualist approach might be the starting point for most of
these interpretative methods, but many would consider that there should also be empirical,
argumentative, logical and normative elements.200 This means that, in interpreting a legal
rule, most people would also view it in its larger context for example by considering its
purpose, legal history or the intention of the legislator.201
However, there are also those who in legal interpretation would look beyond these
elements. They would include also other normative systems that use rules and norms to
control behaviour to determine, such as social norms or ethics,202 or take a more pragmatic
approach and consider the effects of a certain interpretation.
The aim of this section is to identify which forces could affect the outcome of the act of the
interpretation and, consequently, how this impacts the spirit of international tax law.
Against this background, it will first be discussed whether the outcome of interpretation is
impacted by the values and preferences of the interpreters themselves and how this might
be relevant in determining what is part of the concept of law and what is not. Subsequently,
various legal principles will be examined to discuss whether such principles can be of use in
differentiating between one’s own moral preferences and the established moral
considerations that are part of the concept of law. To this context, it will also be considered
how competing legal principles could be reconciled. Furthermore, it will be discussed if the
differences in legal cultures could lead to significant differences in how legal texts might be
viewed. Finally, it will be discussed how much relevance should be placed on the intention
of the legislator in interpreting legal texts.
4.1 The Interpreter’s Moral Values
According to Dworkin, “constructive interpretation is a matter of imposing purpose on an

object or practice in order to make of it the best possible example of the form or genre to
198
See for instance, Dworkin (1986), at pp. 225-275; and Berman, M. N. (2017). Our Principled Constitution. U.
Pa. L. Rev., 166, 1325, at pp. 1341-1342.
199
Manning (2006), at p. 70 (“Modern textualists acknowledge that statutory language has meaning only in
context, and that judges must consider a range of extratextual evidence to ascertain textual meaning”) and (at
p. 110 (”Properly understood, textualism means that in resolving ambiguity, interpreters should give
precedence to semantic context (evidence about the way reasonable people use words) rather than policy
context (evidence about the way reasonable people would solve problems.”).
200
Van Hoecke (2011), at p. 17.
201
Levine, S. J. (2015). The Law and the Spirit of the Law in Legal Ethics. Journal of the Professional Lawyer, 1-
32, at p. 2.
202
See Bicchieri, C. (2005). The grammar of society: The nature and dynamics of social norms. Cambridge
University Press for more on other normative systems than legal systems.
68
which it is taken to belong.”203 This statement entails that the act of interpretation is much
more than just comprehending the words on paper. It is also about understanding the
author’s motive or intentions at the time of writing. Beyond that, one needs to concern
oneself with the development of morality in the political discourse,204 as changes in values
and in content tend to become very relevant for existing legal rules. This is particularly true
if these rules have been around for some time.205
If we accept Dworkin’s assertions that (i) law should be interpreted constructively, (ii) that
interpretation is more than just a linguistic analysis,206 and (iii) that we should strive to
interpret the law in its best possible light, it is almost inescapable that correct
interpretations of tax law go hand in hand with assumptions about the answers to many
underlying moral questions. On the one hand, these could be governance-type questions
that follow from one’s political philosophical preferences on what the nature of government
should be. For example, these are questions on the relation between the state and its
citizens, what the objectives of taxation are, how the state can use its coercive power, how
the tax burden should be distributed, and how collected revenue could be used.207 On the
other hand, a plethora of moral questions on the concrete design and application of tax laws
will also arise. For instance, questions on how tax policy should be designed and how tax
laws should be understood. Moreover, another question is in what way both tax policy and
the behaviour of taxpayers should be evaluated against general normative rules and legal
principles.208
Dworkin argues that the exercise of interpretation asks a number of things of judges,
especially, when they are deciding hard cases. They should look back at the legal text and
the intention of the legislators (which Dworkin calls conventionalism), and they should look
forwards to contemporary legal practice and the unfolding political narrative (which he calls
legal pragmatism).209 Judges should find “in some coherent set of principles about people’s
rights and duties, the best constructive interpretation of the political structure and the legal
doctrine of their community.”210 Essentially, they would be constructing and testing various
rival legal interpretations against a multifaceted collection of political and moral
principles.211 Dworkin contends that these two aspects are complementary and that their
application will ensure a common bandwidth for the reasonable interpretation of any given
law, thus essentially filtering out more radical or eccentric (moral) positions.212 Dworkin
concedes that this still leaves room for individualised judgements on fairness and justice at
the fringes of this bandwidth. In fact, Dworkin appears to believe that this room for
individualised judgements is essential:
203
204
Dworkin (1986), at p. 316.
205
206
Dworkin (1986), at p. 109.
207
Van Brederode (2020), at p. 2.
208
209
Dworkin (1986), at p. 225.
210
Dworkin (1986), at p. 255.
211
Dworkin (1986) at p. 265.
212
Dworkin (1986), at p. 256.
69
No mortal judge can or should try to articulate his instinctive working theory so far, or
make that theory so concrete and detailed, that no further though will be necessary
case by case. He must treat any general principles or rules of thumb he has followed in
the past as provisional and stand ready to abandon these in favor of more
sophisticated and searching analysis when the occasion demands. […] It would be
absurd to suppose that he will always have at hand the necessary background
convictions of political morality for such occasions. Very hard cases will force him to
develop his conception of law and his political morality in a mutually supporting
way.213
Arguably, Dworkin also implies here that the act of interpretation is very much about the
one doing the interpreting. The interpreter might put their own convictions and frame of
reference on the intentions of the author. On top of that, Dworkin takes a Foucauldian view
in saying that “interpreters think within a tradition of interpretation from which they cannot
wholly escape.”214 This means that a normative approach to interpretation likely does not
produce a mind-independent outcome. It is dependent on personal values, principles,
choices and preferences.215 To put it in terms of the sorites paradox, on the scale from red
to orange, the position where one judge might say that the colour red changes to orange is
different from the position that another judge might identify.
Therefore, the correct result could, at least in part, be in the eye of the beholder when it
comes to the interpretation of legal texts. It could be argued that this means that there is an
inherent uncertainty in interpreting legal texts. One could possibly compare this to what is
generally known as the confirmation bias.216 As such, the normative preferences of the
interpreter could directly affect the outcome of the interpretation.
This notion should give pause to interpreters of legal texts to ask themselves where a
particular belief or conviction comes from or how they came to hold it. The point of such an
exercise is to discover whether this conviction is based on a self-evident truth or not. The
realisation that some beliefs might not be rooted in self-evident truths can be explained by
the fact that people tend to hold moral beliefs or convictions that are not based in fact but
has been developed within a certain culture. This explains why different people from
different cultures hold different convictions. Moreover, it means that, even though one can
trace the clear causal relationship of why someone would hold a certain moral conviction,
this is not evidence of the soundness of that conviction or its connection to some universally
accepted truth.217
This is considered as a difficult exercise by most people because it opens one’s moral
convictions up to (self-)doubt. It forces one to think about whether there are genuine
213
Dworkin (1986), at pp. 257-258.
214
215
Hage, J. (2011). The Method of a Truly Normative Legal Science. In Methodologies of Legal Research: What
Kind of Method for What Kind of Discipline? (Van Hoecke, M. (ed.)). 19-44. London: Hart Publishing, at p. 30.
216
Nickerson, R. S. (1998). Confirmation bias: A ubiquitous phenomenon in many guises. Review of general
psychology, 2(2), 175-220, at p. 175 (“Confirmation bias, as the term is typically used in the psychological
literature, connotes the seeking or interpreting of evidence in ways that are partial to existing beliefs,
expectations, or a hypothesis in hand.”).
217
Dworkin (1986), at pp. 427-428.
70
reasons to hold one’s moral convictions. Dworkin argues that this fear is unnecessary, as
only a moral argument can hurt a moral conviction.218 This points to Hume, who has argued
that an ought-statement can never be derived from an is-statement.219 This means that a
normative ought-statement can never be objectively true. Even though an ought-statement
can be supported by any number of is-statements, it can only be justified by at least one
other normative ought-statement.
Finding the origin of one’s moral conviction, however, is not a normative exercise. It has
nothing to do with the validity of one’s normative statements, it is a search for their genesis.
Discovering where one’s moral convictions come from, therefore, is a factual exercise. This
means that knowing the causal origin of a moral conviction has no bearing on whether one
should abandon this moral conviction. This is because the causal origin says nothing about
the value of that conviction or whether someone else’s moral beliefs might be better or
worse. Thus, it should not be frightening to know which part of the interpretation is based
on moral convictions that are based on self-evident truths or moral convictions that stem
from cultural influences. In fact, with respect to this study, it is an important step to
comprehend which elements in an interpretation that are objectively part of the spirit of the
law and which elements that are actually part of the interpreter’s own moral convictions.
For example, according to Van Brederode, the morality of taxation is directly dependent on
one’s preferences in political philosophy and beliefs about what role the state should
have.220 Moreover, he asserts that there is no standard to measure how much each
individual must contribute to society in terms of paid taxes.221 He goes on to conclude that
the moral obligation to pay taxes can only come from a valid legal rule and not from a vague
moral standard such as fair share. At the same time, he states that the law provides a
bandwidth for taxation “with a maximum (no more than legally owed) and a minimum
(violation of the spirit of the law)”.222 Accordingly, he concludes that as long as behaviour is
to be considered legally acceptable, it should also be morally acceptable. This short
argumentation illustrates, in my view, the importance to accurately determine where moral
language comes from. As argued earlier, morality and law should not be viewed as
completely separate, and in interpreting law, one quickly runs into moral dilemmas.223
Deciding whether a moral proposition within an interpretation is generally held to be true or
not is essential in determining whether a moral judgement can be at all be a part of law.
In short, ideally there would be a commonly accepted, understandable and knowable

standard by which one can determine what the meaning of the law is, and, conversely, by
which one can evaluate actions to be either in line with or in conflict with this law and the
broader legal system in which it sits.224 However, insofar as there are standards in place —
such as article 31 VCLT or the various Interpretation Acts that will be discussed later on in
this study — they tend to focus on the meaning or intention of the legislator and do not
218
Dworkin (1986), at p. 428.
219
Hume (1896), at p. 469.
220
221
222
223
See Section 2.3.
224
Hage (2011), at p. 42.
71
take fully into account the role of the interpreter on the outcome of the interpretation.
Therefore, I would contend that it is not enough to focus on developing standards for a
commonly understood language. What is (also) lacking is an understood mechanism to filter
out the subjective elements that effectively change the outcome of the interpretation
depending on the personal preferences and values of its interpreter rather than the
inherent morality of the law.
4.1.1 Understanding Moral Language Through Metaethics
The previously discussed natural law theorists, legal positivists and other legal philosophers
all have views on the relationship between law and morality, and most seem to agree that
morality could act as a stabilising or anchoring force within (the interpretation of) law.225
However, morality is also used in practice as an argument that is meant as a force to
destabilise. For instance, commentators (such as NGOs or the media) often state that the
fair share in profit tax is not paid.226 Such a statement goes to the principles on which the
international tax system is build. Thus, it questions whether a specific tax rule, or the
international tax system of corporate income taxation as a whole, is actually morally sound.
Interestingly, neither the legal philosophers nor the above-mentioned commentators spend
too much time on explaining what morality is exactly or what they mean by it. Morality
seems to be a term that should just be understood implicitly, or that is understood in the
same way by everyone. This raises the question of whether the way one thinks about
morality influence the manner in which one interprets legal texts.
The field of metaethics could provide an answer on this point, as metaethics looks at the
meaning of moral language. It attempts to answer questions on what morality is. For
instance, is morality a matter of taste or of truth? Is morality based on objectively knowable
facts or is morality more like an opinion or preference? Is it more like a set of cultural
conventions? Are moral facts different from other facts? Where do these moral facts come
from: are they taught to us or are we born with them? In other words, what is the origin of
morality and from where do they derive their authority?227
It must first be said that metaethics is highly abstract and (almost) all of its underpinning
theories contain flaws. However, the insights from metaethics might still be useful to better
illustrate the impact the interpreter could have on legal interpretation. The focus of this
study prevents extensive descriptions of all the different perspectives in metaethics and
controversies hereto. Therefore, this paragraph will be limited to a brief overview of the
main theories and the problems surrounding these theories.
225
See Section 2.3.
226
See Section 9.4.
227
See for example, Fisher, A. (2014). Metaethics: an introduction. Routledge, at pp. 2-5; Sayre-McCord, G.
(2014). Metaethics. In The Stanford Encyclopedia of Philosophy (Summer 2014 Edition) (E. Zalta (ed.)), at para.
1.
72
A very basic breakdown of the field of metaethics, divides its views roughly into two groups:
(i) those who believe there are no moral facts and (ii) those who believe such moral facts do
exist.228
4.1.1.1 Moral Facts Do Not Exist
Branches of metaethics that assert that there are no moral facts are, for instance, emotivism
and prescriptivism. These contend that, when people use moral language, they are in fact
expressing either an emotion or an opinion about someone’s behaviour. The use of moral
language signifies a way of telling people (or companies) to stop the kind of behaviour that
they are engaged in.229 Morality, therefore, stems from an individual’s own beliefs rather
than from moral facts.
Moral antirealists are another example of metaethics that believe that there are no moral
facts. For instance, in this regard, Australian philosopher J.L. Mackie has put forward the
error theory. He states that people are systematically wrong when they make moral
judgements, because there are no objective moral or ethical values.230 Error theory is
grounded in the idea that moral propositions do not refer to objective features of the world
at all. An error theorist would therefore say that there is nothing inherently wrong about
murder or that there is nothing inherently right about taking care of your children. This does
not mean that one cannot hold moral views concerning these issues. It just means that
these views might be rooted in (conventional) attitudes or policies rather than observable
and testable moral facts.231
The problem with the idea that there are no moral facts is the question of how we might
justify that one set of moral arguments is placed over another set of moral arguments. If
moral statements are a matter of opinion, which opinion should prevail? At the same time,
in practice, it happens all the time that some opinions are valued higher than others. For
instance, it can be observed in the media that the opinion that is widely held by the public
often will be presented as the opinion that should prevail over all other opinions.232
Interestingly though, there are indications of the fact that what is presented in the media as
the widely held opinion by the public might, in fact, only be the opinion of a vocal minority
with good access to the media.233
228
Allan, L. (2015). A Taxonomy of Meta-ethical Theories. Retrieved from
http://www.RationalRealm.com/philosophy/ethics/taxonomy-meta-ethical-theories.html.
229
Fisher, A. (2014), at pp. 25-26.
230
Mackie, J. (1977). Ethics: inventing right and wrong. Penguin Books, at p. 15.
231
Mackie (1977), at p. 16.
232
See examples of this throughout Section 9.4, and, particularly, in Sections 9.4.2.2. and 9.4.3.2.
233
Lammers, J. (2021). Has Public Opinion Moved the Political Needle on Corporate Tax Avoidance?, Tax Notes
International, Vol 104 (9), 999-1011, at p. 1002.
73
4.1.1.2 Moral Facts Exist
Most people are thought to identify with some form of moral realism.234 This is the belief
that there are moral facts much in the way that there are scientific facts. In this view, one
can ascertain whether a moral proposition is true or false based on moral facts. Most people
intuitively appear to think this makes sense: they feel that some things are just (morally)
wrong and that other things are just indisputably right.
Moral Absolutism
Within moral realism, different views can be found. For instance, there are those who
believe in moral absolutism. This means that moral facts are constant and always apply the
same way everywhere. Moral propositions can, therefore, be tested against absolute moral
standards. Moral absolutism can be found in ethical theories such as the divine command
theory and the ideal observer theory.
Moral absolutism has the appeal of simplicity. A moral proposition can only be true or false,
and, therefore, the distinction between what is deemed good and bad is crisp and clear. The
big — and possibly — unanswerable questions with regard to moral absolutism, however,
are where these moral facts come from and how we know what they are. This is known as
the grounding problem.235 The grounding problem has several issues that mainly go to
arbitrariness. To explain this further, the divine command theory, the ideal observer theory
and the problems that these theories run into with regard to the grounding problem will be
discussed in some detail.
The divine command theory is one of the oldest ethical theories in the world. It holds that
what is moral and what is immoral is commanded by God. Therefore, it attempts to solve
the grounding problem by saying that morality comes from God. There is, however, a
fundamental problem with this ethical problem. This problem is described by Plato and is
known as the Euthyphro dilemma.
In Plato’s text, Socrates and Euthyphro meet on the steps of the Athens courthouse.
Socrates is there because charges have been brought against him for corrupting the youth
of Athens. Euthyphro is there to prosecute his own father on charges of murder. As Socrates
asks if this does not disturb him, Euthyphro says that he is a theologian and that this gives
him special insight into what is right and wrong, and, thus, that he knows that he is acting in
the spirit of true piety. He believes prosecuting his own father is the right thing to do,
because the gods have commanded it. In the dialogue that follows, the two men attempt to
define piety but without success. During the conversation, Socrates makes the logical
distinction that the good might not be good because the gods command it, but that the
gods command it because it is good. At the end, Socrates says that he will just tell his
234
Weinberg, J. (2021), What Philosophers believe: Results from the PhilPapers 2020 Survey. DailyNous.
Retrieved from https://dailynous.com/2021/11/01/what-philosophers-believe-results-from-the-2020-
philpapers-survey/.
235
The grounding problem represents the need for an objective basis to support the concepts of right and
wrong. Without such an objective basis, morality runs the risk of being subjective, and the justification of one’s
actions and/or the resolution of conflicts would be based on force rather than reason. See for example,
Nielsen, K. (1997). God and the Grounding of Morality. University of Ottawa Press, at pp. 15-16.
74
accuser that he will become Euthyphro’s pupil and that his insights into right and wrong will
make him better his life.236
The essence of the Euthyphro dilemma, therefore, is the question of what the origin is of
what is good (and bad). If one assumes that something is good just because God commands
it, this would mean that, if God creates goodness, anything God commands is also good.
However, in the Bible, God also commands killing and violence.237 Moreover, if God were to
change their mind, something that is considered good today would simply have to be
considered bad tomorrow. It makes God’s commands and the morality that flows from them
arbitrary. The idea about what is good then just becomes meaningless, as the only relevant
thing is the divine command itself. Conversely, if one assumes that God commands only that
which is good, God is nothing more than a go-between or an interpreter. It means that God
is not omnipotent. The source of what is good and bad lies elsewhere. God cannot change
this. God just knows what the right answer is. This therefore fails to give an answer to the
problems of where the distinction then comes from and where it derives its authority
from.238
The ideal observer theory also attempts to solve the grounding problem. Firth puts forward
that moral propositions should be judged similar to how an ideal observer would judge
them. In his article, he describes the traits that such an ideal observer should have.
According to Firth, these should be (i) omniscience, (ii) omni-percipience, (iii) impartiality
and disinterestedness, (iv) dispassionateness, and (v) consistency. Moreover, Firth stresses
that the ideal observer is not some sort of deity. In all other aspects of life, the ideal
observer should be normal. Whenever there is a moral dilemma, one should thus ask
themselves: what would the ideal observer do? 239
The main problem with the ideal observer theory, however, is that is appears to be circular
in nature. As Firth only describes the traits of the ideal observer, one is still in the dark about
what really is morally good. This is because the morally good is that which an ideal observer
judges to be so, and, in order to be an ideal observer, one has to judge what is morally good.
Moreover, even though Firth states that the ideal observer is not a deity, it is difficult to see
the distinction between the divine command theory and the ideal observer theory. One
could therefore argue that the Euthyphro dilemma also applies to the ideal observer theory
to a great extent.
Moral Relativism
There are also those who believe in moral relativism. This branch of metaethics holds that
moral facts exist, but that more than one moral position on any given issue can be true. The
commonly held view in this regard is descriptive cultural relativism. This means that
people’s moral beliefs differ from culture to culture. There is, however, also normative
236
Plato, H. G. (1961). Euthyphro. In The Collected Dialogues of Plato (ed. H. Cairns). Princeton University
Press, pp. 169-185.
237
See for example, Genesis 22, Numbers 11, Numbers 15, Numbers 33, Deuteronomy 17, Deuteronomy 19,
Joshua 8, and 1 Samuel 6.
238
Koons, J. (2012). Can God's Goodness Save the Divine Command Theory from Euthyphro?. European Journal
for Philosophy of Religion, 4(1), 177-195, at p. 194.
239
Firth (1952), at pp. 333-345.
75
cultural relativism that states that it is not our beliefs that differ but that moral facts
themselves differ across cultures.240
The main issue with moral relativism is that, if a culture is the sole arbiter of what is wrong
or right for it, no culture can actually be wrong. Ultimately, this means that all moral
propositions can be true and false at the same time. This would make any moral judgement
essentially meaningless. Compare this, for example, to the ideas of Finnis, which were
discussed earlier.241 He contends that unjust laws cannot be justifiably enforced by the
state.242 The moral test lies, thus, not in the legal validity of the rule but in the justification
for and, thus, the ability of a state to enforce that rule. But according on cultural relativism,
one subsequently should say that the laws of the Nazi regime were actually (morally) right
for the people in that culture. Arguably, most people would find this a problematic outcome
of a debate on the morality of law.
4.1.2 Moral Convictions and the Concept of Law
The above reasoning is meant to illustrate that moral language can be dependent on one’s
own convictions, values, or preferences, or it may be based on more widely held moral
convictions, or it may even be based on moral convictions that are considered to be self-
evident.
This distinction is important, because it is contended that those moral convictions that are
not held widely enough should not be part of the concept of law. Compare, for instance, the
reasoning of Fuller’s principles of legality.243 By adhering to the principles of legality, the
legal rules will have built-in moral standards of respect, fairness, and predictability, and they
are thus integral to that system. But, in the case of moral convictions that are not widely
held, one might argue that these convictions are not known, they are not part of a
consistent legal system and might be contradictory to other (widely held) moral convictions.
Moreover, there is a significant risk that such moral convictions are not relatively constant,
so that people in general cannot rely on these moral convictions as stable foundation for
legal rules.
Fuller’s principles of legality are meant to act as principles to promote efficiency and
effectiveness as well as to act as principles that reflect moral ideals of fairness. As a result,
satisfying all conditions would constitute an inner morality to law that imposes a minimal
degree of fairness and promotes the rule of law. Following the explanatory, axiomatic and
logical approach, I would argue that this argument does not only apply to the constitution of
valid law but also to the way law is interpreted. As legal interpretation cannot just be
arbitrary, not every moral consideration can be part of law. Consequently, if these
conditions are not met because one’s own moral convictions are not widely held, the
interpretation cannot be a valid legal interpretation. In other words, such an interpretation
240
For a more extensive explanation of descriptive and normative cultural relativism and how these concepts
relate to each other, see Spiro, M.E. (1986). Cultural relativism and the future of anthropology. Cultural
Anthropology, 1(3), 259-286, at pp. 259-264.
241
242
Finnis (2011a), at p. 260.
243
Fuller (1969), p.28.
76
is not an accurate reflection of the spirit of the law, as it only reflects one’s personal
preferences.
This raises the question of how moral convictions that are widely held can be distinguished
from moral convictions that are only personal preferences.
4.1.3 Morality in General Principles of Law
In this section, it will be considered whether legal principles are indicative of widely held
moral convictions and, thus, if they can help in differentiating between one’s own moral
preferences and established moral considerations that are part of the concept of law.
According to Dworkin, judges should find “in some coherent set of principles about people’s
rights and duties, the best constructive interpretation of the political structure and the legal
doctrine of their community.”244 However, which principles should be part of this coherent
set? Dworkin argues that most people believe that an individual might not always have as
their duty to treat everyone in the given community with equal care and concern, but that
most people believe that a government does have this as their duty.245 In Dworkin’s
reasoning this brings an important distinction between private and public responsibility.
Public responsibility should be understood — much in line with Rawls’ principles of justice
— that the government should succeed in providing a state of equal opportunity. To make
sure that people have access to an equal share of resources and to ensure that each
individual has the legal rights to use these resources as they please.246 This approach to
equality of resources is superior to the libertarian approach: “it fits legal and moral practices
just as well but works better as an abstract moral theory.”247
This approach to public responsibility also has an impact on private responsibility. It

essentially means for private responsibility that one should factor into the moral decision
the relative cost to this initial equal division of resources. Moreover, one should work out
how to act selfishly while minimising the incurred costs to others. This is a comparative
harm approach that is meant to ensure that the loser loses the least. Dworkin, therefore,
appears to subscribe to the basic idea that one should consider the situation from the
perspective of the least advantaged party. One could assume that, if everyone bases each of
their individual decisions on such considerations, the public and private responsibilities
combined will guardrail this so that it roughly works out fairly for everyone in society.248 In
this regard, Gribnau & Dusarduijn point out that this public responsibility (also) requires a
commitment to a coherent set of fundamental (legal) principles. It is the task of lawmakers
to ensure that the law is always made, developed, and interpreted based on these
consistently applied principles.249
244
Dworkin (1986), at p. 255.
245
Dworkin (1986), at p. 296.
246
Dworkin (1986), at p. 299.
247
Dworkin (1986), at p. 301.
248
Dworkin (1986), at p. 312.
249
Gribnau, J.L.M., & Dusarduijn, S. (2021). Principles-based tax drafting and friends. On rules, standards,
fictions and legal principles. In Contemporary Issues in Tax Research, 4. 165-206, at p. 170.
77
Specifically, with regard to a legal framework for taxation, Vanistendael has described the
principles, which, in his view, should make up this framework. He argues that the first
principle of such a framework should be that no tax can be levied except under the
authority of law.250 In addition, he points to the principle of equal treatment.251 This
principle might not be specific to tax law, but that does not take away from its fundamental
importance as a principle that should govern the legal framework of taxation. The principle
does not only entail that people who have equal circumstances must be treated equally but
also that unequal treatment of people who do not have equal circumstances must have a
rational basis.
More specifically related to taxation, Vanistendael also identifies the principle of

proportionality, the ability-to-pay principle and the principle of fair play as fundamental
parts of the legal framework for taxation. The principle of proportionality means that the
means — for instance, coercive force of a state — used to attain a certain goal set by the
legislator or the tax authorities must be proportional to the aims that are sought to be
achieved.252 This therefore means that there are limits to the lengths that a government can
go in enforcing the law. The ability-to-pay principle means that the tax burden someone is
exposed to should be proportional to the resources that they have.253 Finally, the fair play
principle means that the tax authorities must be fair in its dealings with a taxpayer.254 This
entails that a tax authority must inform the taxpayer on decisions that it has made with
regard to the taxpayer and that the taxpayer must be able to trust the official decisions of
the tax authorities — for instance, on how the tax rules should be interpreted with regard to
the taxpayer’s situation.
Gribnau & Dusarduijn also point to equal treatment, legal certainty, proportionality as
fundamental legal principles when it comes to tax law. With regard to the international tax
system and the concept of fairness, they also consider the principle of neutrality255 and the
single or full taxation principle.256 On tax law and the allocation of taxing rights in addition to
the ability to pay principle,257 they also consider the benefit principle and the source
principle. More specific to EU law, they also consider the principle of consistent
interpretation,258 the principle of supremacy,259 and the principle of effective judicial
250
Vanistendael, F. (1996). 2 Legal Framework for Taxation. In Tax Law Design and Drafting, Volume 1.
International Monetary Fund, at p. 16; Also see OECD. (2015a). Fundamental principles of taxation. In
Addressing the Tax Challenges of the Digital Economy. OECD Publishing, at pp. 30-32.
251
Vanistendael (1996), at p. 19.
252
253
254
255
See for further explanation Section 5.4, and, in particular, section 5.4.4.1.
256
See for further explanation section 5.4; Also, see OECD (2015a), at p. 30; Mason, R. (2020). The
transformation of international tax. American Journal of International Law, 114(3), 353-402; Avi-Yonah, R. S.
(1996). International taxation of electronic commerce. Tax L. Rev., 52, 507.
257
The total tax burden should be distributed among taxpayers according to their capacity to bear it.
258
National judges should avoid direct conflicts between EU law and national law by interpreting all existing
domestic law (as far as possible and subject to the fundamental principles) in conformity with any relevant
provisions of Union law
259
National judges must (in principle) disapply any provisions of domestic law that are contrary to provisions of
Union law when this cannot be avoided or resolved by applying the principle of consistent interpretation.
78
protection.260 According to these authors, these fundamental legal principles are standards
that are an integral part of the legal system and are also developed within the legal system
itself. These principles are strongly influenced by society’s values concerning morality and
integrity according to Gribnau & Dusarduijn. Moreover, they govern the system in part like
the rule of recognition, but they also govern behaviour.261
This means that the fundamental legal principles form the internal morality of law as well as
the regulative ideals that are closely connected to moral values and the integrity of the tax
system. A consistent principled approach to tax law, therefore, entails that the (interplay
between) individual rules of the tax code are in line with these principles.262 This also entails
a private responsibility in applying the rules. Taxpayers should also respect the general
principles of law, even if these principles are not an explicit part of a particular legal text.
Legal principles could therefore be viewed as a form of solidified morality that is widely
accepted to have legal force.
However, if one accepts this, one might wonder if all (the above-mentioned) principles of
law should carry the same weight when it comes to legal interpretation. For example, Van
Hoecke argues that one could make a distinction between a guiding or structural legal
principle as opposed to a correcting or ideological legal principle. A structural legal principle,
in his view, is induced from the legal system itself, and, as a result, it has a strong
institutional support. It is to be observed as a “hidden axiom[..] of the logical structure of the
legal system.”263 At the same time, because it can be induced from the legal system itself, a
similar result could likely be achieved by interpretating law by analogy and/or through
purposivist interpretation.264 One could therefore argue that the morality of the structural
principles of law is firmly part of the spirit of the law.
An ideological or correcting legal principle, however, is applied only to restrict the

application of legal rules. Such a principle corrects the application of a legal rule when the
outcome of these rules in a specific situation is considered to be unfair, unreasonable or
unacceptable when compared to a commonly accepted moral or political point of view. It is
only when the conflict with this commonly accepted moral or political viewpoint is clear that
the legal rule would be discarded. Moreover, this will then be applied in the form of a
general legal principle, even though the underlying reason for discarding the legal article
might be distinctly non-legal in origin.265 This means that an ideological legal principle needs
institutional support. In contrast to structural legal principles, ideological legal principles are
not induced from the legal system itself. Rather, these are non-legal principles that are
made legal by finding constitutional support through considerations by the courts and by
lawmakers.266 Van Hoecke states that this also means that these ideological legal principles
have to be able to rely on a broad consensus in society in order to be able to gain the
necessary institutional support. However, once this is the case, this also means that the
260
Rights and obligations flowing from EU law must be adequately enforceable in practice.
261
See Hart (2012), at pp. 115-116: Shapiro (2009), at p. 18; Raz (1979), pp. 38-39.
262
Gribnau & Dusarduijn (2021), at p. 172.
263
Van Hoecke, M. (1995). The use of unwritten legal principles by courts. Ratio Juris, 8(3), 248-260, at p. 250.
264
265
266
79
morality of ideological legal principles should be considered part of the spirit of the law as
well, albeit, perhaps, they are more reliant on a more pluralist approach to legal
interpretation than structural legal principles.
4.1.3.1 Principles of Tax Law
If one accepts that both structural and ideological principles can be legal principles but that
the difference between these is that structural principles are intrinsic to the law while
ideological principles are not, the question is then which principles of tax law are structural
and which are ideological.
It seems obvious that non-discrimination-related principles are part of the structural legal
principles. These principles are not limited to tax law, and, invariably, they are an essential
part of constitutions as well as international treaties.267 Similarly, principles of
proportionality, the use of coercive force and legal certainty should also be considered
structural principles, as they also transcend the tax area and typically are found in
constitutions and international treaties. With regard to principles that refer specifically to
tax law, it might be harder to clearly determine what are structural legal principles.
For example, the ability-to-pay principle can be found in a number of constitutions, which
would suggest that it is a structural principle.268 This also makes sense, as it is closely
connected to the principle of non-discrimination. However, Hongler argues that, in
international tax law, the ability to pay principle is a defective principle.269 Hongler argues
that global justice does not require international tax law to be in line with the ability-to-pay
principle. The ECJ has referenced the ability-to-pay principle in Schumacker.270 This means
that the ECJ applied the ability-to-pay principle in the context of the EU principle of equal
treatment. However, the ECJ does not do this consistently in other case law, meaning that
this principle is not applied to all cross-border situations.271
From the point of view of the ability to pay this is bound to lead to unsatisfactory
results, because for the taxpayer his ability to pay is determined by the combined
elements of all the tax systems of the Member States in which his income is sourced.
The implementations of the concept of ability to pay in the Member States are of
course quite different, but the question is whether the Court could not set one step
further by deciding to make a proportional application of those concepts depending on
267
Vanistendael (1996), at pp. 19-27.
268
269
Hongler (2019), at p. 406.
270
Case C-279/93. Judgment of the Court of 14 February 1995. Finanzamt Köln-Altstadt v Roland Schumacker.
ECLI:EU:C:1995:31, at para. 41 (“That argument cannot be upheld. In a situation such as that in the main
proceedings, the State of residence cannot take account of the taxpayer' s personal and family circumstances
because the tax payable there is insufficient to enable it to do so. Where that is the case, the Community
principle of equal treatment requires that, in the State of employment, the personal and family circumstances
of a foreign non-resident be taken into account in the same way as those of resident nationals and that the
same tax benefits should be granted to him.”).
271
Hongler (2019) at p. 398.
80
the proportion of the income that falls within the tax jurisdiction of each Member
State.272
This would suggest that the ability-to-pay principle would be considered a structural legal
principle with regard to the application of national law, but it would sooner belong in the
ideological-principle category with respect to the application of EU tax law. In fact, one
might wonder if there is enough institutional support to even consider that the ideological
principle has legal standing, considering ECJ case law and the conclusions of both
Vanistendael and Hongler. Moreover, from a global perspective, applying the ability to pay
principle appears to have too many practical problems to be considered a principle of
Tax neutrality is widely considered as a crucial part of a well-functioning tax system. As a

result, tax neutrality is the normative universe of tax policymakers.273
[S]eek neutrality. A tax system that treats similar economic activities in similar ways
for tax purposes will tend to be simpler, avoid unjustifiable discrimination between
people and economic activities, and help to minimize economic distortions.274
However, in Section 5.4.4.1, it is discussed why tax neutrality is an active policy choice. From
this, one could conclude that the principle of tax neutrality is based on ideological choices
rather than that tax neutrality is a structural part of tax law. Hongler argues that, from a
perspective of fairness and justice, there is also no compelling argument as to why a tax
system should be neutral. In fact, because of the focus on tax neutrality, international
distributive justice routinely takes a backseat to economic efficiency.275 Finally, there are
also good reasons for tax systems not to be neutral. It can be efficient to discriminate for tax
purposes, for example in cases of encouraging behaviour because of positive spin-off effects
such as in investing in R&D. This is also efficient in cases where behaviour is to be
discouraged because of the external costs for society such as with the cases regarding
environmental taxes. Therefore, tax neutrality should be considered as an ideological tool to
achieve specific policy goals, and not as a structural principle inherent to taxation in neither
national nor international tax law.
The source principle and benefit principle are both to be viewed as principles that justify a
state to tax income. The first entails that, if income originates from a certain jurisdiction,
that jurisdiction should have the (first) right to tax that income. The latter means that, if an
economic actor benefits from a government’s spending or expenditures, that economic
actor should also be expected to contribute by paying taxes in that jurisdiction. As such,
272
Vanistendael, F. (2014). Ability to pay in European community law. EC Tax Review 23.3. 121-134, at p. 134.
273
See Peters (2013), at p. 13; Hongler (2019), at p. 418; De Wilde, M. F. (2010). Some thoughts on a fair
allocation of corporate tax in a globalizing economy. Intertax, 38(5), at p. 288.
274
See Mirrlees, J. A., et al. (2011). Tax by design: The Mirrlees review. Oxford University Press, at p. 471.
275
Hongler (2019), at p. 435; Also, see Sections 5.4.4.1 and 11.1.
81
both principles could be viewed as structural principles to the design of the international tax
system.276
Finally, the full taxation principle is discussed in some detail in section 5.2 and beyond.277
Here, it suffices to state that there are multiple practical problems with the concept of full
taxation. Moreover, it might simply be too early to tell whether full taxation is really
accepted as an international norm as a result from the OECD/G20 BEPS project. In any
event, there are strong arguments to assume that full taxation cannot be considered to be
customary international tax law at this moment. These two observations mean that
currently full or single taxation is not yet a structural principle, and it is likely not a legal
ideological principle either. Instead, at present, the principle of full taxation might have to
be categorised as a non-legal ideological principle that might find the necessary institutional
support to become legal but, at the moment, might not have achieved this level of
institutional support yet.
4.1.3.2 Reconciling Competing Legal Principles
Another question that arises with regard to (structural and ideological) legal principles is
what happens if there are competing principles. According to Gribnau, legal principles are
the moral core of the legal system and, as such, carry the entire system of legislation.278 This
means that legal principles are of a higher order than ordinary legal rules. Moreover, they
are different from legal rules, while legal rules are more absolute in nature.279 Legal rules
either apply or they do not apply. If two conflicting legal rules would lead to a different
consequence, the legal system would be inconsistent. As both Fuller and Dworkin believe,
the legal system cannot — or at least should not — be inconsistent. Therefore, only one rule
can ultimately apply. Legal principles, on the other hand, always apply.280 When a situation
arises where two principles are conflicting or give conflicting outcomes, there is a need to
consider which principle that should be given the most weight. However, whatever the
result of this consideration might be, both principles will have to be upheld. The reason for
this is that, if you would not uphold one of these principles, this would lead to an
inconsistency in the legal system, as the integrity of law requires a consistent application of
its underpinning legal principles.
For guidance on how this can be done effectively, one could look to the Canadian Charter of
Rights and Freedom. This Charter is part of the Constitution of Canada and describes the
rights and freedoms necessary to have a free and democratic society.281 However, these
276
See section 5.3.3; also, see Escribano, E. (2020). The Renaissance of the Benefit Principle for the 21th
Century International Tax Reform. Kluwer International Tax Blog; Christians, A., & Van Apeldoorn, L.
(2021). Tax Cooperation in an Unjust World. Oxford University Press, chapter 2; Ozai, I. (2020). Inter-Nation
Equity Revisited. Colum. J. Tax L., 12, 58, at p.71.
277
See Sections 5.3, 5.3.2, 5.4 and 5.4.1.
278
Gribnau, J. L. M. (2011). Fiscale ethiek: wederkerige verantwoordelijkheid voor de integriteit van het
belastingrecht. Geschriften van de Vereniging voor Belastingwetenschap, (243). Kluwer, at p. 13.
279
Happé (2011), at p. 36.
280
This is the logical consequence of that legal principles form the moral core of the legal system and as such
carry the entire system of legislation.
281
See Government of Canada, Constitution Act, 1867. Retrieved from https://laws-
lois.justice.gc.ca/eng/Const/index.html (last accessed 18-07-2022).
82
rights and freedoms can be limited to protect other rights or important national values.282
The Ontario Human Rights Commission has considered that there are no bright-line rules for
dealing with competing human rights claims. Principles are abstract and allow for some
flexibility in approaching claims on a case-by-case basis. Canadian case law also reflects that
the specific facts will often determine the outcome. Moreover, this, in turn, has led to the
following framework for reconciling competing fundamental legal rights:283
(i) No rights are absolute

Fundamental rights and freedoms of one individual are inherently limited by the
rights and freedoms of others. For instance, the Canadian courts have found that it
was justified to limit the freedom of religion of certain individuals, as the freedom to
hold beliefs should be considered broader than the freedom to act on these
beliefs.284
(ii) There is no hierarchy of rights

All rights and freedoms in the Charter of Rights and Freedoms are equally deserving
and approaches that place certain rights over others should be avoided. No right is
inherently superior to another.285
(iii) There must be competing legal rights

Not all claims that one’s freedom is limited concern legal rights. In some instances,
the freedom that is being infringed upon is to be considered a personal preference,
and/or it appears that the facts and circumstances of the case are such that the claim
does not fulfil all conditions of the legal right. Moreover, as the Charter of Rights and
Freedoms does not extend such incomplete claims, these also cannot limit the rights
and freedoms of others.
(iv) The full context, facts, and constitutional and societal values must be considered
The competing rights must be defined in relation to each other and in the context in
which they clash. This scoping of rights is viewed to be a critical element in rights
reconciliation: “The key to rights reconciliation, in my view, lies in a fundamental
appreciation for context. Charter rights are not defined in abstraction, but rather in
the particular factual matrix in which they arise. […] There is no mechanistic rule that
can be applied to yield a definitive answer to the pressing question: What should
courts do when Charter rights conflict? Rather, courts must be acutely sensitive to
context and approach the Charter analysis flexibly, and with a view to giving fullest
possible expression to all the rights involved.”286
282
See Government of Canada, Guide to the Canadian Charter of Rights and Freedoms. Retrieved from
https://www.canada.ca/en/canadian-heritage/services/how-rights-protected/guide-canadian-charter-rights-
freedoms.html (last accessed 18-07-2022).
283
Ontario Human Rights Commission, Policy on Competing Human Rights. Retrieved from
https://www.ohrc.on.ca/en/policy-competing-human-rights (last accessed 18-07-2022).
284
Trinity Western University v. British Columbia College of Teachers, (2001) 1 S.C.R. 772, at para. 29.
285
Dagenais v. Canadian Broadcasting Corp., (1994) 3 S.C.R. 835, at p. 916.
286
Iacobucci, F. (2003). “Reconciling Rights” the Supreme Court of Canada's Approach To Competing Charter
Rights. In The Supreme Court Law Review: Osgoode’s Annual Constitutional Cases Conference (Vol. 20, No. 1, p.
6), at p. 140 and p. 164,
83
(v) The extent of interference must be considered
In rights reconciliation, a balancing of the rights of individuals and groups rights is
very common. The mere recognition of the rights of one (group) cannot, in and of
itself, violate the rights of another (group). The rights of the other (group) must be
encroached upon in some way. Similarly, it is not enough that there is a chance that
these rights might be violated—the violation must actually occur. Moreover, even if
there is an actual violation, if the impact on the other’s rights is minor or trivial, the
right is not likely to receive much if any protection.287
(vi) The core of a right is safeguarded more than its margins

If there is a substantial violation of the rights in question, reconciling these rights
means that one right will give way to the other or that both rights will be
compromised to a certain degree. The situation where one right will give way is more
likely when an action would be contrary to a fundamental aspect of another
individual’s rights. Also, the impact on the core of the right must be shown to be real
and significant in relation to the impact on the rights of the other party. However,
even if there is a significant impact on the core of a right, there still is a duty to
accommodate the right that is compromised as much as possible. In other words, the
outcome where one right completely prevails over another should be unlikely.
(vii) All competing rights must be protected

Reconciliation entails compromises to both sets of rights. Canadian courts describe
this as constructive compromises. This process implies a search for a reasonably
available and effective alternative measure, which would achieve the important
objectives at stake, which is meant to minimise the potential negative impact on
either person’s rights. There might be rare cases where it proves impossible to find
alternative measures. As a result, one might be forced to have one right (completely)
prevail over another. The legislator should then provide for a means to
accommodate this (undesirable) outcome.
(viii) Rights of one group in society might be restricted by law to grant rights to others
There is often a specific protection in place to safeguard the rights of a specific
group, which is often based on their religion or gender. Often, this protection has
been entered into legislation to recognise structurally competing rights and to
reconcile these. A general restriction of the rights of others in society to the benefit
of such a group is commonly accepted, as long as the government can show that the
limitation is proportional and fair.
In Canada the Oakes test was developed by the Canadian Supreme Court to show the
proportionality and fairness of such a government limitation of the rights of (a group
of) members of society. The Oakes test consists of the following:288
1) There must be a pressing and substantial objective.

2) The means to achieve that objective must be proportional.
287
Syndicat Northcrest v. Amselem, (2004) SCC 47, at paras. 57 and 60.
288
R. v. Oakes, (1986) 1 S.C.R. 103, at paras. 69-71.
84
a) The means must be rationally connected to the objective (is the measure
effective?).
b) There must be minimal impairment of rights (is the measure
proportional?).
c) There must be proportionality between the infringement and objective
(does it benefit society overall?).
4.2 Converging Legal Cultures
This section considers whether differences in legal cultures might lead to different
interpretations of tax law especially with reference to morality and the spirit of the law. The
underpinning idea is that legal language could be understood differently dependent on
which certain legal culture that one is in.289 This is because legal culture could have a
profound effect on the way that a legal scholar looks at legal texts, as legal cultures tend to
share basic ideologies and values. This means that they tend to share a similar concept of
law, how law is made and why certain laws have binding force. Moreover, they share what
they consider valid legal sources in deciding legal conflicts, how laws should be interpreted
and what kind of legal arguments they widely consider to be valid.290
In fact, legal comparative studies show that, very often, it is not so much the legal rules that
are at the heart of the comparison but rather the legal discourse or legal culture. This means
that the way legal professionals and society at large discuss and perceive legal rules are as
much a part of the legal system as the rules that they are made up of.291 Accordingly, in
order to understand the spirit of international tax law to formulate a definition, one is
required to look closer at different legal styles and customs as well as their perspectives.292
In this regard, Van Hoecke points out that having the same legal culture hinges on having a
shared basic ideology and shared values.293 This is because a shared ideology and shared
values would put the systems in the same legal family, as they likely share the same legal
paradigms. Moreover, even if there are differences within this shared ideology — for
instance, on the concept of law or what legal sources are — the legal systems would still be
in the same cultural family, which would be indicative of a shared understanding of legal
cultures, legal language and taxonomy.
In this section in particular, common law and civil law will be examined. This selection is
based on the fact that these legal cultures are the most pervasive globally. This is especially
true if one also factors in where most multinationals have their residence.294 On the one
hand, the basis for the legal system of most Commonwealth countries—India among
289
Van Hoecke, M., & Warrington, M. (1998). Legal cultures, legal paradigms and legal doctrine: towards a new
model for comparative law. International & Comparative Law Quarterly, 47(3), 495-536, at p. 535.
290
Van Hoecke & Warrington (1998), at pp. 519-520.
291
Van Hoecke & Warrington (1998), at p. 495.
292
Zweigert, K. & Kötz, H. (1987). Introduction to Comparative Law, 2nd revised edition (transl. T.Weir).
Oxford, Clarendon Press, at pp. 36-37.
293
294
See OECD. Measuring Multinational Enterprises. Retrieved from https://www.oecd.org/sdd/its/measuring-
multinational-enterprises.htm (last accessed 18-07-2022).
85
them—can be found in English common law. Of course, the common law legal culture is also
dominant in the United States. On the other hand, civil law has become the dominant legal
system throughout Europe, helped along by the collapse of the communist and socialist
regimes in Eastern and Central Europe in the 1990s. Moreover, most non-western societies
also have legal systems that stem from one of these western legal families.295 The reason for
this is that, in many non-western societies, the legal systems of colonial rulers have
survived. For instance, the legal systems in many developing countries in Africa can be
traced back directly to the Code Napoléon. Moreover, the influence and power of Germany
in the end of the 19th century is responsible for the present-day situation that the German
Civil Code is the basis for civil law in large parts of Asia, amongst which you find Taiwan,
Japan and South Korea. Also, German civil law still survives in parts of the Chinese legal
system. However, the current legal system in China—as in other Asian countries that are still
ruled by a communist or socialist government—should likely be classified as socialist law
rather than civil law. Most Islamic countries do not really fall within any of the western legal
families. However, for instance, Indonesia—the largest Islamic country in the world—
certainly retains some of the civil law legal traditions because of their colonial history.296
4.2.1 Civil Law and Common Law Cultures
The most obvious and formal differences are that civil law is based on codified law and that
common law relies on case law as a legal source.297 This provides for different frameworks
for thinking about legal problems.298 For example, with regard to the question of how the
preparatory work in parliaments, intentions of the legislator and the purposes of the law are
relevant in determining how legal questions should be answered.
Another difference between civil law and common law is the approach to and purpose of
legal doctrine. Legal doctrine might technically, in and of itself, not be a source of law, but it
is undeniably very important for the development of the law and how it is perceived. In
common law, legal doctrine is used to compile and classify cases and draw conclusions as to
their combined meaning regarding the progression of the law. In civil law, legal doctrine
tends to focus on the systematic expositions revolving around broad legal principles in order
to produce general theories to further the progression of the law and the legal system as a
whole.299
Moreover, civil and common law legal cultures have different approaches to the origin of
legal rights and obligations, which might affect how one thinks about legal problems. The
civil law paradigm is built around the transaction and will of its parties. The law gives the
deliberate act of entering into a contract its intended effect. That means that legal
consequences stem from the will of the actor.300 However, the common law paradigm is
built around the actors and the requirements that come with their respective roles (e.g., the
295
296
297
Dainow, J. (1966). The civil law and the common law: some points of comparison. Am. J. Comp. L., 15, 419,
at pp. 423-427.
298
299
Dainow (1966), at p. 428.
300
Pound (1921), at p. 21; Dainow (1966), at p. 419.
86
roles of lessor and lessee). Accordingly, the legal consequences do not stem from the will of
the actors but from the relationship of the different actors and liabilities, rights, duties and
powers that are inherent to that relationship.301 These different paradigms offer different
perspectives of the legal rights and obligations that flow from a situation where, for
instance, real estate is rented out. Civil law speaks of “letting and hiring and of the
consequences which as willed by entering into that contract [, while common law] speaks of
the law of the landlord and tenant and of the warranties, duties and incidents that are
attached to these positions.”302
The differences in how law is practiced and understood also trickles down into the way that
law is taught in different cultures. Legal education in jurisdictions with civil law legal systems
tends to focus on statutory law. Statutes and case law are looked at from the abstract
perspective of their systemic structure, their underpinning legal principles and theories as
well as how these are discussed in legal doctrine. In common law jurisdictions, legal
education focuses on analysing case law instead of doctrine and advocates for a strict
interpretation of legal statutes in order to ensure that the legislation does not limit the
judicial primacy too much.303
Furthermore, in common law countries, attorneys with a number of years of experience and
strong reputation can be elected as judges.304 Common law judges, therefore, might be said
to draw on their practical experience and let their judgements be guided by the reasoning
and interpretations of statutory law in previously decided cases. In civil law countries, there
is often a separate educational track of several years to become a judge that builds on the
basis of general legal principles, theories that were also taught at university and teaching
methods for drafting legal arguments, opinions and decisions. In fact, in civil law
jurisdictions, it is often possible to enter these tracks (almost) directly after receiving the
university degree, and, thus, it is not uncommon for civil law judges not to have a
comparable practical experience to their common law peers.
4.2.1.1 Different but Similar
The purpose of this section is not to make an exhaustive comparison of common and civil
law culture but to ascertain whether differences in legal cultures would lead to different
interpretations of tax law. One might conclude that, even though common law and civil law
cultures differ in many ways, this might, in practice, not be problematic when it comes to
interpreting tax law.
For instance, a closer look at the differences with regard to codification and legal doctrine
reveals the following: MacCormick & Summers put this distinction in terms of legal
rationality and legal reason.305 A modern civil law code tends to be ordered in rational, well-
structured texts that are built on legal ideas and concepts. This gives everyone — citizens
301
Pound (1921), at p. 21.
302
Pound (1921), at p. 22.
303
Dainow (1966), at p. 429.
304
Dainow (1966), at p. 431.
305
MacCormick, N., & Summers, R. (Eds.). (1997). Interpreting Precedents: a comparative study. Ashgate /
Darthmouth, at pp. 4-6.
87
and officials — access to the basic rules of the system. However, one still needs legal
expertise and an understanding of the common legal language to truly understand its
meaning. However, common law systems have a lot of structured, statutory rules, but these
are built upon case-by-case decisions that are challenging to understand. Understanding of
a common legal language is therefore at least equally as important.
In practice, the question is whether the difference between rationality or reason in a legal
system is really that relevant. For, according MacCormick & Summers, “no contemporary
legal system is conceivable that does not make large use of both.”306 It is all about whether
the two approaches are balanced within each legal family and what this means for the
development of the broader legal culture. They find that, in both civil law and common law
cultures, legal precedence has normative force and, as such, is very important in legal
decision making and the development of law. There is no real dichotomy between the two
cultures in this respect. MacCormick & Summers do point out that, in civil law, this
normativity of precedence is something that has evolved over the years in judicial practice
but should now be seen as an irreversibly accepted legal authority in civil law countries.
Moreover, they also find that common law countries rely more and more on statutory law
and codification. Legal reforms come more often through legislative change, and there is no
indication that stare decisis in any way causes for these reforms to stagnate regardless of
whether they depart from precedence. 307
Moreover, the continuous efforts of positive and negative harmonisation through EU law
have led to a situation where a common legal culture is observable in the whole of Europe.
Not only are the EU common law countries moving increasingly closer to the continental
European civil law legal system, countries that also formally are not part of the EU have
adopted and implemented many of the EU legal rules and regulations.308 This development
is also unlikely to be significantly affected by Brexit in the foreseeable future.309
On the second point, the different approaches to rights and obligations do not necessarily
mean that the legal rights and obligations for any transaction ultimately differ between the
different paradigms. In fact, one could argue that different paradigms should produce a
comparable end result. The difference lies mainly in that they arrive at their respective
results from different directions because of differences in legal culture. Historically, one
could argue that a convergence of common law and civil law is also observable here.
The Importance of Motive

To illustrate this point, one specific issue will be highlighted here through a brief historic
overview from both the perspective of civil and common law, namely the importance of
motive.
306
MacCormick & Summers (1997), at p. 5.
307
MacCormick & Summers (1997), at pp. 531-535.
308
309
See for instance European Commission, the UK-EU Withdrawal Agreement. Retrieved from
https://ec.europa.eu/info/strategy/relations-non-eu-countries/relations-united-kingdom/eu-uk-withdrawal-
agreement_en on the requirements in the Withdrawal Agreement with regard to U.K.’s obligations to protect
the integrity of the Internal Market.
88
A general point of departure for most legal systems is that law works towards the ordering
of society with as little conflict as possible.310 Ordering society in a way that ensures peace
and stability, however, means different things at different times throughout the ages. For
instance, in the Middle Ages, this mostly meant protecting the status quo. In the 17th
century, however, the focus of wat law was supposed to be shifted to promoting the self-
assertion of the individual.311
In western legal cultures in general, one can identify a shift towards individualism. As a
result, both present civil and common law cultures are really built around the individual’s
interests. In fact, the two principal characteristics of contemporary western legal culture are
individualism and rationalism.312 This means, firstly, that individuals are believed to be
autonomous and free within society and that law should act an instrument to protect both
collective and individual interests.313 Secondly, this means that society should be built on
reason and verifiable knowledge and that individuals have virtually unlimited potential to
gather knowledge to understand and shape reality within the confounds of reason.
However, particularly in the historic development of common law and more specifically in
American legal thinking, there was a marked shift towards ultra-individualism.314 This meant
that law acted more and more as an instrument to protect an individual’s interests and
individual property and less to protect the collective interests of society as a whole.
In common law, this rise of (ultra-)individualism can be traced back to the Reformation in
the 16th century.315 The leaders of the Reformation, Luther and Melanchton, insisted on
national law to protect against the universal authority of the Catholic Church.316 According
to Pound, the mission of the Reformation was to give life to individual freedom. This meant
that English legal and religious reform went hand in hand in its ideas that the individual
should be protected from the sovereign’s authority.
This thinking was taken a step further in 17th century England and in America after the end
of the American Revolution in the 18th century. These respective periods gave rise to
Puritanism within Protestantism. The fundamental idea of Puritanism is that each individual
enters into a “willing covenant of conscious faith.”317 With this, Puritanism puts the
individual and its conscience and judgement in the centre. This means, on the one hand,
that no outside power might force the individual’s will and, on the other hand, that the
Puritan must always bear the full consequences of their own choices.
In terms of the development of the legal and political system, the individualism in
Puritanism meant that, in the eyes of the Puritan, the relationship with the state was more
310
See for instance, Hart (2012), at p. 20 et seq.; Pound (1921), at p. 138.
311
Pound (1921), p. 194; Dworkin (2013), at p. 292.
312
Van Hoecke & Warrington (1998), at pp. 508-515.
313
Pound (1921), at p. 139.
314
Pound (1921), at p. 37.
315
The Reformation is widely considered to have started with the publication of Disputation on the Power and
Efficacy of Indulgences (or the 95 Theses) by Martin Luther in 1517, see
https://www.luther.de/en/95thesen.html.
316
Pound (1921), at p. 38.
317
Pound (1921), at p. 42.
89
one where the individual and the state were on an equal footing than one where individuals
were subject to the power of the state. This means that the Puritan, in essence, agreed to a
certain contract with the state. In contrast to the Middle Ages, people were no longer seen
as a mass but as a collection of individuals with their own legal rights and legal duties.
Moreover, a necessary consequence of Puritan thinking is that there has to be complete

freedom of contract, as the Puritan has to be free to make their contract with the state. The
rationalism in Puritanism means that the Puritan is completely accountable for their choices
and, therefore, always must bear the full consequences of these choices. Therefore, the
Puritan directly connects wrongdoings with punishment. In fact, in Puritanism, the notion
that ill will has to be punished (severely) is prevalent. This also means that everything under
Puritanism is made into a moral question. These were however formulated as legal
problems, as they were considered a possible breach of contract. The idea of the individual
and the state operating on an equal footing demanded that the individual held to their
contract exactly, and that legal and moral principles had to be applied to one’s actions
uniformly.318
We are to be with one another but not over one another. The whole is to have no
right of control over the individual beyond the minimum necessary to keep the peace.
Everything else is to be left to the free contract of the free man.319
From this reasoning, it follows that common law under Puritanism looks upon someone who
violates the law in the abstract. A person is free to do as they please. This means that if
someone does something wrong, they (always) willingly and knowingly chose to do wrong,
and, therefore, must face the corresponding (legal) consequences.
This means that motive cannot play a meaningful role. For, that would mean that a judge
could interpret the law differently in individual cases. However, it would be unthinkable that
the courts could form a legal argument based on something as sourceless, as the reasoned-
out intentions of the legislator or moral considerations.320 This would go against the idea
that the individual and the state are on equal footing, as such interpretive powers would
allow the courts to use personal standards when judging an individual rather than using only
impersonal legal rules. This would put a judge over both the individual that was to be judged
and the state that enacted the legal rule by which a judgement should be handed down.
Under Puritanism, this was untenable.321
An important part of the development of modern time civil law was the desire of growing
nation states to unify and organise their individual legal systems. Throughout Europe, the
national legal systems were a mix of civil law, canon law and local customs. All three sources
of law usually had influences of or had adapted principles from ancient Roman law. Legal
scholars attempted to systematise these scattered legal provisions and customary laws into
an organised legal system that was in line with principles of both civil law and natural law.
318
Pound (1921), at p. 44.
319
Pound (1921), at p. 49.
320
Raz (1979), at p. 59.
321
Pound (1921), at pp. 53-54.
90
The Dutch scholar Hugo Grotius’ original 1631 work Inleidinge tot de Hollandsche rechts-
geleerdheid is a seminal work in this regard.322
The period from the late 18th century into the early 19th century is signified by the
emergence of comprehensive, systematic legal codes in virtually every European nation: for
example, Austria (1786 and 1811),323 Prussia (1794),324 and France’s Code Civil (1804).325
Each of these national codes followed the principles from Roman law, but they were written
in the national language. As Latin was largely abandoned as the legal language, this period is
considered the age of codification in Europe.326 On the topic of legal interpretation of these
national legal codes, Grotius wrote the two paragraphs below, which are of specific interest
in this regard:327
§ 22. Zo wanneer van eenige zaken gheen beschreven land rechten, handvesten,
keuren ofte ghewoonten en werden bevonden, zoo zijn de rechters van ouds by
eede vermaent geweest daer in te volgen de beste reden nae hare wetenheid ende
bescheidenheid. Doch alzoo de Roomsche wetten inzonderheid sulcx, als die ten
tijde des keizers Justiniaen vergadert zijn gheweest, by verstandighe luiden
bevonden werden wijsheyds ende billickheyds vol te zijn, zoo zijn de zelven eerst als
voor-beelden van wijsheid ende billickheid, ende metter tijd door gewoonte als
wetten aengenomen : Ghelijck oock daer nae ghebeurt is dat eenighe zaken in
meerder billickheid zijnde overleit, by een groot deel der christenheid iet naerders
aengenomen, ende zeer oneighentlick bekomen hebbende de naem van geestelicke
* ofte pausselicke rechten *, oock in dese landen kracht van wet heeft bekomen,
$ 23. Aengezien hier vooren gezeit is dat onder de werckinge des wets is de
verbintenisse, ende de burgerwetten doorgaens in ' t algemeen werden ingestelt,
hoe wel de reden niet altijdt, even-wel schijnt te passen, ' t welck alzo toekomt
omdat de verscheidenheiden der menschelicke zaken zeer onzeecker zijn, ende de
wet iet zeeckers moet stellen, zoo valt hier uit dickmael gheschil of sulcken wet oock
altijd verbind : waer op met onderscheid moet werden geantwoord want indien de
eenige ende wel-bekende reden des wets in ' t alghemeen ophoud , zo moet de wet
verstaen werden dood te zijn , alzo des wet-gevers wille alsdan ophoud. Over-sulcks
alle wetten alleen op oorlog gegrond, houden op in tijd van vrede, oock sonder
weder roepinge. Maer indien de wet niet in ' t algemeen op en houd , zo moet gelet
werden of de oeffening vande wet in de voorgevallen gelegentheid opentlick soude
strijden met de wille des wet-gevers per contrarie, in welcken ghevalle de wet noch
uiterlick noch innerlick en verbind als by voor-beeld : de wet verbied alle burghers by
nacht op de wal te komen : een borgher woonende by de wal hoort by nacht dat
den viand de wal beklimt : Indien hy alsdan t’huis bleeff ende niet sijn best en deede
322
Grotius, H. (1895). Inleidinge tot de Hollandsche rechts-geleerdheid (Vol. 1). Gouda Quint.
323
Levy, M. (1991). The Rights of the Individual in Habsburg Civil Law: Joseph II and the Illegitimate. Man and
Nature/L'homme et la nature, 10, 105-112, at p. 107 and p. 111.
324
Britannica. (2018). Prussian Civil Code. Encyclopedia Britannica.
325
A Barrister of the Inner Temple (1827). Code Napoléon or the French Civil Code. London. Retrieved from
http://files.libertyfund.org/files/2353/CivilCode_1566_Bk.pdf
326
Schlesinger, R.B. (1995). The past and future of comparative law. The American Journal of Comparative
Law 43.3, 477-481, at p. 479.
327
Grotius (1895), at pp. 5-6.
91
om den viand af te keeren, hy soude wel doen nae de woorden van de wet , maer
niet nae de zin van den wet-gever die voor al betracht moet werden . Maer indien
de oeffening sodanigen opentlicken strijd met des wet-gevers meeninge niet meede
en brengt, moet noch ghezien zijn, of de wet nae ' t recht-snoer des voorzichtigheids
ziet op een alghemeen ghevaer, of dat de wet iet houd als zeeckerlick gedaen ' t
welck niet en is gedaen. Indien men ' t eerste bevind , zo verbind de wet innerlick
ende uiterlick oock die luiden waer in het quaet, waer voor gevreest wierd,
eigentlick geen plaets en heeft . Over-sulcks de wet verbiedende dat iemand die de
wacht niet en heeft by nacht sal gaen langers straet met wapenen, verbind oock de
gheschickte luiden, die niet quaeds in de zin en hebben, om dat het gevaer daer de
wet op ziet plaets heeft of kan hebben. Maer houd de wet, by gebreck van beter
bewijs (alzo de menschen nae ' t blijck moeten oordeelen) iet voor geschied, ' t
welck niet en is geschied, gelijck als iemand belast werd een vrou-mensch te
trouwen om dat door twee getuigen de trou-belofte werd gehouden voor bewesen,
hoewel die inder waerheid niet en is geschied, zodanighe wet verbind wel alle
anderen die gheen zeeckere kennisse en hebben; maer hy, die de zeeckere kennisse
heeft, is daer door in sijn ghewisse niet verbonden; welck onderscheid wel dient
waer-ghenomen, niet alleen tot onderrechtinge der rechtvaerdige gemoederen,
maer oock tot beslichtinge van veele geschillen, waer van t'sijner plaetse sal werden
gehandelt.
In essence, Grotius makes the point in § 22 that, in case there are no national legal
provisions that cover a certain situation, the courts should use their best judgement and
discretion. Moreover, as ancient Roman law was considered to be full of wisdom and equity,
Roman law should be considered law by custom. Accordingly, judges should consider
(principles of) ancient Roman law as part of contemporary law when deciding cases that
were not specifically covered by contemporary rules.
In § 23, Grotius goes on to note that the application of laws should not be absolute. Judges
should assess whether the application of a given law is, in fact, in line with the intention of
the legislator. Also, it should be considered whether the application of the law could lead to
an undesirable or unjust outcome, or even an outcome that could be contrary to the
intention of the legislator. Grotius gives the example that, if the law said that no people
were allowed on the city walls after dark and a citizen saw that the enemy was coming over
the city walls, it would go against the intention of the legislator if that citizen stayed inside
their house and did not do something to prevent the enemy from attacking. The citizen’s
(in)action would thus be in accordance with the letter of the law but not in accordance with
its spirit. A contrario, a citizen that did take action to prevent this enemy attack should not
be held to have acted in conflict with the law.328
Thus, in stark contrast to 17th and 18th century common law Puritanism, Grotius believed
that motive was of major importance in interpreting and applying the law. Moreover, by
allowing courts to look to (legal) principles outside of national legislation, he also accepted
the courts could — and possibly should — act as co-legislators to ensure an equitable
application of the law.
328
Even though they acted in conflict with the letter of the law, they acted in line with its spirit.
92
In common law countries, elections for the judiciary were often the norm by the end of the
19th century. This also meant that common law courts more and more started to become
representatives of the people in doing justice. As such, they became delegates of the
majority (or at least the plurality), standing up for the whole of society and in public
interest. Pound argues that this also ushered in a new age for common law. There was a
shift from the rule of law being highly formal, inelastic and inflexible to a stage of
liberalisation. He states that this new stage insisted on morality rather than uniformity, on
justice in the ethical sense rather than form, and on reason rather than rule.329
This legal evolution that there could be such a thing as good faith could also be considered
to be problematic. It could lead to a situation where logical reasoning based on moral
principles went so far that it negated the underlying rules. An individualistic system in which
good faith could make almost any behaviour permissible is ultimately unsustainable. The
excess use of discretionary powers of the courts had to be fixed by introducing more rules,
which led to a gradual stiffening of the legal system. This stiffening of the legal system was
meant to reach a more sustainable balance between equity and certainty. On the one hand,
it became evident that it was necessary to avoid the arbitrary application of the rules and
that the same outcome should apply to the same situation. On the other hand, it also
became evident that there had to be “equality of opportunity to exercise one’s will and
employ one’s substance.”330
In essence, this surge in codification meant that common law aligned much more with civil
law on the notion that the central point in transactions should be the will of the parties
involved.
4.2.1.2 Tax Law Is Statutory Law
Another compelling reason as to why the differences between common law and civil law
would not lead to significant other results, specifically, with regard to corporate income tax
law is that all over the world, including common law countries, tax law has been very much
based on statutes and regulations. The result of this is that, in both common law and civil
law countries, interpretations of tax law are based on the application of statutory law. This
is done on the basis of a systematisation of facts, legal rules and legal principles. This means
that individual cases, statutes and case law are looked at from the perspective of their
systemic structure, their underpinning legal principles and theories as well as with regard to
how these are discussed in legal doctrine, and these are subsequently applied to the legal
facts of the case.331
For example, the United States’ Supreme Court states that, in statutory interpretation, it
tends to take the purposivist approach.332 The Court looks at statutory texts as a
harmonious whole and interprets them in a manner that furthers statutory purpose.
329
Pound (1921), at p. 141.
330
Pound (1921), at p. 142.
331
Vanistendael (1996), at pp. 34-35.
332
Costello, G. (2006). Statutory Interpretation: General Principles and Recent Trends. Library Of Congress
Washington DC Congressional Research Service, at p. 2.
93
Moreover, it calls upon the United States’ Senate to include a clear statement of
congressional intent to prevent that the Court has to stack the deck by reverting to
overriding presumptions to infer such a purpose.333
Moreover, a shared or common language can also develop across different legal cultures by
applying “an internationally common scientific meta-language (transdisciplinarity), which
uses existing common concepts and elements and/or develops new ones; or a constant
exchange of concepts and viewpoints between legal systems (interdisciplinarity), as it is
already to some extent the case amongst legal systems within the European Union.”334 In
this regard, Bentham’s plea for a shared taxonomy should be compared — particularly in an
international context — to illustrate how it is necessary to prevent too vague language in
legal articles or arbitrary interpretations of these articles by the courts. There should be
“words that are appropriated to the subject of law, […] that in all languages pretty exactly
correspond to one another, which comes to the same thing nearly as if they were the
same.”335
It can be argued that, especially in international corporate tax law, such international meta-
language exists. On the one hand, a common tax taxonomy follows, which is especially
prevalent in Europe from the positive integration of European Commission communications
and directives. For example, with regard to general-anti-abuse clauses, CFC-rules or
principal purpose tests, as well as by negative integration through ECJ jurisprudence on the
interpretation of specific wordings or turns of phrases in EU legislation. On a global scale,
one could point to the OECD/G20 BEPS project336 that has introduced and developed several
concepts (based on mostly civil law systems and cultures) and has disseminated these to all
the members of the OECD/G20 Inclusive Framework.337 A third example of such
transdisciplinarity across cultures is Article 31 of the VCLT, which states that terms in a
treaty have an ordinary meaning,338 referring to a social practice that has developed into a
tradition of a particular way of phrasing treaty texts, which ensures a specific
interpretation.339 These efforts to come to an international overarching understanding of
specific terms, wordings and turns of phrases in (national) tax law legislation have a
profound effect in influencing and converging different legal cultures on international
income tax policy the world over.
333
Costello (2006), at p. 17.
334
335
Bentham (2000), at p. 235.
336
Base erosion and profit shifting (BEPS) refer to tax planning strategies used by multinational enterprises
that exploit gaps and mismatches in tax rules to avoid paying tax. Developing countries’ higher reliance on
corporate income tax means that they suffer from BEPS disproportionately. BEPS practices cost countries USD
100-240 billion in lost revenue annually. Working together within the OECD/G20 Inclusive Framework on
BEPS, 141 countries and jurisdictions are collaborating on the implementation of 15 measures to tackle tax
avoidance, improve the coherence of international tax rules and ensure a more transparent tax environment.
See OECD. What is BEPS. Retrieved from http://www.oecd.org/tax/beps/about.
337
See OECD, Members of the Inclusive Framework, November 2021. Retrieved from
https://www.oecd.org/tax/beps/inclusive-framework-on-beps-composition.pdf (last accessed 18-07-2022)
338
United Nations. (1969). Vienna Convention on the Law of Treaties. Treaty Series, 1155, 331.
339
Also, see Section 4.3.2 and 4.3.3.
94
4.2.1.3 Globalisation and Digitalisation
Arguably, trade and technology have made the world an ever more connected and
interdependent place since the Age of Exploration in the 15th century, or at least since the
17th century with the Dutch East India Trading Company as the world’s first multinational
company, transcontinental employer and foreign direct investor.340 Also, the growing
interconnectedness and interdependence of the world has contributed to a wider and
quicker dissemination of ideas that stem from (political) philosophers, which has paved the
way for different communities and/or regions to even be able to develop shared ideologies
and values.
A strong convergence of cultures is also observable on other fronts. For instance, the
Economist points out that cultural integration in the 21st century is being further promoted
by companies like Netflix. While almost all of Netflix’ content was American at first, about
50% of its content is now made in the EU. Interestingly, Netflix now has more local
productions under way than the German and French national public broadcasters.341
Moreover, the content travels. For example, Danish and French (Netflix-produced) series do
well all over Europe and sometimes also manage to impress U.S. viewers.
This slew of EU content was not necessarily born from savvy Netflix business developers.
The EU legislator had a big hand in forcing Netflix, as well as other online streaming services,
to look towards EU filmmakers and documentarists. Under the guise of ensuring adequate
investments in European works, and, level playing field considerations, the European
Commission requires online streaming services to offer at least 30% European-made
content, and this content needs to feature prominently on the online streaming service.342
Therefore, the European Commission explicitly uses level playing field considerations to
effectively tip the playing field towards a certain policy goal. It utilises the playing field to
achieve a certain purpose.
The commercial success of the EU content makes that streaming services have embraced
this requirement rather readily, but the main point here is that the combination of
globalisation, digitalisation, and a degree of coordinated legislative pressure go a long way
to bring cultures together. In fact, European integration is often helped along by American
companies. Like Netflix, companies such as Google, Facebook, Twitter etc. have also had an
immense effect on disseminating a sort of collective culture across borders. In fact, this type
of market-organised global harmonisation tends to make (European) politicians nervous, as
this leads to a concentration of (political) power outside the political sphere. Subsequently,
340
Foreign investments by the East India Trading Company led to the development of urban features,
construction of canals, expansion of economic activity, opening of mines, exploitation of forests, building of
ships etc. all along its trading routes.
341
Charlemagne (2021), How Netflix is Creating a Common Culture, The Economist, 31 March. Retrieved from
https://amp.economist.com/europe/2021/03/31/how-netflix-is-creating-a-common-european-culture.
342
Directive (EU) 2018/1808. On the coordination of certain provisions laid down by law, regulation or
administrative action in Member States concerning the provision of audiovisual media services (Audiovisual
Media Services Directive) in view of changing market realities, considerations 36 and 44. Retrieved from
http://data.europa.eu/eli/dir/2018/1808/oj.
95
this triggers political intervention and the adoption of rules such as the 30% national
content requirement for streaming services.
Such a process of global cultural convergence does not only apply to the performing arts but
also to legal culture. If we accept Van Hoecke’s notion that having a shared basic ideology
and shared values are the most important elements of having a common legal culture,343
then underlying forces of globalisation and digitalisation must be acknowledged as strong
drivers that converge (legal) cultures.
A strong convergence of legal culture as a result of market forces can be observed

specifically in international corporate tax policy. As globalisation and digitalisation
fundamentally have changed business models across the globe, the last 25 years have made
it painfully clear that the international system of the corporate income tax is under
enormous pressure. The increased vertical integration of supply chains has led to a
concentration of tax revenue in a limited number of countries that were preferred
headquarter locations.344 On top of that, the increased reliance on intangible assets has
made it harder to determine where activities had taken place under the existing rules,
where value was created and, thus, where profits should be taxed. Moreover, these
circumstances have led to a widespread tax planning in various degrees of aggressiveness,
which exacerbated the concentration of tax revenue in a limited number of jurisdictions.345
This process has ultimately led to the OECD/G20 BEPS project and the forming of the
Inclusive Framework.346 Moreover, this process meant that over 140 jurisdictions agreed to
a fundamental international tax reform in 2021.347 In terms of legal culture, this is
impressive, as the countries that make up the Inclusive Framework all effectively have
subscribed to the OECD as the standard-setting body on matters concerning international
profit taxation. Even if some only did so grudgingly, this is a momentous achievement.
Without going into any level of detail of the content of the agreement, this essentially
means that international taxation is to be governed by shared values and principles that
largely come from the legal culture of civil law.
The interplay between the EU and OECD is also interesting in this regard. For instance,
Valderrama shows that with regard to good tax governance and fair tax competition, the EU
is both an importer and exporter of (global) rules. She finds that the EU is introducing
international standards in EU legislation with regard to exchange of information, BEPS and
transparency rules. But, at the same time, the EU is setting the standard internationally with
regard to fair tax competition. Moreover, where the EU is a rule taker, it makes sure that in
particular the European Commission plays a predominant role in the discussions at the level
of the OECD/G20. By doing so, the Commission ensures that the development of these
international tax rules as well as the relationships between EU and non-EU countries are
343
344
Christians, A. (2018). Taxing According to Value Creation. Tax Notes International, June 18, 1379, at p. 1380.
345
Also see Peters (2013), at pp. 31-48.
346
See for more information on BEPS and key figures about the Inclusive Framework:
OECD, What is BEPS? Retrieved from https://www.oecd.org/tax/beps/about/ (last accessed at 02/02/2022).
347
OECD. (2021b). Statement on a Two-Pillar solution to Address the Tax Challenges Arising from the
Digitalisation of the Economy, OECD/G20 Base Erosion and Profit Shifting Project, 8 October 2021. OECD.
96
also addressed.348 In this regard, Valderrama shows that the development of a common EU
legal culture — particularly in the field of international taxation — is not limited to the EU
itself. The fact that the EU has developed a more or less common European legal culture
that is based on largely shared ideologies and values also means that it exudes a
gravitational force. The sheer scale of the EU, for instance in terms of international trade
and investment and/or its market size, makes it so that the legal culture of the EU directly
influences the international tax policy discussions at the main standard setting forum of
today — the OECD. By extension, this has direct bearing on the legal culture of the rest of
the world. This process, logically, is self-reinforcing and leading to legal cultures, at least
with regard to international profit taxation, converging ever faster to a point where it would
be very hard to identify different national legal cultures. Ultimately, this may occur until
only one international legal culture of international tax law remains.
However, this point has not been reached just yet. Despite globalisation, national
differences in legal culture still exist today. For instance, even though the civil law system
has been prevalent in most of Western Europe, the Nordic countries have their own system
to this day, which is called Scandinavian or Nordic law. One could argue that this system
holds the middle between civil law and common law, as it is a blend of statutory, customary
and case law. In general, the Nordic countries have a specific legal method and legal culture
that has a less theoretical and conceptualised approach to legal problems than what is
commonly seen in other EU Member States.349 According to the Stockholm Institute for
Scandinavian Law, it should be formally classified as civil law (as opposed to common law),
but it should be viewed as its own independent subgroup like the Roman and Germanic
groups.350
Moreover, despite globalisation, distance still has meaning when it comes to the likelihood
of finding shared ideologies and values. For instance, despite its German civil law roots,
Asian legal culture’s collectivist approach, seen most prominently in China but also in Japan,
was determined to a large extent under the influence of Confucian theory.351 According to
the philosophy, every person has as their duty to respect the natural order of things. This
means that the individual’s position takes a backseat to their duties towards others and
towards society, as exercising one’s individual rights might upset the natural order of things
and/or be damaging to society as a whole. Belonging to a community (company, university,
club) is considered to be more important,352 and, therefore, there is a set collective
responsibility for faults and crimes. As a result, conflicts are preferred to not be brought
before the court but solved through reconciliation.353
348
Valderrama, I. J. M. (2019). The EU standard of good governance in tax matters for third (non-EU)
countries. Intertax, 47(5), at p. 466.
349
Bernitz, U. (2007). What is Scandinavian law? Concept, characteristics, future. Scandinavian studies in
law, 50(1), 13-30, at p. 16.
350
Bernitz (2017), at p. 17.
351
Confucius was a philosopher and teacher who lived from 551 to 479 BCE. Confucianism is one of the most
influential religious philosophies in the history of China, and it has existed for over 2,500 years. It is concerned
with inner virtue/personal ethics, morality, living with strong character and respect for the community and its
values.
352
Llompart, J. (1985). Japanisches und Europaisches Rechtsdenken. Rechtstheorie, 16, 131, at p. 145.
353
Van Hoecke & Warrington (1998), at p. 506-507.
97
Finally, MacCormick & Summers note that, besides observable convergences, there are still
marked differences between civil law’s legal culture and common law’s legal culture. In
particular, differences are observable with regard to how judicial opinions and decisions are
published, analysed, and systemised. Also, in civil law, one precedent can typically be
enough to set a point of law, while, in common law, a line of precedents is generally needed
(except in constitutional cases).354
These examples underline the fact that, irrespective of the points of convergence, the
respective legal cultures are still visible in many aspects of the legal profession. This means
that the framework or paradigm of how to think about legal problems extends far beyond
the mere legal rules or mechanics of how they came to be. Specifically, with respect to
international profit taxation, one might argue that, to a certain degree, different legal
cultures are harder to identify as policymaking through large international agreements has
been extremely successful under the OECD/G20 BEPS project.355 As a result, the effect of
different legal cultures on how national and international tax law might be interpreted
would also be less and less pronounced.
4.3 Legislative Intent and Purpose
For many, the spirit of the law seems synonymous with the purpose of the law or the
intention of the legislator.356 The aim in this section is to investigate if there might be
problems with relying on the intention of the legislator in interpreting the law on the one
hand and defining the spirit of international tax law on the other. As a starting point for this
examination, the Canadian Interpretation Act will be discussed.
The first law that came out of the Canadian Parliament after it was first established in 1867
was the Interpretation Act,357 titled An Act respecting the Statutes of Canada. The
Interpretation Act has since played a very important role in illuminating the meaning of
Canadian federal legislation.358 To illustrate this, in a parliamentary session in 1883, the
honourable Donald MacMaster said regarding the Interpretation Act:
It is well known to all legal gentlemen here – and as many hon. members opposite
have appealed to the laity in this House, I may be permitted to read a section from the
Interpretation Act [that] a law once enacted on the Statute Book is always speaking:
354
MacCormick & Summers (1997), at p. 536-539.
355
Compare also Valderrama (2019) on the interplay between the OECD and the EU in codifying these
international tax standards in EU law, and subsequently in the national legislation of the EU Member States.
356
See for example, Levine (2015), at p. 2; Finkel, N. J. (1999). Commonsense justice, culpability, and
punishment. Hofstra L. Rev., 28, 669, at p. 669; Ostas, D. T. (2003). Cooperate, Comply, or Evade: A Corporate
Executive's Social Responsibilities with Regard to Law. American Business Law Journal, 41, 559, at pp. 583-584;
Merriam-Webster. (n.d.). The spirit of the law. In Merriam-Webster.com dictionary. Retrieved from
https://www.merriam-webster.com/dictionary/the%20spirit%20of%20the%20law; HMRC. (2016).
Introduction to tax avoidance. Retrieved from https://www.gov.uk/guidance/tax-avoidance-an-
introduction#what-tax-avoidance-is (last accessed 26-05-2022).
357
The latest version (2015) of the Interpretation Act can be found here: https://laws-
lois.justice.gc.ca/eng/acts/i-21/index.html.
358
Neudorf, L. (2018). Canada's First Act: The History and Role of the Interpretation Act. In Legislating
Statutory Interpretation: Perspectives from the Common Law World (2018: Carswell), 1, 2019-113, at p. 198.
98
‘The law is to be considered as always speaking and whenever any matter of thing
is expressed in the present tense the same is to be applied to the circumstances as
they arise, so that effect may be given to each Act, and every part thereof,
according to its spirit, true intent, and meaning’
The Interpretation Act [therefore] is the lamp by the light of which our Statutes must
be read.359
The Canadian Interpretation Act is still in force today. The reference that MacMaster made
is reflected in present-day articles 10 and 12.360 The wording of the Canadian Interpretation
Act is interesting. For example, article 10 states that the interpretation of existing Canadian
legislation should be applied in such a way that it always does justice to its true spirit, intent
and meaning. It is, however, not apparent whether or not the Canadian legislator thinks the
spirit, intent and meaning are supposed to mean three different things or are to be
understood largely to be overlapping concepts. Article 12 then adds that every act in Canada
should be understood as remedial and that the interpretation of these enactments should
be fair, large and liberal to make sure that the purpose of these enactments can be
achieved. Again, it is not exactly clear how the three concepts should be understood in
relation to each other, but, together, they are argued to seek to prevent a narrow statutory
interpretation by the courts.361 Instead, this wording calls for interpretations that take into
account the statutory text, the context and the overall purpose of the legislation.362
Moreover, it is an invitation to the Canadian courts to not shy away from their law-making
responsibilities.
The Canadian Interpretation Act was inspired by the English Interpretation Act from 1850,363
which is also known as Lord Brougham’s Act. The historic English Interpretation Act,
however, differs from its present-day Canadian cousin. Lord Brougham’s Act, or An Act for
Shortening the Language used in Acts of Parliaments, as its long title reads, devised a system
of dividing legislation into sections that are automatically “deemed substantive enactments
without any introductory words.”364 It also stated that other relevant acts could simply be
referred to by year of enactment, that the masculine form included females, the singular
form included plural,365 and how to deal with acts that have been (partly) repealed.366
359
House of Commons Debates. (1883). 5th Parl , 1st Session, April 25, 1883, at 810 (Hon Donald MacMaster),
available at https://www.canadiana.ca/view/oocihm.9_07186_1_2/72?r=0&s=1.
360
Interpretation Act. (1985). R.S.C., 1985, c. I-21. Retrieved from https://laws-lois.justice.gc.ca/eng/acts/i-
21/page-2.html#docCont.
Article 10 (Canada)
The law shall be considered as always speaking, and where a matter or thing is expressed in the present tense,
it shall be applied to the circumstances as they arise, so that effect may be given to the enactment according to
its true spirit, intent and meaning.
Article 12 (Canada)
Every enactment is deemed remedial, and shall be given such fair, large and liberal construction and
interpretation as best ensures the attainment of its objects.
361
Neudorf (2018), at p. 217.
362
Neudorf (2018), at p. 209.
363
Act for shortening the Language used in Acts of Parliament. (1850) 13 & 14 Vict. c. 21. Retrieved from
http://nzlii.org/nz/legis/imp_act_1881/ia185013a14vc21259/
364
Act for shortening the Language used in Acts of Parliament (1850), section 2.
365
Act for shortening the Language used in Acts of Parliament (1850), section 4.
366
Act for shortening the Language used in Acts of Parliament (1850), sections 5 and 6.
99
In short, Lord Brougham’s Act was meant to make both the writing and reading of legislation
easier. The English Interpretation Act of 1850 has since been superseded by the
Interpretation Act of 1889, the Laying of Documents Before Parliament (Interpretation) Act
of 1948367 and the Interpretation Act of 1978.368 However, the intention of these later
versions is comparable to their 1850 original. In that sense, the English Interpretation Act
differs from the Canadian variant. Where the Canadian variant is “the lamp by the light of
which the law should be read,” its English counterpart is more an instruction manual that
guides the proper assembly of legislation.
Canada is not the only Commonwealth country with a present-day spin-off from Lord
Boughman’s Act. Interpretation Acts can be found all over the Commonwealth, for instance,
in Northern Ireland, Scotland, the Republic of Ireland, Australia, New Zealand, Hong Kong,
Malaysia and Singapore. A closer look at these various Interpretation Act variants shows
that the Scottish Interpretation and Legislative Reform (Scotland) Act 2010369 and the
Interpretation Act (Northern Ireland) 1954370 strongly resemble the English variant. This
might also be expected, as these Commonwealth countries are a part of the United
Kingdom. Also, the Hong Kong General Clauses and Interpretation Ordinance 1966 is similar
to the UK Interpretation Act, albeit that the Hong Kong version is far more detailed in its
clarification of the interpretation of words and expressions in the legislative language.371
Article 15AA of the Australian Interpretation Act 1901372 and article 17A of the Malaysian
Interpretation Act 1948 and 1967373 both state that the preferred interpretation of an Act is
the interpretation that would best achieve or promote the purpose or object of that Act.374
Finally, article 5 of the New Zealand Interpretation Act 1999,375 articles 5 to 7 of the Irish
367
UK Interpretation Act (1948). Retrieved from https://www.legislation.gov.uk/ukpga/Geo6/11-
12/59/contents.
368
UK Interpretation Act (1978). Retrieved from https://www.legislation.gov.uk/ukpga/1978/30/contents.
369
Interpretation and Legislative Reform (Scotland) Act 2010. Retrieved from
https://www.legislation.gov.uk/asp/2010/10/contents.
370
Interpretation Act (Northern Ireland) 1954. Retrieved from
https://www.legislation.gov.uk/apni/1954/33/contents.
371
Interpretation and General Clauses Ordinance (Hong Kong). Retrieved from
https://www.elegislation.gov.hk/hk/cap1.
372
Acts Interpretation Act (Australia). Retrieved from https://www.legislation.gov.au/Details/C2014C00077.
373
Interpretation Acts 1948 and 1967 (Malaysia). Retrieved from
https://ppuu.upm.edu.my/upload/dokumen/20180726160154RUJ_3_INTERPRETATION_ACT_388.pdf.
374
See:
Article 15AA (Australia)
In interpreting a provision of an Act, the interpretation that would best achieve the purpose or object of the
Act (whether or not that purpose or object is expressly stated in the Act) is to be preferred to each other
interpretation.
Article 17A (Malaysia)
In the interpretation of a provision of an Act, a construction that would promote the purpose or object
underlying the Act (whether that purpose or object is expressly stated in the Act or not) shall be preferred to a
construction that would not promote that purpose or object.
375
Interpretation Act 1999 (New Zealand). Retrieved from
https://www.legislation.govt.nz/act/public/1999/0085/latest/DLM31459.html?src=qs.
Article 5 (New Zealand)
Ascertaining meaning of legislation
100
Interpretation Act 2005,376 and article 9A of the Singaporean Interpretation Act (originally
enacted in 1965)377 are a lot more extensive than the Australian and Malaysian ones.
(1) The meaning of an enactment must be ascertained from its text and in the light of its purpose.
(2) The matters that may be considered in ascertaining the meaning of an enactment include the indications
provided in the enactment.
(3) Examples of those indications are preambles, the analysis, a table of contents, headings to Parts and
sections, marginal notes, diagrams, graphics, examples and explanatory material, and the organisation and
format of the enactment.
376
Interpretation Act 2005 (Ireland). Retrieved from
http://www.irishstatutebook.ie/eli/2005/act/23/enacted/en/html?q=interpretation+act.
Article 5 (Ireland)
(1) In construing a provision of any Act (other than a provision that relates to the imposition of a penal or other
sanction)
a) that is obscure or ambiguous, or
b) that on a literal interpretation would be absurd or would fail to reflect the plain intention of
i. in the case of an Act to which paragraph (a) of the definition of “Act” in section 2 (1) relates, the
Oireachtas, or
ii. in the case of an Act to which paragraph (b) of that definition relates, the parliament concerned,
the provision shall be given a construction that reflects the plain intention of the Oireachtas or parliament
concerned, as the case may be, where that intention can be ascertained from the Act as a whole.
(2) In construing a provision of a statutory instrument (other than a provision that relates to the imposition of
a penal or other sanction)
a) that is obscure or ambiguous, or
b) that on a literal interpretation would be absurd or would fail to reflect the plain intention of the
instrument as a whole in the context of the enactment (including the Act) under which it was made,
the provision shall be given a construction that reflects the plain intention of the maker of the instrument
where that intention can be ascertained from the instrument as a whole in the context of that enactment.
Article 6 (Ireland)
In construing a provision of any Act or statutory instrument, a court may make allowances for any changes in
the law, social conditions, technology, the meaning of words used in that Act or statutory instrument and
other relevant matters, which have occurred since the date of the passing of that Act or the making of that
statutory instrument, but only in so far as its text, purpose and context permit.
Article 7 (Ireland)
(1) In construing a provision of an Act for the purposes of section 5 or 6 , a court may, notwithstanding section
18 (g), make use of all matters that accompany and are set out in
a) in the case of an Act of the Oireachtas, the signed text of such law as enrolled for record in the Office
of the Registrar of the Supreme Court pursuant to Article 25.4.5° of the Constitution.
b) in the case of an Act of the Oireachtas of Saorstát Éireann, the signed text of such law as enrolled for
record in the office of such officer of the Supreme Court of Saorstát Éireann as Dáil Éireann
determined pursuant to Article 42 of the Constitution of the Irish Free State (Saorstát Éireann),
c) in the case of any other Act, such text of that Act as corresponds to the text of the Act enrolled in the
manner referred to in paragraph (a) or (b).
(2) For the purposes of subsection (1), it shall be presumed, until the contrary is shown, that a copy of the text
of an Act that is required to be judicially noticed is a copy of the text to which subsection (1) relates.
377
Interpretation Act 1965 (Singapore). Retrieved from https://sso.agc.gov.sg/Act/IA1965.
Article 9A (Singapore)
(1) In the interpretation of a provision of a written law, an interpretation that would promote the purpose or
object underlying the written law (whether that purpose or object is expressly stated in the written law or not)
shall be preferred to an interpretation that would not promote that purpose or object.
(2) Subject to subsection (4), in the interpretation of a provision of a written law, if any material not forming
part of the written law is capable of assisting in the ascertainment of the meaning of the provision, consideration
may be given to that material
101
Not only do they state that the preferred interpretation is one that would best achieve or
promote the purpose or object of the Act, but they also state where one might look to
understand what the purpose or object of the Act might be. As far as content goes,
however, they are fairly similar to the Australian and Malaysian Acts. The Irish Act stands
out, as it refers to the intention of the Irish Parliament rather than the purpose and object
of the Act. Moreover, together with the Singaporean Interpretation Act, the Irish Act
explicitly acknowledges that (the purpose of) enacted legislation might be ambiguous or
even obscure. However, the wording and intent stay close to the other Interpretation Acts
discussed here.
Therefore, it can be concluded that the Commonwealth countries that have an

Interpretation Act tend to have acts that overlap with Article 10 of the Canadian
Interpretation Act. However, besides Canada, the Interpretation Acts in the Commonwealth
countries do not seem to typically include an article such as Article 12 of the Canadian
Interpretation Act.
It thus appears that, with Article 12, the Canadian Interpretation Act intends to go further
than the other previously discussed Interpretation Acts. In addition to stating that all
enactments should be interpreted in the light of their intended purposes and objectives, the
Canadian Interpretation Act states that every enactment is deemed remedial and that the
construction and interpretation of all of these acts should be fair, large and liberal to best
ensure the attainment of its objectives. With this addition of the remedial quality of
legislation, the Interpretation Act also itself gives a broad and general interpretation of all
other (Canadian) legislation. In other words, the law is there to provide a solution to a
a) to confirm that the meaning of the provision is the ordinary meaning conveyed by the text of the
provision taking into account its context in the written law and the purpose or object underlying the
written law; or
b) to ascertain the meaning of the provision when
i. the provision is ambiguous or obscure; or
ii. the ordinary meaning conveyed by the text of the provision taking into account its context in
the written law and the purpose or object underlying the written law leads to a result that is
manifestly absurd or unreasonable.
(3) Without limiting the generality of subsection (2), the material that may be considered in accordance with
that subsection in the interpretation of a provision of a written law shall include
a) all matters not forming part of the written law that are set out in the document containing the text of
the written law as printed by the Government Printer;
b) any explanatory statement relating to the Bill containing the provision;
c) the speech made in Parliament by a Minister on the occasion of the moving by that Minister of a motion
that the Bill containing the provision be read a second time in Parliament;
d) any relevant material in any official record of debates in Parliament;
e) any treaty or other international agreement that is referred to in the written law; and
f) any document that is declared by the written law to be a relevant document for the purposes of this
section.
(4) In determining whether consideration should be given to any material in accordance with subsection (2), or
in determining the weight to be given to any such material, regard shall be had, in addition to any other relevant
matters, to
a) the desirability of persons being able to rely on the ordinary meaning conveyed by the text of the
provision taking into account its context in the written law and the purpose or object underlying the
written law; and
b) the need to avoid prolonging legal or other proceedings without compensating advantage.
102
problem. It always is intended do something that brings an issue closer to its resolution. The
interpretation of all Canadian enactments, including that of the Interpretation Act itself,
should therefore be aimed at finding this resolution. Presumably, this is supposed to be a
fair and equitable resolution, as the interpretation should be fair, large and liberal. With
this, the Interpretation Act is instructing the courts on how to interpret the federal
legislation.378 This makes the Canadian Interpretation Act unique to the Canadian statute
book379 and particularly interesting for the purpose of this book.
It perhaps also makes Canada an outlier in the common law legal culture, as Article 12
“seeks to eliminate old common law approaches to statutory interpretation [and] authorizes
courts to become part lawmaker alongside Parliament through the process of interpretation
in such a way as to best achieve the goals of the legislation.”380 Typically, though, the courts
in common law legal cultures are hesitant to take up this role.381 Neudorf has observed that,
even though the Interpretation Act instructs courts to do so, the courts in Canada typically
are still hesitant to put more weight on the statutory purpose than the text.382
Therefore, one might conclude that the law — in this case the Canadian Interpretation Act
— gives direction as to how one should interpret law, but this is not the same as offering a
framework or common standards. It is still very much up to the interpreter to decide what
sort or which colour of light that is cast by “the lamp that by the light of which the texts
should be read”.383
4.3.1 Intentionalists versus Purposivists
Where statutory texts are concerned, the intentionalist approach seems to be favoured,
especially in common law cultures.384 However, in civil law interpretation, this is often a
search for legislative intent and purpose. Apart perhaps from instances where the statute is
unclear, does not cover the situation or is anachronistic,385 civil law courts tend to take a
greater interest in the exact wording of the applicable statute and exercise less freedom in
their legal reasoning than common law courts.386 Eskrigde argues that this search for
legislative intent might work in cases where the statute is relatively recent and specifically
addresses the issue, but, in all other cases, a dynamic interpretation makes more sense.387
378
Neudorf (2018), at p. 217.
379
Neudorf (2018), at p. 207.
380
Neudorf (2018), at pp. 217-218.
381
Hart (2012), at p. 135; Pound (1921), at p. 53 and p. 63 et seq.; Vanistendael (1996), at p. 34.
382
Neudorf (2018), at p. 218.
383
House of Commons Debates. (1883). 5th Parl , 1st Session, April 25, 1883, at 810 (Hon Donald MacMaster),
available at https://www.canadiana.ca/view/oocihm.9_07186_1_2/72?r=0&s=1.
384
See Choi, J. H. (2020). An empirical study of statutory interpretation in tax law. NYUL Rev., 95, 363, at p.
365. Here, this point is both confirmed and nuanced, as it is asserted that the methodological distance
between textualists and purposivists is often overstated, as both generally attempt to discover the purpose of
legal statutes when the meaning of a legal article is unclear, but just use different tools to get there.
Interestingly, the author points only to the legislative purpose and not to other doctrinal sources that might be
important for a more dynamic interpretation of law.
385
Eskridge Jr, W. N. (1986). Dynamic statutory interpretation. U. Pa. L. Rev., 135, 1479, at p. 1504; Daniel T.
Ostas, D. T. (2020). Ethics of tax interpretation. Journal of Business Ethics, 165(1), 83-94, at p. 86.
386
387
Eskridge (1986), at p. 1479.
103
He goes on to make the point that a government that is seeking the common good should
advocate for dynamic interpretation.388 Moreover, the need for dynamic interpretation also
follows from the reasoning of Hart,389 and Dworkin.390
[P]ropositions of law are true if they figure in or follow from the principles of justice,
fairness, and procedural due process that can provide the best constructive
interpretation of the community’s legal practice.391
Earlier in this book, it has been considered that this approach of constructive interpretation
requires both a backward-looking and a forward-looking approach.392 Dworkin sees
interpretation as something resembling a chain novel.393 A story in which the legal statute is
only the first chapter of many more legal statutes from many other sources and authors.
The similar objective of these other sources and authors is to make their work the best,
internally coherent work that it can turn out to be.394
However, Eskridge asserts that both Hart’s and Dworkin’s reasonings still fall short to
achieve an interpretation of law that is also a fair representation of (the development of)
political morality. He argues that this is true for two reasons. The first is that legal statutes
are the product of political compromise, and this means that policy is inherently
fragmented. Statutes often — if not always — have their own internal inconsistencies. They
are often inconsistent with the historical development of the entire legal system, as they are
made under different political constellations.395 The second argument is about the
perspective of the interpreter. If the interpretation of law requires one “to weave statutory
checkerboards into a coherent pattern”,396 there is a danger that the predispositions of the
interpreter might lead to an outcome that promotes moral values that are not (yet) widely
held in the current political and doctrinal discourse.397 It is not for nothing that Dworkin
relies on Hercules, which is an almost god-like, all-powerful and omniscient being to
perform the task of constructive interpreting.398 Accordingly, Hercules is a figure that, much
like the ideal observer,399 lacks the all too human trait of being biased.
In an interesting empirical study on statutory interpretation in tax law, Choi finds that the
U.S. Internal Revenue Service over the past 100 years has moved substantially to justify its
rulings on normative policy grounds instead of statutory grounds.400 This shift towards
388
Eskridge (1986), at p. 1516.
389
See Section 2.2.1.2 on the point that Hart sees open structure of law needing interpretation and the law-
making responsibility of the courts.
390
Dworkin (1986), at pp. 225-275.
391
Dworkin (1986), at p. 225.
392
393
Dworkin (1986), at p. 228.
394
Eskridge (1986), at p. 1516; Dworkin (1986), at pp. 225-275.
395
Eskridge (1986), at p. 1552.
396
Eskridge (1986), at p. 1553.
397
This could either point to moral values that were part of the intention of the legislator but are considered to
be outdated in the current political and doctrinal debate, or moral values that constitute personal preferences
that are not yet to be considered to hold legal force. See Eskridge (1986), at p. 1553.
398
See for instance, Dworkin, Law’s Empire, pp. 258-266.
399
See Section 4.1.1.2. on the ideal observer theory.
400
Choi (2020), at p. 392.
104
normative policy grounds is mainly concentrated in the last 30 years (between 1990 and
2020). According to the author, this is indicative of a shift in how tax law is interpreted by
the IRS. Choi also finds that the IRS has become more purposivist and less textualist, but this
shift occurred already in the 1940s. After 1940, the IRS has remained fairly steady in its
purposivist reasoning.401
The empirical data on the Tax Court suggest that there is no increase in normative policy
grounds considerations over the 100-year period.402 The data further suggest that the Tax
Court considerations have decidedly become more textualist after 1980, following a turn
away from purposivist considerations after 1990.403 This result is interesting, as the U.S.
Supreme Court states that, in statutory interpretation, they do tend to take a purposivist
approach.404 Choi looks at a number of possible explanations for this finding. For instance,
he looks at whether the Tax Court has developed a diverging methodology to other U.S.
courts but did not found significant differences.405 Choi has further found that Democratic
judges at Tax Court statistically are significantly more purposivist, while Republican judges
tend to be more textualist.406 In fact, other research has also shown a similar trend at the
level of the U.S. Supreme Court.407 However, Choi nuances this finding that partisan trends
should not be overstated, as they might really be nothing more than larger trends of the
time408 or just that younger, newly appointed judges “who attended law school and
practiced during the ascendance of textualism, are generally more formalist and accepting
of the canons of construction, regardless of political affiliation.”409 Nonetheless, he
concludes that party affiliation does seem to be significant as a predictor of interpretive
methodology.410
Even though it might follow from Dworkin and others that a more dynamic interpretation of
the law would be preferable from a point of view of fairness, justice and morality, these
results are indicative of the fact that, in practice, (common law) courts’ interpretations of
tax law might still tend to rely much on a quest for legislative intent and/or purpose.
Moreover, political affiliation might be a factor with regard to the question of whether one
relies more on the statutory text itself or also refers to other doctrinal sources in this quest.
4.3.2 The Assumption of Reasonable Intent
Is it logical to assume that lawmakers, and by extension the laws that they adopt, always
have good intentions? Are they always supposed to be interpreted in the best possible
401
Choi (2020), at p. 397.
402
Choi (2020), at p. 396.
403
Choi (2020), at p. 399.
404
Costello (2006), at p. 2.
405
Choi (2020), at p. 404.
406
See Choi (2020), at pp. 404-405. Choi also nuances this statement as he points out that this change might
be due to partisan affiliation but could also be the effects of larger time trends.
407
Law, D. S., & Zaring, D. (2009). Law Versus Ideology: The Supreme Court and the Use of Legislative
History. Wm. & Mary L. Rev., 51, 1653, at p. 1671.
408
Choi (2020), at p. 405.
409
Gluck, A. R., & Posner, R. A. (2017). Statutory Interpretation on the Bench: A Survey of Forty-Two Judges on
the Federal Courts of Appeals. Harv. L. Rev., 131, 1298, at p. 1300.
410
Choi (2020), at p. 407.
105
light?411 In general, the Interpretation Acts tend to state how the law needs to be
interpretated so that it serves the purpose and intent of that law. Also, the U.S. Tax Court
appears to look primarily towards the intent and purpose of the legislator. With that, there
appears to be an assumption that legislators always have their heart in the right place.
In international law, the assumption of reasonable intent of national lawmakers appears to

be very strong. For instance, see Section 3 of the Vienna Convention on the Law of Treaties
devoted to the interpretation of treaties. Article 31 VCLT starts with: “A treaty shall be
interpreted in good faith in accordance with the ordinary meaning to be given to the terms
of the treaty in their context and in the light of its object and purpose.” 412 Article 32 VCLT
goes on to explain: “Recourse may be had to supplementary means of interpretation,
including the preparatory work of the treaty and the circumstances of its conclusion, in order
to confirm the meaning resulting from the application of article 31, or to determine the
meaning when the interpretation according to article 31: (a) leaves the meaning ambiguous
or obscure; or (b) leads to a result which is manifestly absurd or unreasonable.”413 Therefore,
the assumption is that countries that enter into a treaty could not have intended that
certain unreasonable outcomes might be the result of applying the treaty.
Dworkin also seems of the opinion that there should be an assumption of reasonable intent.
At the very least, he thinks that legislation should be interpreted in a constructive manner.
In this, he makes a distinction between conversational interpretation and constructive
interpretation. This goes to the point that words have meaning that goes beyond their mere
context. The struggle here is to understand that there is a difference between the meaning
of a plain text and that words have a usage specific to their context. Article 31 VCLT states
specifically that terms in a treaty have an ordinary meaning.414 The article thus refers to a
sort of social practice that has developed in the treaty world and that one cannot just look
to one particular treaty and then interpret these words. If there is a tradition of a particular
way of phrasing, this tradition should be considered in the interpretation of that particular
text.
This raises the question of whether reasonable intent should rather be viewed as an
expository device. The intention of the legislator or the purpose of the law might not always
be enough to come to an interpretation that gives a satisfactory result. In any case, the
intention of the legislator is not always very clear. The explanatory notes and/or a tradition
in how particular words or phrasings should be understood helps to come to a generally
accepted interpretation. However, perhaps, these do not always give enough solid footing
for interpreting legal texts for every situation imaginable throughout different periods in
time. Possibly, this is indicative of the notion that the intention of the legislator in that sense
has a limited shelf life, because, as time progresses, there will be more and more situations
that the statute does not directly address or that could even have been considered at the
time the legal rule was drafted or simply that the legislator’s intention is too narrow a
concept:
411
See Section 4.1.
412
United Nations (1969), article 31(1) VCLT.
413
United Nations (1969), article 32 VCLT.
414
106
Let us not forget that so-called interpretation is not merely ascertainment of
legislative intent. If it were, it would be the easiest instead of the most difficult of
juridical tasks. Where the legislature has had an intent and has sought to express it
there is seldom a question of interpretation. The difficulties arise in the myriad of
cases in respect to which the lawmaker had no intention because he had never
thought of them.415
4.3.3 The Fiction of Remedial Effect
In the previous sections, it has been contended that a framework to interpret law should
take into account (i) the legal text itself, (ii) the intention of the legislator, (iii) the unfolding
narrative of doctrinal and political morality and (iv) the effect that the predispositions of the
interpreter might have on the act of interpretation.
It has been discussed that it is important for the legal text to be built on a set of widely
accepted and understood phrasings. This goes beyond Dworkin’s point that lawyers and
judges look at law in the same way, using the same criteria in their argumentation. Even
though they share the same language to explain what law is, legal texts should not just be
the reflection of a common language. It should also be built on a common structure.
Construction of meaning in legal texts should focus on what is regarded as (self-evident)
knowledge and how that kind of knowledge is constructed through language. In treaties, we
see that this is operationalised by particular turns of phrase that refer to specific social
practices that have been developed in the treaty world. One, therefore, cannot just
interpret these words by looking at one particular treaty. The social practice should be taken
into account in the interpretation of that particular text. Especially, in an international
setting, it is important that these phrasings develop and are used consistently for a uniform
application of the relevant article.
Using social practices to agree on certain turns of phrases does not only help to prevent
prima facie interpretation problems, but it also helps to understand the intention of
legislators better. Of course, the way preambles and explanatory notes to legal texts are
structured as well as the precise phrasings used in these texts can also prove to be very
helpful. Similarly, these phrasings — and changes to them — should also filter down to
national legislation. A (more) systematic approach to phrasing is therefore helpful to
separate wordings that incidentally differ from international standards from intentionally
differently worded phrasing. It could very well be that a different phrasing is used
intentionally, specifically, because a different meaning was intended. However, this appears
not always to be the practice. For example, in EU directives’ language on the general anti-
abuse rules (GAAR) is slightly different in several directives, without much indication a
substantially different meaning is intended.416 However, there differences in wording
415
Pound (1921), at p. 174.
416
For example, in the EU legislative body, there is a general anti-abuse rule (GAAR) in a number of EU direct
tax directives. For instance, there is a GAAR in the Parent-Subsidiary Directive (Council Directive 2011/96/EU of
30 November 2011, article 1, paragraph 2), the Merger Directive (Council Directive 2009/133/EC of 19 October
2009, article 15, paragraph 1(a)), and in the Anti-Tax Avoidance Directive (Council Directive (EU) 2016/1164 of
12 July 2016, article 6). The wording of each of these GAARs, however, is slightly different from one Directive
107
inevitably lead to disagreements on the meaning of these legal texts and how different EU
jurisdictions interpret them.
On the intention of the legislator, it has further been remarked that the idea should be that
laws are remedial and that there generally should be the assumption of reasonable intent. It
has also been remarked that the interpretation of any legal article should impose a purpose
to make it “the best possible example of the form or genre to which it is taken to belong.”417
This, however, presents two problems. The first is that it might not always be clear what the
intent of the legislator has been. What if the legislator had no intention on a specific matter
because they had never thought of it?418 Or because the technology that triggered a certain
situation had not been invented at the time of the legislative act? The second problem is
that it is not always clear whether the intentions of the legislator were completely benign.
What if the explicit intent of the legislator was to implement a clear beggar-thy-neighbour
tax rule? And does it matter if the legislator explicitly considered to have a tax law that is
detrimental to other jurisdictions or if they just forgot to mention this? Or if they had not
realised this to be the case? In the latter two instances, the legislator could present
perfectly benign policy intentions purely from the perspective of their own jurisdiction.
Accordingly, should a fair interpretation of a legal text be different depending on whether
the legislator is callous, duplicitous, or careless? Likely, most people would not think so.
On this point, it has been suggested that law must have an inherent degree of temporal
relativity.419 This would, on the face of it, allow for dealing with the situations where the
legislator either genuinely did not have an intention or where their intentions were less than
honourable. This would work by applying a compelling overriding (moral) principle to
interpret a questionable legal rule in its contemporary context.
Happé follows a similar line of reasoning. He states that one should apply an Aristotelean
view.420 He argues that legislation by necessity must have a general nature, and that this
means that it is not the law’s fault that it does not encompass all situations precisely. The
problem is that every conceivable human action just cannot be captured in general
provisions. There can always be a situation that cannot be classified under the words of the
law, but which, according to its intention, should be covered by it. Happé states that, in case
of such an event, one should first look to the legislator to correct this situation. The
legislator should amend the law in line with its spirit. However, in absence of such an
amendment, Happé considers that all taxpayers also have a moral duty to act in line with
the spirit of the law. In order to do so, the taxpayer should consider whether the legislator
would have approved of the taxpayer’s interpretation of the law if the legislator had known
at the time of legislation that the law would have been interpreted as such. The taxpayer
should therefore put themself in the position of the legislator.
to another. Interestingly, the Interest & Royalty Directive (Council Directive 2003/49/EC of 3 June 2003) does
not include a GAAR of its own but does include a SAAR.
417
418
Pound (1921), at p. 174.
419
See section 2.2.1.3.
420
Happé (1999) at p. 20; Aristotle. (1999), Ethica Nicomachea, Nederlandse vertaling Ethica, Historische
Uitgeverij, Groningen, at 1111 b 5.
108
[t]he reason for this is that law is always a general statement, yet there are cases
which it is not possible to cover in a general statement. In matters therefore where,
while it is necessary to speak in general terms, it is not possible to do so correctly, the
law takes into consideration the majority of cases, although it is not unaware of the
error this involves. And this does not make it a wrong law; for the error is not in the
law nor in the lawgiver, but in the nature of the case: the material of conduct is
essentially irregular. When therefore the law lays down a general rule, and thereafter
a case arises which is an exception to the rule, it is then right, where the Iawgiver's
pronouncement because of its absoluteness is defective and erroneous, to rectify the
defect by deciding as the lawgiver would himself decide if he were present on the
occasion, and would have enacted if he had been cognizant of the case in question.421
The obvious problem with this approach is that it is not easy to know what a legislator
would have done, had they known in the past how their legal texts would have been
interpreted in these future situations. As considered before, this approach holds an inherent
risk of an interpretation that would be biased towards an interpreter’s own situation. So,
even though the intent here appears to be to operationalise an objective way to deal with
inevitable uncertainty in legal texts, this approach might not be successful in effectively
eliminating the predispositions of the interpreter.
Moreover, Happé implicitly assumes reasonable intent of the legislator. At least, he assumes
that the legislator did, and would always, act in line with a moral principle, that is
understood the same by the interpreter. Here, the question is whether this assumption
necessarily always is true.
Governments have goals: they aim to make the nations they govern prosperous or
powerful or religious or eminent. They also aim to remain in power.422
In the case where the legislator’s policy intent could be understood as to not be in line with
such a (commonly understood) moral principle, the answer to the Aristotelean question
might well be that the legislator would also approve of an interpretation that falls short of
this moral principle.
A similar problem lies at the root of considering the unfolding political and doctrinal moral
narrative. One must assume that the unfolding narrative is one of reasonable intent in order
to be able to arrive at a morally acceptable legal interpretation. Moreover, there is also an
assumption that there is always some degree of agreement in this unfolding narrative. If
one or both assumptions appear to be false, the unfolding narrative could very easily turn
out to be a device that is mainly suitable for confirming one’s own beliefs.
This ultimately means that interpretations based solely on the legal text, the legislator’s
intentions and the unfolding political and doctrinal narrative in reality could allow one to
cherry-pick the arguments that best suit their own biases and present these as perfectly
421
Aristotle (1999), at V.14, 1137 b.
422
109
reasonable and morally just interpretations of law. In fact, the media analysis shows that
this has effectively been the case in the public debate on corporate tax avoidance.423 Over
the course of about 20 years, each stakeholder has been rather doggedly defending their
own position as legally and morally correct. Moreover, the analysis suggests that not many
have ventured to consider the issue from any other viewpoint than their own, which has
resulted in a situation where everyone appears to claim that the other has missed the point.
One of the fundamental reasons for this complete state of disagreement amongst these
different stakeholders has been—as the media analysis in Part II demonstrates —that each
actor’s starting point for their reasoning is different from the others. They each have
approached the subject from their own point of view.424 For instance, NGOs started out by
pointing to the fact that tax avoidance was problematic for developing countries. Later on,
their talking points focused more on how public services in advanced economies were
suffering from multinationals not paying taxes in the countries where much of their revenue
is generated. Governments were more concerned about how measures to fight tax
avoidance might impact their own local economy. Later on, they worried more about the
effects that tax avoidance might have on general tax morale, and thus, the tax revenue
flowing into their national coffers. Businesses have mostly been concerned about how
measures might impact cross-border investments and the ability to compete on a global
playing field. In short, each actor tends to worry most about their own plight or interest.
Their interpretation of what is just appears to be strongly biased towards their own
position. The result of this is that the stakeholders’ positions over time became more
polarised rather than that they naturally arrived at a point of consensus.
The choice of the criteria on which the issue of tax avoidance is considered, therefore,
directly leads to differences in judgement on what is a fair and proportional response. In
other words, the choice of principles leaves parties either advantaged or disadvantaged.
Such biases could be neutralised by applying Rawls’ theory of justice. The veil of ignorance
can be used as a general expository device to ensure that no-one’s choices can be biased to
improve their own position in the interpretation of law. A fair agreement or bargain on a
just and correct interpretation should, under these conditions, be possible, and this
agreement should reflect principles of justice.
To effectively eliminate the interpreter’s own predispositions that would influence the
outcome of the interpretation of law, one should align the starting position of all possible
interpreters. One could imagine a great equalizer, that ensures that one’s interpretation is
not automatically biased towards one’s own position: a Rawlsian reset button. The way to
operationalise such a device requires a similar thought experiment as Rawls — and to some
extent Nozick — suggested. Thus, the act of interpreting law should include a veil-of-
ignorance-inspired exercise, where each actor is forced to consider the positions of all
possible stakeholders and, particularly, the position of the most adversely affected persons.
One should, therefore, consider, from behind the veil of ignorance, whether the least
advantaged party would still agree with the outcome of a particular interpretation. Is this
the case, then the outcome can be considered just and in line with both the letter and spirit
423
See Section 9.4.
424
Lammers (2021), at pp. 1003-1004.
110
of the law. This would then be a representation of the standpoint of moral justice. Would
the least advantaged actor have a problem with the outcome, this would mean that the
principles of justice would not be (completely) satisfied. This could indicate that there is a
moral problem with either the interpretation and the interpreter’s view of the (spirit of) the
law or with the actual underlying rule. This exercise can be done from both the position of
the one who makes new policies or laws — does this new policy or law comply with the
fiction of remedial effect? — or the one how applies the law — is this subject’s behaviour in
line with the fiction of remedial effect?
One could argue that the OECD/G20 took this approach in considering the tax challenges of
the digitalisation of the economy,425 especially, with regard to the design of Pillar One. It is
unclear whether this has been deliberately executed as such, but the result is the same. In
very broad strokes, the OECD/G20 Inclusive Framework considered that the economic
reality had changed to a degree in which the least advantaged party, in this case market
jurisdictions, did no longer benefit enough from the international profit tax system that was
in place. This situation meant that more and more actors were considering the system as a
whole to be unfair. Instead of scrapping the entire system and replacing it with something
else, the OECD/G20 looked for a way to let market jurisdictions benefit more. The rules of
the current system were changed to the point where the least advantaged party could again
agree to the system as a whole. Even though this came at a cost for some parties, those who
were better off to begin with did not veto this improvement of the position of those worst
off.
425
See OECD. (2018c). Tax Challenges Arising from Digitalisation - Interim Report 2018: Inclusive Framework on
BEPS, OECD/G20 Base Erosion and Profit Shifting Project. OECD Publishing; OECD. (2019a). Addressing the Tax
Challenges of the Digitalisation of the Economy – Policy Note As approved by the Inclusive Framework on BEPS
on 23 January 2019, OECD/G20 Base Erosion and Profit Shifting Project. OECD Publishing; OECD. (2019b).
Addressing the Challenges of the Digitalisation of the Economy - Public Consultation Document 13 February – 6
March 2019, OECD/G20 Base Erosion and Profit Shifting Project. OECD Publishing; OECD. (2019c). Programme
of Work to Develop a Consensus Solution to the Tax Challenges Arising from the Digitalisation of the Economy,
OECD/G20 Base Erosion and Profit Shifting Project. OECD Publishing; OECD. (2019d). Secretariat Proposal for a
“Unified Approach” under Pillar One – public consultation document 9 October 2019 – 12 November 2019,
OECD/G20 Base Erosion and Profit Shifting Project. OECD Publishing; OECD. (2019e). Global Anti-Base Erosion
Proposal (GloBe) (Pillar Two) – public consultation document 8 November 2019 – 2 December 2019, OECD/G20
Base Erosion and Profit Shifting Project. OECD Publishing; OECD. (2020a). Tax Challenges Arising from
Digitalisation – Report on Pillar One Blueprint: Inclusive Framework on BEPS, OECD/G20 Base Erosion and Profit
Shifting Project. OECD Publishing; OECD. (2020a). Tax Challenges Arising from Digitalisation – Report on Pillar
One Blueprint: Inclusive Framework on BEPS, OECD/G20 Base Erosion and Profit Shifting Project. OECD
Publishing; OECD. (2020b). Tax Challenges Arising from Digitalisation – Report on Pillar Two Blueprint: Inclusive
Framework on BEPS, OECD/G20 Base Erosion and Profit Shifting Project. OECD Publishing; OECD. (2020d). Tax
Challenges of the Digitalisation of the Economy – Global Anti-Base Erosion Model Rules (Pillar Two): Inclusive
Framework on BEPS, OECD/G20 Base Erosion and Profit Shifting Project. OECD Publishing; OECD. (2021b);
OECD. (2021c). Tax Challenges Arising from The Digitalisation of The Economy Global Anti-Base Erosion Model
Rules (Pillar Two) Inclusive Framework On BEPS, OECD/G20 Base Erosion and Profit Shifting Project. OECD
Publishing; OECD. (2022a). Pillar One – Amount A: Draft Model Rules for Nexus and Revenue Sourcing – Public
Consultation Document 4 February 2022 – 18 February 2022, OECD/G20 Base Erosion and Profit Shifting
Project. OECD Publishing; OECD. (2022b). Pillar One – Amount A: Draft Model Rules for Tax Base Determination
– Public Consultation Document 18 February 2022 – 4 March 2022, OECD/G20 Base Erosion and Profit Shifting
Project. OECD Publishing; OECD. (2022c). Pillar One – Amount A: Draft Model Rules for Domestic Legislation on
Scope – Public Consultation Document 4 April 2022 – 20 April 2022, OECD/G20 Base Erosion and Profit Shifting
Project. OECD Publishing.
111
Applying an expository device such as the fiction or remedial effect to legal interpretation
has an interesting consequence. It renders the intention of the legislator effectively
irrelevant. To a lesser degree, the same applies to the purpose of the law. In other words, it
replaces the assumption of reasonable intent of the legislator with a fiction of remedial
effect. Like the Canadian Interpretation Act, the idea that the interpretation of the law
should be such that it fulfils the principles of justice so that the outcome represents moral
justice could be considered a “lamp by the light of which [all] statutes should be read.”426
This works as an overriding mechanism to the intention of the legislator. In fact, it serves to
raise the intent of any legal stature to the level that reflects moral justice.
Even if the legislator had intended an outcome that—at any moment in the future—would
have been considered unjust from the perspective of the least advantaged, the fiction of
remedial effect could replace the legislator’s intention as the touchstone for a correct and
morally just interpretation. Of course, if the legislator never had an intention or did not
express one, the fiction of remedial effect would provide a mechanism by which to judge
the moral justice of an interpretation. This is a mechanism that would be based on a more
objective measure than the subjective Aristotelean exercise of reverse-engineering a
legislator’s intent as Happé envisaged. This is a mechanism that is based on the supposition
that, if the least advantaged parties would affirm the interpretation as just, everyone else
would do the same.
The fiction of remedial effect should not be understood always to override or completely
replace (i) the text of the legal article, (ii) the intention of the legislator, or (iii) the unfolding
narrative of doctrinal and political morality. The expository device is meant to allow one to
evaluate the final choice of the interpretation that is “believed sounder, fairer and more just
on the whole” at any particular moment in time.427
The fiction of remedial effect of legislation could, thus, be a helpful element for an effective
framework to interpret law fairly. In addition, a common taxonomy for the design and
wording of legal texts as well as a common understanding or compendium of the unfolding
narrative of doctrinal and political morality — for instance, promoted by an international
standard-setting organisation such as the OECD — will contribute greatly to ensure a
systematically coherent interpretation of the law. This is because language is not just a
reflection of reality but also shapes it. Therefore, a common understanding of the language
and concepts used inevitably converges interpretations both across borders and throughout
time.
4.3.4 A Practical Experiment: Fairness in Parking Regulations
There is at least one assumption underpinning the fiction of remedial effect. It assumes that
laws ought to be just, as laws that lack in moral standing would not be able to endure. This
assumption is also quite pervasive in legal philosophical thinking.428 As we have seen, even
legal positivists believe that a legal system must rest on a sense of moral obligation, as it
426
See Section 4.3.
427
Dworkin (1986), at p. 263.
428
See section 2.2.1 and 5.4.2.
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cannot exclusively rest on the mere power of man over man. Even though laws might have
been enacted in a valid legal manner, one should still consider whether one should obey
these laws if they were grossly unfair or morally reprehensible.429 Accordingly, it seems safe
to say that, if not for reasons of validity, then for reasons of longevity, it is important that
laws are considered just and fair by the public.
A law that is considered fair should also inspire behaviour that is considered morally right or
just. Conversely, it should assign culpability to those whose actions are regarded as morally
wrong. As the fiction of remedial effect should ensure that the intent of any legal stature is
raised to the level that reflects moral justice, the result should be that—as seen from behind
the veil of ignorance—there should be agreement that even the least advantaged party
would agree with the degree of blame that flows from any given legal statute. Moreover,
the perception of fairness is dependent on the idea that some kind of social norm has been
violated. Research then also shows that—from the perspective of the one who the law
applies to—two competing motivations can occur when violating the rules. On the one
hand, there is the upside of how much one gains from cheating. On the other hand, the
downside is that cheating might affect one’s ability to maintain a positive self-concept of
being honest. This results in most people thinking it is okay to cheat just a little, as this does
not compromise the self-concept too much in that most people think cheating too much is
wrong, as this would mean one has to update their self-concept.430
In an interesting study conducted by Garcia, Chen & Gordon, a similar test has been
conducted. Their main result is that one could violate the letter of the law without incurring
culpability while violating the spirit of the law always incurs culpability even if the letter of
the law remains unbroken.431
The paper sets out with giving an account of different ways the spirit of the law has been
described or defined in academic literature. For example, the spirit has been described as
the “perceived intent” of the law or as “commonsense justice” but also as “its general
meaning or purpose, as opposed to its literal content,” or as “protecting legal and social
values,” and “the fundamental rules that emphasize the social and ethical values protected
by the letter of the law.”432 In the article, they recognise problems with all of these
descriptions and decide, for the purposes of their paper, on a definition of the spirit of the
law as the perceived intention, meaning what ordinary people think that the law ought to
be.433 The authors do not describe any mechanism to objectively arrive at the perceived
intention, nor do they further analyse what the perceived intention means precisely.
Instead, the article assumes that people instinctively understand what this is. Subsequently,
they apply this idea of the perceived intention of the law to a number of case studies.
429
Hart (2012), at pp. 202-211.
430
Mazar, N., Amir, O., & Ariely, D. (2008). The dishonesty of honest people: A theory of self-concept
maintenance. Journal of marketing research, 45(6), 633-644, at p. 634.
431
Garcia, S. M., et al. (2014). The letter versus the spirit of the law: A lay perspective on culpability. Judgment
& Decision Making, 9(5), at p. 479.
432
See, Finkel (1999), at p. 669; Garner, B. A., & Black, H. C. (2009). Black's law dictionary. St. Paul, MN: West.;
Ostas (2004), at pp. 583-584.
433
Garcia, et al. (2014), at p. 480.
113
These case studies explore the hypothesis that culpability is determined by violating the
perceived intention of the law rather than the letter of the law. For the first case study,
participants were shown one of two photos showing a parked car. In the first photo, a car
was parked partly outside a designated parking spot so that the car encroached upon
another parking spot. In the second photo, the car again was parked partly outside a
designated parking spot. However, now, the car was not encroaching upon another parking
spot, but rather it was very close to a wall in the parking lot. The participants were told that
the relevant parking law stated that “a car cannot be parked upon or across the line.”
Participants were asked to answer the following questions:
(i) Is this action technically speaking legal? (letter of the law)

(ii) Does this action violate the intention of the law? (perceived intention of the law)
(iii) Should this person receive a parking ticket? (culpability)
The results show that almost 100% of the participants answered that, in both situations, the
letter of the law had been broken. Moreover, almost 100% of the participants believed a
parking ticket should be issued to the person that encroached upon another parking spot. In
the situation where the car was very close to the wall, however, only 50% of the participants
thought a parking ticket should be issued.434
In a second case study, participants were given one of two situations. The first situation was
that a handicapped person parked in a handicapped parking space without the proper
handicap licence plate or placard showing. The second situation was that an able-bodied
person parked in a handicapped parking place with a car that had the proper handicap
licence plate or placard showing. The participants were told that the relevant parking law
stated that “only cars showing a handicap licence plate or placard can park in handicapped
parking spaces.”
Participants were asked to answer the same questions:
(i) Is this action technically speaking legal?

(ii) Does this action violate the intention of the law?
(iii) Should this person receive a parking ticket?
The results show that, in the first situation, 83% of the participants answered that the action
was not legal (17% thought the letter of the law had not been broken even though the car
did not have a handicap placard). 37% of the participants thought that this situation went
against the law’s intention, and about 57% thought that a parking ticket should be issued. In
the second situation, 23% of the participants answered that the action was not legal, 80% of
the participants thought this situation went against the intention of the law, and about 33%
of the participants thought that a parking ticket should still be issued. So, 57% of the
participants believed that a parking ticket should have been issued in the situation where
the letter of the law had been violated but not the spirit. And 33% of the participants
believed that a parking ticket should be issued in the situation where the letter of the law
was respected, but the spirit of the law had been violated. The differences in judgement
434
Garcia et al. (2014), at pp. 482-483.
114
between the case studies can be explained, according to the authors, by the violation of the
perceived intention or spirit of the law. The results, therefore, show that culpability is, to a
large degree, dependent on whether people feel that the perceived intention of the law has
been violated.
If these same cases are viewed from behind a veil of ignorance and based on whether the
least advantaged person would affirm the interpretation, one could consider the following:
In the situation where the parked car was encroaching upon the other parking space, the
least advantaged party would likely be the one that would have liked to have used that
parking space but could not as a result of how the first car had been parked. Therefore, it
would be in line with the principles of justice that the law is interpreted in such a way that a
parking ticket should be issued. In the situation where the parked car is very close to the
wall, the least advantaged person is likely the one that parked closer to the wall than they
should have. One could therefore argue that the morally correct interpretation of the law
should not result in a parking ticket.
In the other case study, the situation where the handicapped person parked in a
handicapped parking spot in a normal car, the least advantaged party could conceivably be
another handicapped person in a car with the proper handicap plate and/or placard who
presumably had to park further away. The question is then whether this person would think
that someone that did not comply with the legal requirements should be treated the same
as someone who does comply with the legal requirements. Arguably, the least advantaged
person in this scenario would also think that a parking ticket should be issued. Not issuing a
parking ticket, like 43% of the participants of the study seem to think would be fair, could
therefore be viewed as going against the principles of justice.
In the situation where an able-bodied person parked in the handicapped parking space in a
car showing a handicap plate and/or placard, the least advantaged person would likely be a
handicapped person that would have liked to park in that handicapped parking space. It
thus seems likely that the least advantaged person would think that a parking ticket should
be issued. However, 67% of the participants thought it to be fair if no ticket was issued.
The difference in the outcomes might be explained as follows. It could be argued that what
Garcia, Chen & Gordon see as the spirit of the law is, in actuality, what people think the
intention of the legislator could have been (and, therefore, not necessarily what the law
should have been). Also, it appears that the perspective from which people judge fairness in
the case studies is unclear at best. It seems likely that people used themselves as reference
points and asked whether they thought it would have been fair if they had received a
parking ticket if they had been in this situation. While the study yields interesting results,
the comparison with the fiction of remedial effect shows that following the people’s view of
the legislator’s intent and/or of fairness does not necessarily lead to the same result of what
would be fair or morally just from the perspective of the least advantaged party.
However, it does show that people intuitively seem to sense that the presented situation
where an able-bodied deprives a handicapped person from a handicapped parking space is
likely worse — morally speaking — than when this happens between two handicapped
115
persons. This might go to the earlier point that it could be considered okay to cheat a little
but not to cheat a lot.435 The reason that most people might consider the able-bodied
person the bigger cheater could lie in the fact that this person actually breaks the rule that a
handicap placard cannot be used by anyone else than those it has been issued to. As a
result, the able-bodied person most likely should have gotten two fines, as they—in fact—
violated two legal rules: (i) using another person’s handicap placard, and (ii) parking in a
handicapped spot without a valid handicap placard.
Of course, in practice, there would be problems with the application of the rules in such a
manner. For instance, how could a parking attendant know that a parked car with the
correct handicap plate or placard had been driven there by an able-bodied person? He
would not be able to tell just by looking at the car. The risk that the able-bodied person that
unfairly parked in a handicapped spot would get caught thus seems very small. The likely
outcome of this scenario would thus be that the parking attendant would not issue a
parking ticket, even though the principles of justice might have compelled them to. Also, the
least advantaged party did most likely not even know that they were disadvantaged, as they
also would not know that the car had not been driven by a handicapped person. However,
from the perspective of justice and fairness, it should not matter whether the risk of getting
caught was big or small and/or if someone was aware of being wronged or not.
This practical example also illustrates that it is not necessarily easy to determine who the
least advantaged party is. Interpreters might also disagree on who the least advantaged
party is. It can depend, for instance, on how much interpersonal differences one wants to
account for. For example, is the degree of mobility of a handicapped person to be
considered, or are all handicapped persons considered to benefit equally from parking in a
handicap parking spot? The expository device of considering whether the least advantaged
person might affirm a certain interpretation is thus not watertight or even unambiguous.
Therefore, one might argue that it is not perfect, as the starting positions of the interpreters
might still differ. However, it does force these starting positions to converge. Even if this
convergence may not completely eliminate the bias towards one’s own position, it at least
obliges a further explanation of one’s particular position through the same type of lens. It is
then up to the interpreter to justify within these boundaries why their interpretation would
be fairer than other alternatives.
The law’s true position is one of standing for ultimate and more important social
interests as against the more immediate pressing but less weighty interests of
the moment by which mere will unrestrained by reason is too likely to be
swayed.436
One issue that is central to this study is how one can discern the personal moral preferences
from moral preferences that are widely regarded to be true, as it is assumed that personal
moral preferences should not constitute legal rights and obligations:
435
Mazar et al. (2008), at pp. 642-643.
436
Pound (1921), at p. 81.
116
The problem with spirits is that they tend to reflect less the views of the world whence
they come than the views of those who seek their advice.437
In this chapter, it was discussed that constructive interpretation, as advocated by Dworkin,

aims to combine the legal text itself and the meaning of the legislator—the backward-
looking element in interpreting law, or conventionalism—as well as the forward-looking
perspective of how legal doctrine and the political morality currently stands and how this
narrative is unfolding towards the future in interpreting the law. This study has discussed
how law needs an element of temporal relativity to retain its authority over time.438 The
forward-looking interpretative elements attempts to operationalise this point of temporal
relativity (or context sensitivity).
It has also been argued that interpreters themselves influence the interpretation of law. As
the act of normative interpretation is not a mind-independent exercise, the values,
preferences and principles of the interpreter will have a significant influence on the
outcome of the interpretation and thus which moral propositions that are to be considered
true or false in the legally enforceable sense.
The field of metaethics has been discussed to explain the importance of realising where
moral language comes from. Such an understanding can give insight in if an interpreter
might be more inclined towards, for instance, the divine command theory and/or ideal
observer theory or if they might lean more towards moral relativism. With this, it important
to realise that the position one takes on the metaethical framework—and thus one’s views
on whether moral propositions are true or false or whether more positions are possible—is
very much dependent on the ethical theories one subscribes to, including whether one is
more inclined towards natural law theories, legal positivism, or Dworkin’s legal theory.
This section also illustrates that that the metaethical problem of where moral language
comes from and how we might distinguish between good and bad behaviour is not unlike
the problem presented by the sorites paradox. The idea of moral absolutism leaves one with
the problem that the judging of whether something is good or bad is just not clear-cut, and
pretending it is anyway (by simply leaving out the vagueness by way of introducing an
omniscient deity or ideal observer) does not solve the problem at all. At the same time,
stating that there are no moral facts or saying that they are culturally relative ultimately
lead to the conclusion that all actions can be considered good and bad at the same time and
thus makes the moral judgement more or less meaningless.
In practice, however, one can argue that most people would be able to agree on some
actions being definitely good and some actions being definitely bad. This also follows from
Dworkin’s notion of constructive interpretation. Where the problem lies is that they do not
seem to be able to agree on the precise point of where the boundary is. It might therefore
be necessary to accept that within a specific range certain moral propositions can still
simultaneously be true and false or, at least, not-true and not-false. At the same time, a
437
Public Citizen v. United States Department of Justice, 491 U.S. 440, 473 (1989) (Kennedy, J., concurring).
438
117
shared framework to assess the legal enforceability of moral propositions would be helpful
to minimise the bandwidth of moral propositions where this overlap takes place.
Furthermore, it has been argued that legal cultures, particularly with regard to international
tax policy, are converging. It has also been argued that this convergence, in fact, takes place
in the larger context of broad cultural convergence under the influence of digitalisation and
globalisation. Principally, the work of the OECD/G20 Inclusive Framework as the global
setter of standard for the development of (international) tax law policy and the interplay
with the European Commission as EU lawmaker have led to the conclusion that the
differences in legal culture with regard to tax law are not likely to be significant drivers of
differences in legal interpretations and underlying morality considerations. It is unlikely that,
in a world where tax standards are converging as they are, morality would take a
significantly different position in the interpretation of statutory tax law by either the tax
authorities in common law or civil law countries or their respective courts.
With regard to the importance of the legislator’s intent or the purpose of the law with
regard to the interpretation of legal texts, a number of observations were made. First of all,
looking at the legislator’s intent or even the purpose of the law does not take into account
the development of the political morality, and it does not fully consider the development of
the legal doctrine. Also, it does not allow for gaps in the law where the legislator did not
have an intention at all, for example, in the situation to which the law should be applied to
involve technology that was not even imagined at the time the law was made. One could
take the purposivist view in saying that one should consider the purpose of the law from the
viewpoint of what reasonable people reasonably could have intended. However, one then
runs into the problem of having to determine what reasonable people would imagine, and
thus what reasonable really means. The trouble with this is that this might be a very
subjective exercise. As has been argued above, it is important to consider how one could
objectify what is reasonable. The risk that one’s own moral preferences rather than a widely
supported notion of justice fairness determines what is reasonable should be minimised as
much as possible to prevent that one’s judgement of what is reasonable is influenced too
much by the bias towards one’s own situation.
It has been suggested that such an assessment could be made more objective by making the
judgement of what could be a reasonable purpose of the law from behind a veil of
ignorance. If the outcome of a certain interpretation from behind the veil of ignorance
would be affirmed by the least advantaged party of such an interpretation, one could argue
that this interpretation could be considered fair by all affected parties. This is the essence of
what in this study has been called the fiction of remedial effect.
It is important that this exercise is done from behind the veil of ignorance. In assessing a
reasonable outcome (in line with a reasonable purpose of the law), one should not know
that one is the least advantaged party, as this would not lead to a fair assessment of the
interests of all possible affected parties. One should, therefore, consider, from behind the
veil of ignorance, whether the least advantaged party would still agree with the outcome of
a particular interpretation. If this is this the case, the outcome could be viewed as a
representation of the standpoint of moral justice and, therefore, be considered just and in
line with both the letter and spirit of the law. If the least advantaged party would
118
foreseeably have a problem with the outcome, the assessment should be that the principles
of justice would not be (completely) satisfied. This could indicate that there is a moral
problem with either the interpretation or the interpreter’s own moral convictions of what
the (spirit of) the law should be, or it could indicate that there likely is broad consensus in
society that there is a moral problem with the actual underlying rule. If the latter is the case,
it does not matter that the rule always has been unjust or that the intention of the legislator
was not reasonable at the time the rule was enacted. In fact, it is more likely that, in such
cases, this is an indication that the political and/or doctrinal morality has moved away from
(the original) purpose of the underlying legal rule in question.
For this reason, it is also important that the fiction of remedial effect should not be
understood to always override the intention of the legislator or the purpose of the law in
interpreting legal rules. It is meant as an expository device, perhaps as a tie-breaker rule,
that allows one to apply a comparative approach in the interpretation of legal rules. This is
because it allows for one to evaluate whether the interpretation applying the fiction of
remedial effect would be “believed sounder, fairer and more just on the whole” 439 at the
time the legal rule was to be applied to a given concrete situation. As the short case study
on parking regulations shows, such an approach could lead to different outcomes than
where people intuitively would assign culpability when they feel that the letter of the law
might not be violated, but the spirit of the law is.
Much of the argumentation in this section revolves around the question of how those moral
convictions that could be part of law can be distinguished from moral convictions that are
personal preferences. The contention is that traditional means, such as the application of
legal principles and the use of shared taxonomy, and traditional approaches, such as
through intentionalism or purposivism, are not effective enough in minimising the
bandwidth of moral propositions where it is very difficult to distinguish one from the other.
Especially, in the international debate on corporate income tax law, the importance to
understand the difference between arguments based on personal preferences and legal
arguments is growing. Nowadays, society at large seems to expect from, particularly,
multinational corporations, more than ever to consider not only whether a certain tax
structure is legally acceptable but also take into consideration whether such a legally
acceptable tax structure is also acceptable on ethical and moral grounds.440 Normative
morality considerations have, therefore, gained much importance in the interpretation of
tax law, especially, in cross-border situations. But which normative arguments are legally
relevant, and which are not? It is generally accepted that normative statements do not have
an answer that is either objectively true or objectively false. It can only be justified by
another normative statement.441 They can, therefore, only be judged based on how
convincing they are thought to be. But from a legal standpoint, only legal arguments should
count.
As discussed in the section on legal principles, ideological non-legal arguments can acquire
the status of ideological legal principles by gaining enough institutional support. This
439
Dworkin (1986), at p. 263.
440
See examples throughout section 9.4.
441
Hume (1896), at p. 469.
119
requires that such a non-legal argument can rely on a broad enough consensus in society to
secure the necessary measure of institutional support. Besides, these ideological legal
principles should not compete with structural legal principles to the point where the
structural legal principles can effectively no longer be upheld when interpreting the law. The
fiction of remedial effect, therefore, could be a mechanism to assist in separating personally
held moral convictions from moral convictions that have come to be widely held and rely on
a broad consensus in society. How the issue of which arguments could have legal force, and
which have not specifically should be considered in international tax law is further examined
in chapter 5.
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5 Morality in International Tax Law
Now on the infinite variety of nations there are upon the earth, there are no two which
agree exactly in their laws: certainly not in the whole: perhaps not even in any single
article: and let them agree today, they would disagree to-morrow.442
There are those who think that international law is not really a legal system.443 There are
those who question whether international tax law is part of international law,444 and there
are those who say that international tax law does not truly exist, as tax laws are really a
national affair.445 This section aims to examine these claims and determine whether there is
a spirit of international tax law and, if so, whether it has any practical use.
5.1 International law
The first point that international law is not a legal system comes from the notions that
international law is too theoretical, too political and too restricted by sovereignty. These
notions mainly stem from the fact that international law does not have a supreme lawmaker
or legislature (a world government or parliament), no clear law enforcer or law interpreter
(a world police force), and no adjudicator (a world supreme court).446
However, international law undeniably exists. There are rules that conduct the behaviour of
states when it comes to transactions and problems that transcend national borders.447
Moreover, the majority view today is that these international rules of conduct are law in
their own right,448 as the international rules of conduct are also thought to be binding on
442
Bentham (2000), at p. 235.
443
Bederman, D. J. (2002). The spirit of international law. University of Georgia Press, at p. 2, and at pp. 23-26.
444
Avi-Yonah, R. S. (2004). International tax as international law. Available at SSRN 516382, at pp. 483-484.
445
Arnold, B. J. (2019). International tax primer. Kluwer Law International, at pp. 13-15; Isenbergh, J. (2010).
International Taxation (3rd Edition) Concepts and Insights Series. Foundation Press, at p. 3; Mason (2020), at p
353.
446
Bederman (2002), at pp. 23-24.
447
Bederman (2002), at p. 1.
448
See for example, Mason (2020), at p. 353; Avi-Yonah (2004), at pp. 500-501; Bederman (2002), at pp. 21-22.
121
international actors. For example, the American Law Institute states that, when a rule of
international law has been accepted as such by the international community of states,449 it
is meant to be adhered to and is, in practice, followed.450 This means that states, in general,
accept the validity of international tax law as law.
Furthermore, international law is arguably gaining in importance. Globalisation and

digitalisation are important drivers of the ever further integration of the global economy.
This development leads to more international cooperation, and it requires countries to
cooperate in more areas.451 In fact, globalisation and digitalisation lead to the identification
of shared interests in international society that are of vital importance to virtually all states,
and these interests can only be protected through international coordination.452 This is, for
example, the case on matters concerning global environmental issues. The reckless
behaviour of one state with regard to such shared interests could potentially endanger all
states in the world. As a result, these shared interests increasingly are the direct cause for
the development of international regulation. Examples of this include the international rules
on the functioning of the international economy, the reducing of risks in financial market
developments, the protection of the global environment, the management of common
resources, or taxation.453 Given these shared interests, individual states must subsequently
consider this international regulation in the design of their legal system. Accordingly, while
it is not likely that states have abandoned self-interested motifs such as improving their
competitive position, it would appear that the shared interests of society on a global scale
are gaining a more prominent position in the development of international law. As a result,
international law is also becoming a more tangible factor of everyday life for more and more
people.454
However, it is important to point out that international law is not like domestic law. Law-
making occurs through a combination of consensual and coercive means. However, as there
is no supreme lawmaker in international law, its actors differ from those prevalent in regular
law-making procedures. The outcome of international law-making between states is to a
great extent based on a consensus-oriented political processes, although some might claim
that states with less political or economic power are forced to agree.455 Even though
international law is traditionally based on explicit consent, there is an observable trend
where international organisations operate on a broad consensus basis or even on a majority
rule.456 In fact, it is widely accepted by now that not only states can bring forth international
laws, but international organisations and special interest groups may also have a very
dominant presence in international law-making.457 For instance, where broad international
449
American Law Institute. (1987). Restatement of the Law, the Foreign Relations Law of the United States (No.
540). American Law Institute-American Bar Association (ALI-ABA), at paras. 102 (2) - 102 (3).
450
Work on the fourth Restatement is currently underway, but there is no reason to assume that this view on
international law will change dramatically.
451
452
Hongler (2019), at p. 258.
453
454
Hongler (2019), at p. 259.
455
Hongler (2019), at p. 155.
456
Hongler (2019), at p. 251.
457
122
soft-law agreements form the basis for the design of new international standards and
regulations, which are subsequently endorsed by states.
However, even though international law can stem from different lawmakers, international
law is like domestic law in the sense that it is both a body of rules and a normative system (a
framework for making law). In other words, international law consists of primary rules that
govern behaviour and secondary rules that validate these primary rules. Although, one
might argue that those secondary rules might be a little bit more diffuse than Hart might
have envisaged as a rule of recognition.
5.2 International Tax Law
With minor exceptions, tax laws are not “international” they are creations of sovereign
states. Arguably at least, there is no overriding international law of taxation arising
either from the customary practice of sovereign states or from actions of some
international body such as the UN or the OECD.458
Strictly there is no ‘international’ taxation. Only nations and their subdivisions impose
taxes. The subject known as ‘international taxation’ involves international aspects of tax
systems arising in national environments.459
As shown above, some scholars consider tax law to be a predominantly national affair. Avi-
Yonah, however, clearly disagrees with this point of view.460 Tax is not just a domestic
matter where one sometimes has to deal with cross-border situations. There are some 3000
bilateral tax treaties that are based on either the OECD model treaty or the UN model treaty
and “are intended for adherence by states generally.”461 In addition to this—at least since
the OECD report from 1998 on harmful tax practices,462 the adoption of the Code of Conduct
for business taxation in the EU,463 and, consequently, the inception of the Code of Conduct
Group464 as well as the development and implementation of the OECD/G20 BEPS projects—
a clear process is in place to align tax policies through multilateralism as well as to guardrail
tax competition. Jurisdictions just cannot credibly pretend that there are no widely accepted
international tax norms465 or ignore these rules just because national interests are at
stake.466 Even if they tried to ignore them, the OECD would clearly attempt to design the
458
Arnold (2019), at p. 13.
459
Isenbergh (2010), at p. 3.
460
Avi-Yonah (2004), at pp. 484-491.
461
See OECD. (2015m). Developing a Multilateral Instrument to Modify Bilateral Tax Treaties, Action 15 -2015
Final Report, OECD/G20 Base Erosion and Profit Shifting Project. OECD Publishing, at p. 15; OECD.
(2019g). Model Tax Convention on Income and on Capital 2017 (Full Version). OECD Publishing, at paras. 4-16;
American Law Institute. (1987), at para. 102 (3); Avi-Yonah (2004), at p 497.
462
OECD. (1998), Harmful Tax Competition: An Emerging Global Issue. OECD Publishing.
463
Council Conclusions. (1997). On taxation policy - Resolution on a code of conduct for business taxation -
Taxation of saving, 1 December 1997, (OJ C 2, 6.1.1998, pp. 1–6).
464
Council Conclusions. (1998). On the establishment of the Code of Conduct Group (business taxation), 9
March 1998, (OJ C 99, 1.4.1998, pp. 1–2).
465
Avi-Yonah (2004), at pp. 500-501.
466
Avi-Yonah (2004), at p. 498.
123
rules that should curb international tax avoidance in particular in such a manner that it does
not necessarily require full international cooperation to still be effective.467
The continuing efforts of the OECD to align the tax policies of all the members of the
Inclusive Framework further also serve as evidence that there is a clear and coherent
international tax regime or, at least, that one of the aims of the Inclusive Framework is to
get to a point where there is one. Moreover, recent OECD progress reports on the
implementation of BEPS measures show that it is not merely happenstance that countries
follow the newly agreed-upon rules, and they do not only do so insofar as these serve their
national interests.468 In fact, there is rather a broad acceptance of the obligation to do so.
This obligation is greatly supported by the fact that the national implementation of BEPS
action points is subject to a peer-review process for which the OECD also has released
common standards and methodologies for states to follow.469
Mason points to the work of the OECD/G20 Inclusive Framework on the BEPS project to
suggest that an international framework for taxation has been developed. She argues that
(i) BEPS has expanded the actors who participate in international tax policymaking, (ii) BEPS
has significantly expanded the agenda of international tax policymaking, (iii) BEPS has
caused international tax policy to be less about avoiding double taxation and more about a
new internationally accepted norm that income should not escape taxation or full taxation,
and (iv) BEPS has introduced novel forms of law such as the multilateral treaty to update
participating countries’ bilateral tax treaties as well as new forms of soft law and
institutional structures.470
In a similar vein, Christians contends that, “if the OECD-based regime is not fully
supranational yet, it is close.”471 Particularly, this was cemented through the establishment
of the OECD/G20 Inclusive Framework in 2016, which includes non-OECD member countries
in international tax policymaking and should be seen as a momentous step in international
tax governance. A step that is paving the way establishing the OECD as the conductor of
pluralistic legal regime development, and manager of the global tax policy discourse. As
such, the lead designer of globally agreed tax standards, recommendations, and best
practices.472
467
See, for instance, OECD. (2015b). Neutralising the Effects of Hybrid Mismatch Arrangements, Action 2 - 2015
Final Report, OECD/G20 Base Erosion and Profit Shifting Project. OECD Publishing; OECD (2021c).
468
See for instance, OECD. (2018d). OECD/G20 Inclusive Framework on BEPS: Progress Report July 2017-June
2018, OECD/G20 Base Erosion and Profit Shifting Project. OECD Publishing; OECD. (2019f). OECD/G20 Inclusive
Framework on BEPS: Progress Report July 2018-May 2019, OECD/G20 Base Erosion and Profit Shifting Project.
OECD Publishing.
469
See, for example, OECD. (2016d). BEPS Action 14 On More Effective Dispute Resolution Mechanisms Peer
Review Documents, OECD/G20 Base Erosion and Profit Shifting Project. OECD Publishing; OECD. (2020e). BEPS
Action 13 on Country-by-Country Reporting – Peer Review Documents, OECD/G20 Base Erosion and Profit
Shifting Project. OECD Publishing; OECD. (2020g). Prevention of Treaty Abuse – Second Peer Review Report on
Treaty Shopping: Inclusive Framework on BEPS: Action 6, OECD/G20 Base Erosion and Profit Shifting Project.
OECD Publishing; OECD. (2021a). BEPS Action 5 On Harmful Tax Practices – Transparency Framework Peer
Review Documents, OECD/G20 Base Erosion and Profit Shifting Project. OECD Publishing.
470
Mason (2020), at p. 354.
471
Christians, A. (2016). BEPS and the new international tax order. Brigham Young University Law Review,
1603, at pp. 1644-1645.
472
Christians (2016), at p. 1646.
124
Hongler, however, believes that the international tax regime is a primitive legal system at
best. He points to the lack of concrete guidelines that international law provides for the
design of international tax law.473 Like Avi-Yonah, he points to differences between
international law and international tax law but suggests that the extended view on
nationality and residence, for instance with regard to CFC-rules, leads to a very blurred
jurisdiction-to-tax relationship, which can make the link to justify the right to tax very
limited.474 Moreover, this is one of the major causes for double taxation through
overlapping jurisdictions, and it is the root cause as to why the BEPS project was necessary
in the first place. Additionally, Hongler argues that the international tax regime is weak since
there is no central legislator and international tax legislation is not systematically regulated.
This leads to fuzzy multilateralism where international tax agreements, such as Tax
Information Exchange Agreements (TIEAs), are often not reciprocal and often lack proper
legal recourse possibilities. Moreover, international tax law relies heavily on soft law sources
such as the OECD and UN Model Convention, and this reliance on soft law will likely increase
in the foreseeable future given the influence that the OECD/G20 BEPS project has had on
international policymaking.475 This reliance on soft law is problematic, because it means that
explicit state consent is less and less a factor in establishing international tax law. Moreover,
the manner in which these rules come to be might not follow the traditional framework for
making international law, and this could be detrimental to the ultimate validity of the
rules.476
On balance, it seems most scholars accept that international tax law is a reality. However,
given the importance that the above-mentioned authors place on both the past and ongoing
work within the OECD in setting the standards in corporate income tax policymaking, it
could be argued that the content and acceptance of soft law are pivotal points for
determining what should be considered part of international tax law. Above, it has already
been mentioned that it is widely accepted that not just states can bring forth international
law, but also international organisations and special interest groups are a very dominant
presence in international law-making.477 The question, however, is whether this dominant
presence in international law-making is enough to be considered an actual source of
international law or what is required to be considered so.
5.3 Sources of International Tax Law
That international law can come from different sources can also be concluded from the
Statute of the International Court of Justice. The ICJ’s Statute is considered by international
law scholars as the basis for what the sources for international law are.
In Article 38 of the ICJ Statute, these are listed as follows:478
473
Hongler (2019), at p. 271.
474
Hongler (2019), at p. 77.
475
Hongler (2019), at pp. 273-276.
476
Hongler (2019), at p. 280.
477
478
United Nations. (1946). The Statute of the International Court of Justice, Article 38 (1).
125
Article 38
1. The Court, whose function is to decide in accordance with
international law such disputes as are submitted to it, shall
apply:
a. international conventions, whether general or
particular, establishing rules expressly recognized by
the contesting states;
b. international custom, as evidence of a general practice
accepted as law;
c. the general principles of law recognized by civilized
nations;
d. subject to the provisions of Article 59, judicial
decisions and the teachings of the most highly
qualified publicists of the various nations, as
subsidiary means for the determination of rules of law.
2. This provision shall not prejudice the power of the Court to
decide a case ex aequo et bono, if the parties agree thereto.
Accordingly, the ICJ statute recognises treaties, custom, general principles of law as primary
source of international law, and judicial decisions and scholarly publications as a subsidiary
means to determine the rules of law. This also overlaps to a great extent with the sources of
international law that the American Law Institute recognises.479 There is no hierarchy amidst
these sources, but there is a synergy between them. Finally, the ICJ Statute gives the Court
the power to interpret the rule of law in such a way that, given the particular circumstances
of a case, the outcome will reflect what is fair and just.
5.3.1 International Conventions
According to the Vienna Convention on the Law of Treaties (VCLT), an international

convention or treaty means an international agreement that is concluded between States in
written form and is governed by international law.480 Additionally, states should establish
their consent to be bound by the treaty by ratifying or accepting that treaty.
This agreement between states entails that the states enter into a binding legal obligation
with the treaty. Moreover, consent to be bound by a treaty can be given by state in a
number of ways, for instance, by signing the treaty, by exchange of instrument, by
ratification or approval, and by accession.481 This means that both the wording and the
manner of acceptance of a treaty are important.482 Moreover, the consent must be given by
(representatives of) the states, as it is an agreement between bodies of international law.483
This can also include an agreement between a state and an international organisation such
479
American Law Institute (1987), at para. 102 (1).
480
See United Nations. (1969). Vienna Convention on the Law of Treaties. Treaty Series, 1155, 331, Article
2(1)(a) VCLT.
481
See United Nations. (1969), Articles 11 -17 VCLT.
482
Hongler (2019), at p. 98; Bederman (2002), at pp. 70-77.
483
United Nations. (1969), Article 7 VCLT.
126
as the UN or the OECD.484 Of course, there can be no fraud, corruption or (threat of) illegal
coercion during the negotiation or signing of treaties, as this would make those treaties
invalid.485 However, Article 52 on coercion does not (explicitly) include political or economic
pressure on states to consent to a certain treaty.486 Finally, it should be clear that an
agreement is governed by international law, meaning that it should not be an agreement
between states that falls under (domestic) civil law.487
Treaties are an important source of international law, but that does not take away from the
importance of customary international law and the general principles of law, which are
described below.488 One reason for this is that one can view treaties in a number of ways,
e.g., as instruments to codify (existing) customary international law or as instruments to
design and propagate new international law. Treaties can also be more like contracts
between nations or more like legislation that establishes rules of conduct between nations.
The truth is that most—if not all—treaties most likely do all of these things.489
Moreover, there can be tensions between treaties and customs. For example, there is the
question of how to deal with situations where a treaty only binds the parties involved in the
treaty but the custom also binds non-parties. A more black letter approach to international
law is that that a non-party should not be able to enjoy the benefits that come from a
treaty. However, the ICJ has found that, for instance, the UN Charter can also create
obligations for non-parties.490 One could argue that, in this particular case, the ICJ looked at
the spirit of the UN Charter rather than the letter, and it found that, “even though
diplomatic protection should be executed by the nation State, [these powers], even if they
are not expressly stated in the Charter, are conferred upon the Organization as being
essential to the discharge of its functions.”491
However, the ICJ has also ruled in an opposite manner. In the North Sea Continental Shelf
Cases, Germany deliberately was a non-party to a treaty to which the Netherlands and
Denmark were parties. The treaty included the so-called equidistance rule, limiting each
country’s access to their respective continental shelves. The ICJ ruled that the equidistance
rule was not a codification of an existing international customary law and, therefore, that
Germany was not bound by it, as it was not a party to this particular treaty.492
Therefore, the development of international law is not just a matter of treaties. Even though
more and more areas of international law are being governed by rules contained in
international agreements, it would not be wise to discount custom as a very important
source of international law.
484
See Bederman (2002), at p. 68; Hongler (2019), at p. 104.
485
United Nations. (1969), Articles 49-52 VCLT
486
See for further discussion on this point, Hongler (2019), at pp. 107-109.
487
Hongler (2019), at p. 106.
488
See Sections 5.3.2 and 5.3.3.
489
490
Reparation for Injuries Suffered in the Service of the United Nations. Advisory Opinion, ICJ Rep. 1949, 174.
491
Reparation for Injuries Suffered in the Service of the United Nations. Advisory Opinion, ICJ Rep. 1949, 174, at
p. 180.
492
North Sea Continental Shelf (Federal Republic of Germany v. Denmark). Judgement, ICJ Rep. 1969, 3.
127
That being said, the current international network consists of more than 3000 bilateral tax
treaties. Each of these tax treaties should be considered to be a convention in the sense of
the VCLT and thus a source of international tax law.493 The same goes for individual treaties
on exchange of information that are currently in place.494 Interestingly though, both of these
types of treaties typically are based on a model convention, which, in most cases, has been
developed by the OECD. For example, the Model Agreement for TIEAs was developed by the
OECD Global Forum Working Group on Effective Exchange of Information with the aim to
promote international cooperation with regard to the exchange of information in tax
matters.495 Of course, this Model Convention is not a binding treaty in and of itself.
At the same time, the Global Forum on Transparency and Exchange of Information for Tax
Purposes consists of 163 members that are all states and 21 observing international
organisations.496 It can, therefore, hardly be said that the Model Agreement is not
important. It has a very decisive impact on the content of TIEAs across the globe. One could
perhaps argue that the Model Agreement is the manifestation or design of new customary
international law and that the TIEAs are the subsequent codification of this (new) custom
and are instruments to propagate this new customary law across the world. By viewing the
Model Agreement in this way, it might possibly be considered a source of international law
under Article 38 of the ICJ Statute. In any case, one cannot simply state that the Model
Agreement is not part of international law, as that would deny its importance.
Similarly, the OECD Model Tax Convention on Income and Capital (OECD MC) serves as a
model for countries to conclude bilateral tax treaties.497 The OECD MC does not only include
the text of the model treaty but also the extensive and detailed commentary on the
meaning of each article, the position of non-OECD countries with regard to certain articles
and the corresponding commentary. This means that the OECD MC does not only cover the
OECD’s perspective, but it also covers a broad range of possible interpretations in detail.498
Moreover, it offers best practices on how countries might overcome these different
interpretations or positions in treaty negotiations. The lion’s share of the more than 3000
bilateral tax treaties in force are based on the OECD MC. Even though these treaties are far
from identical, it is fair to assume that the OECD Model Tax Convention has been the basis
for the negotiations for states to conclude these bilateral tax treaties. Furthermore, the
OECD MC has also provided the uniform basis for the application of the bilateral treaties in
place and, as such, is an important instrument for settling the most common problems with
regard to international taxation. Especially, this is true if said problems had not yet been
manifested at the time of a tax treaty being concluded between two states.
493
OECD (2015m), at p. 15.
494
See, for an overview of the TIEAs in place, https://www.oecd.org/ctp/exchange-of-tax-
information/taxinformationexchangeagreementstieas.htm.
495
OECD (2002b). Model Agreement on Exchange of Information in Tax Matters (Model TIEA), OECD Publishing.
496
See a comprehensive overview of all the members of the Global Forum on Transparency and the Exchange
of Information for Tax Purposes https://www.oecd.org/tax/transparency/who-we-are/members/
497
OECD (2019g).
498
For example, see OECD (2019g), at p. 1505 et seq. on the non-OECD members’ positions on the OECD
Model Tax Convention.
128
The OECD adopted the first draft of the OECD MC in 1963.499 The OECD MC has been under
constant development since, as new international tax issues continuously come up with the
development of the global economy and new tax policy advances. Currently, the OECD MC
is under constant review of Working Party No. 1 of the OECD’s Committee on Fiscal
Affairs.500 The work in WP 1 has led to regular changes of the OECD MC. For example, WP 1
has produced ten comprehensive updates that were published in 1994, 1995, 1997, 1998,
2000, 2003, 2005, 2008, 2010, 2014 and 2017.501 The last comprehensive update of 2017
largely consists of a consolidation to the treaty-related measures resulting from the work of
the OECD/G20 BEPS project under Action 2,502 Action 6,503 Action 7504 and Action 14.505
Therefore, the OECD MC has had a global impact for a long period. However, arguably, the
global importance of the OECD MC has grown further because of the BEPS project, which is
the result of the creation of the OECD/G20 Inclusive Framework in 2016 and the extension
of the CFA membership. Where one in the past could argue that the OECD MC was just the
product of a small number of rich OECD member countries,506 the OECD work on taxation—
and, by extension, the OECD MC—is more inclusive today. The question is, however,
whether this is enough to consider the OECD MC a source of international tax law in and of
itself.
In this study, much has already been said on the OECD/G20 BEPS project and its importance
for the setting of international standards and the tax policy development over the last
decade. An impressive body of work has been produced by the OECD, which includes the
development of four minimum standards,507 a number of common approaches508 and
499
OECD (2019g), at p. I-2.
500
The OECD Committee on Fiscal Affairs (CFA) is the main forum for OECD discussions on taxation, covering
international and domestic tax issues and tax policy and administration. The OECD considers the CFA the key
body for setting international tax standards, and, as such, it builds on strong relationships with OECD member
countries and engages with a large number of non-OECD, G20 and developing countries on an equal footing.
The CFA’s membership was expanded in 2016 with the creation of the OECD/G20 Inclusive Framework, which
currently has 141 members.
501
OECD (2019g), at p. I-3
502
OECD (2015b).
503
OECD. (2015f). Preventing the Granting of Treaty Benefits in Inappropriate Circumstances, Action 6 - 2015
Final Report, OECD/G20 Base Erosion and Profit Shifting Project. OECD Publishing.
504
OECD. (2015g). Preventing the Artificial Avoidance of Permanent Establishment Status, Action 7 - 2015 Final
Report, OECD/G20 Base Erosion and Profit Shifting Project. OECD Publishing.
505
OECD. (2015l). Making Dispute Resolution Mechanisms More Effective, Action 14 - 2015 Final Report,
OECD/G20 Base Erosion and Profit Shifting Project. OECD Publishing.
506
For example, Christians, A. (2007). Hard law, soft law, and international taxation. Wis. Int'l LJ, 25, 325, at p.
330.
507
OECD. (2015e). Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and
Substance, Action 5 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project. OECD Publishing;
OECD. (2015k). Transfer Pricing Documentation and Country-by-Country Reporting, Action 13 - 2015 Final
Report, OECD/G20 Base Erosion and Profit Shifting Project. OECD Publishing; OECD (2015f); OECD (2015l).
508
OECD. (2015d). Limiting Base Erosion Involving Interest Deductions and Other Financial Payments, Action 4 -
2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project. OECD Publishing; OECD.
(2015j). Mandatory Disclosure Rules, Action 12 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting
Project. OECD Publishing; OECD (2015b); OECD (2015g).
129
building blocks509 as part of BEPS 1.0, the development of the multilateral instrument,510 a
global agreement on a two-pillar approach,511 and the development of the two pillars as an
integral policy package, as well as detailed blueprints on the respective moving parts for
each pillar.512 Especially, the European Commission has moved quickly to transpose most of
these elements into EU directives, of which many have already been adopted,513 and others
are still proposals.514 This means that, in the EU, the OECD work has, by and large, been
lifted to the status of minimum standards and has been implemented in EU Member States’
national legislation. However, the OECD is an international organisation based on
consensus. The organisation does not have the power to force OECD member countries to
change their national legislation, let alone where it concerns non-members (even if they are
part of the OECD/G20 Inclusive Framework).515 Without a signed (multilateral) treaty
binding states, the promises made at the OECD negotiating table or in the global
agreements cannot reasonably be enforced. However, much as with the other examples of
the TIEAs and the OECD MC, it is hard to maintain that the international agreements or
underlying OECD publications are easily set aside or ignored, especially, since they have
been endorsed by (almost all) the members of the OECD/G20 Inclusive Framework.
5.3.2 International Custom
The second source of international law according to article 38 of the ICJ Statute is customary
international law. It has been pointed out above that international law-making is not
exclusive to legislators and courts. Custom as a source of international law is grounded in
the notion that there is a shared and knowable will or spirit of a people or a community.516 A
consent of communities that is confirmed by tradition rather than a formal legislator.517 This
goes beyond the conduct of states themselves but can also include the conduct of
international organisations, transnational business organisations as well as religious and
civic groups.518
509
OECD. (2015c). Designing Effective Controlled Foreign Company Rules, Action 3 - 2015 Final Report,
510
OECD (2015m); OECD. (2016c). Explanatory Statement to the Multilateral Convention to Implement Tax
Treaty Related Measures to Prevent Base Erosion and Profit Shifting, OECD/G20 Base Erosion and Profit
Shifting Project. OECD Publishing.; and the Toolkit to apply the MLI, available at
https://www.oecd.org/tax/treaties/application-toolkit-multilateral-instrument-for-beps-tax-treaty-
measures.htm.
511
See OECD (2021b).
512
See OECD (2022a); OECD (2022b); OECD (2022c) on Pillar One; and OECD (2020d) on Pillar Two.
513
See Sections 8.1.5., 8.2.1., 8.3.2 and 8.4.1. for a comprehensive overview of all relevant EU legislative
initiatives and proposals.
514
See European Commission. (2021b). Proposal for a Council Directive on preventing the misuse of shell
entities for tax purposes, COM(2021) 565 final, 12 December 2021; and European Commission. (2021c).
Proposal for a Council Directive on ensuring a global minimum level of taxation for multinational groups in the
Union, COM(2021) 823 final, 22 December 2021.
515
See Christians (2016), at p. 1622.
516
517
Byers, M. (1995). Custom, power, and the power of rules customary international law from an
interdisciplinary perspective. Michigan Journal of International Law, 17(1), 109-180, at p. 179.
518
130
What is and is not custom or, more specifically, what constitutes a rule of customary
international law is very often a question of legally justifiable expectations. The process of
customary international law consequently revolves around finding a consensus for what
most states would find desirable or acceptable as a legal outcome. Moreover, it is the actual
behaviour of states that provides an indication of the degree to which they are interested in
seeing a particular legal outcome.
It is tempting to consider the outcome of the decision-making process in an international

organisation like the OECD to be a reflection of what most states would find to be a
desirable outcome. As such, even though the agreements of international organisations do
not legally bind states, they might be considered soft law that is strong enough to be
customary international law. These international agreements have a complex yet big impact
on the development of international law. For example, they can act as precursors for the
development of customary international law, as they both function as the evidence of the
emergence of certain customs and as a way to promote these customs.519
For there to be customary international law, generally, there need to be two elements. 520
First, there has to be a general state practice, which means that a certain number of states
must adhere to the custom. However, not all states have to agree to which legal outcome
that is most desirable. Second, the states that follow the custom must do so out of the
conviction that the practice is accepted as law, and they must accept that, if the practice is
not followed, there should be consequences.521
For instance, Mason considers that the G20/BEPS project has resulted in the acceptance of
full taxation as a new international norm.522 Mason does not consider whether this means
that full taxation should be seen as customary international tax law, but she does contend
that, taken collectively, the BEPS recommendations represent an unprecedented
commitment to coordinate national tax policy and, in particular, to adhere to the full
taxation as a norm. With this, she at least implies that there is a shared sense that this norm
is the new normal that should be followed.523
Parada believes that full taxation is neither a new norm in the strict international law sense
or that it should be considered customary international law.524 He considers that both
elements — the existence of a state practice and that this practice is the opinio juris — are
519
Shelton, D.L. (2000). Commitment and compliance: the role of non-binding norms in the international legal
system (introduction). In Commitment and Compliance: The Role of Non-Binding Norms in the International
Legal System (Shelton, D.L. ed., 2000). Oxford University Press, at p. 17.
520
See Thirlway, H. (2014). The Sources of International Law. Oxford University Press, at p. 102; Christians
(2007), at p. 329; Parada, L. (2020). Full Taxation: The Single Tax Emperor's New Clothes. Fla. Tax Rev., 24, 729,
at pp. 776-777.
521
This element is commonly known as opinio juris sive necessitates or simply as opinio juris.
522
The term full taxation is based on Reuven Avi-Yonah’s single-tax principle, meaning that international tax
law should do two things simultaneously: (1) ensure that the entire profit of a corporation is taxed (full
taxation), and (2) prevent that that profit is taxed more than once (no double taxation). See more in-depth
discussion Mason (2020), at pp. 370-373; and Avi-Yonah, R. S. (1996). International taxation of electronic
commerce. Tax L. Rev., 52, 507, at pp. 517-520.
523
Mason (2020), at p. 372 and p. 400.
524
Parada (2020), at pp. 782-783.
131
to be considered in combination. Subsequently, it comes down to how widespread the
practice is and how long it has been state practice. This means that there has to be proof
that countries are convinced that a certain practice should be followed as if it were law.
One, therefore, logically cannot, a priori, say that a particular practice should be considered
international customary law.525 However, that does not mean that the OECD/G20 BEPS
project in general—and full taxation in particular—could never be international customary
law. It might just simply be too early to tell.
In general, tax scholars seem reluctant to view agreements at the level of an international
organisation like the OECD as international customary law.526 Even though, generally, the
existence of a general state practice is questioned, most also appear to believe that states
do not have enough of a sense of legal obligation to follow the OECD’s guidance to fulfil the
second conditions for customary international law. Consequently, this means that an
agreement at international level, in and of itself, does not constitute international
customary law.
Chinkin is interesting in this respect, as she considers the transformation of soft law into
hard law such as in the case Nicaragua, where the ICJ found that, even though there was no
consistent state practice, the opinio juris followed from the attitude towards relevant
resolutions of the General Assembly of the UN.527 In this particular case, this was enough to
consider that there was evidence of customary international law. According to Chinkin, this
indicates a willingness of the ICJ to consider resolutions from an international organisation
as a possible source of international law as well as to accept that soft law could transform
into hard law.528 With regard to the BEPS project in the context of the OECD/G20 inclusive
Framework, one could therefore ask if a consistent state practice that is intended to agree
with the OECD proposals can be understood as a legitimate shared expectation among
states that other states will also behave in a way that is in line with the agreement in the
future. Moreover, even though an agreement at the OECD level is not legally binding,529
could states still reasonably expect that other states would follow the design of new tax
policies in their national legislation if they consistently have agreed to do this throughout
the BEPS project? However, Chinkin nuances his point by stating that the specific
circumstances in the case could mean that opinio juris in relation to other resolutions of
international organisations would not be considered in the same marginal manner by the
ICJ.530
525
Parada (2020), at pp. 776-783.
526
Christians (2007), at pp. 328-329; Parada (2020), at p. 779; Hongler (2019), at p. 150 et seq. (Hongler, for
instance, considers in this regard that morality and fairness are not key factors in deciding whether opinion
juris exists. The question is whether countries believe the custom is legally binding and not if they should think
so (at p. 153)).
527
Military and paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America).
Merits, Judgment, ICJ Rep. 1986, 14, at paras. 188-194, at paras. 202-209.
528
Chinkin, C. M. (1989). The challenge of soft law: development and change in international law. International
& Comparative Law Quarterly, 38(4), 850-866, at p. 858.
529
Also see regarding the binding nature of agreements by the OECD, the Convention on the Organisation for
Economic Co-operation and Development, 14 December 1960, article 5 and article 6(1) and (3). Available at
https://www.oecd.org/general/conventionontheorganisationforeconomicco-operationanddevelopment.htm
530
Chinkin (1989), at p. 858.
132
In line with other commentators, Peters also identifies that the changing state-society
interaction goes hand in hand with a shift in international law from a model where states
need to consent to rules of international law explicitly to a model where this explicit consent
is not so clear.531 He describes a trend in which international tax law should be understood
more substantively, meaning that any rule that impacts the taxation of cross-border
activities should be part of international tax law. Besides, he observes a proliferation of the
sources of international tax law. Especially, soft law becomes increasingly important in
governing taxation of cross-border activities. Particularly, international soft law that is
produced by the OECD/G20 does not seem to require explicit consent in order to apply
generally.532 Unlike Hongler,533 Peters does not appear to consider that the possibility of
coercion should be a factor when considering whether these soft law instruments should be
part of international tax law. To put it in simple terms, global companies that operate in a
global society require a global setter of tax standards that apply comparably across (all)
borders.
It should be explicitly considered that the OECD should not be able to conjure hard
international law out of thin air. Even though there are protocols and rules surrounding the
decision-making processes of the OECD, the OECD Secretariat also produces discussion
drafts that have not passed through the rigorous review process of all the OECD/G20
Inclusive Framework members.534 In fact, most discussion drafts and public consultation
documents put out by the OECD with regard to the BEPS project in general and with regard
to addressing the tax challenges of the digitalisation of the economy in particular have been
reflections of ongoing work. Therefore, by definition, they are not an actual, definitive
agreement between the members of the OECD/G20 Inclusive Framework. To see the OECD
publications – which do not even reflect a formal consensus within the OECD – as a source
of international law in their own right would stray very far from the idea that international
law is based on consent. Thus, to ensure sufficient checks-and-balances, it makes sense to
be reluctant to view international agreements as a source of international tax law, let alone
the publications that precede such an agreement. Conversely, following the logic of the
North Sea Continental Shelf Cases,535 viewing these international agreements (or their
preliminary work) as a source of international tax law could make it almost impossible to
reach a political agreement, as countries would likely object to the publication of such
documents or explicitly withhold consent as to prevent that they inadvertently would be
bound even though they are not (yet) part of the agreement. All things considered, I would
therefore contend that the agreements within the G20/Inclusive Framework agreement and
relating OECD publications on the G20/BEPS project should not be considered as
independent sources of international tax law.
If this point is accepted, then this still might not be the whole story. For instance, Christians
considers in the context of the OECD 1998 project on harmful tax practices that
understanding how international law is emerging outside of traditional hard law
531
See Bederman (2002), at p. 17; Hongler (2019), at p. 107, pp. 131-312 and pp. 164-166 for further
discussion on the issue of explicit and implicit consent in international law-making.
532
Peters (2013), at pp. 66-72.
533
Hongler (2019), at p. 239.
534
See for example, OECD (2019d) and OECD (2019e).
535
See North Sea Continental Shelf (Federal Republic of Germany v. Denmark). Judgement, ICJ Rep. 1969, 3.
133
mechanisms is important for its future development. Moreover, she considers that it might
be inescapable that an organisation like the OECD takes a central role as a quasi-
legislator.536 She, however, also concludes that the OECD agreement on harmful tax
competition does not constitute customary international law for similar reasons as the ones
stated above, but that one also cannot then dismiss this as “not law”.537 Moreover, the
author warns the reader to not just label everything that comes out of such an institution as
soft law simply due to the reason that one would expect that states feel compelled to
adhere to these (non-binding) recommendations. The distinction made by the author is that
soft law should be seen as the selective supranationalisation of particular tax norms rather
than as letting national governments achieve regulatory goals that effectively reflect
national goals that might be unattainable in their national political setting. The warning in
the paper, therefore, appears to focus on the risk that too broad of an understanding of
what (international) soft law is might lead to an overreach of the international organisation
to achieve specific policy goals.
Daly describes the characteristics of (international) soft law as follows: soft law instruments
(i) seek to change or guide behaviour of the addressees, (ii) do not create (legal) rights or
obligations themselves for the addressees, and (iii) aim to bring a degree of formalisation
and structure, which makes them strongly resemble rules of law.538 He distinguishes
between two types of soft law. Type one embodies discretionary decisions and provide
consistency and type two seeks to interpret, explain and/or apply primary law over which
the relevant public body has no formal discretion.539 Following this logic, (the commentary
on) the OECD MC or TIEA Model Agreement could be viewed as a type one kind of soft law.
It is a further clarification and dissemination by supranationalisation of international tax
norms that have been in existence for some time. International tax norms that might even
have been around long enough so that their practice is (almost) considered the rule of law.
Interestingly, Navarro argues that one should not automatically turn to the latest version of
the OECD MC and its commentaries to interpret this non-binding soft law instrument
properly, as this would be a backdoor for a quasi-binding status for the OECD MC and its
commentaries. This would, however, mean that the version of the commentaries that
should be favoured is “the one containing the most adequate interpretative outcome in
accordance with the possible meanings of the terminology [its] context and its purpose.”540
The author argues that this is to prevent arbitrariness. However, as argued in the section on
the fiction of remedial effect,541 without an objective method to finding the purpose of the
(soft) law (instrument) that effectively eliminates the predispositions of the interpreter, the
risk of arbitrariness might remain.
536
537
538
Daly, S. (2021). The Rule of (Soft) Law. King's Law Journal, 32(1), 3-13, at p. 4.
539
Daly (2021), at p. 5.
540
Navarro, A. (2020). International Tax Soft Law Instruments: The Futility of the Static v. Dynamic
Interpretation Debate. Intertax, 48(10), at p. 860; also, see in this regard Pötgens, F. P. G., & Vergouwen, M.
(2022). De status van het OESO-Commentaar volgens de jurisprudentie van de Hoge Raad (deel 1). Weekblad
voor fiscaal recht. WFR 2022/72. 462-474.Pötgens, F. P. G., & Vergouwen, M. (2022). De status van het OESO-
Commentaar volgens de jurisprudentie van de Hoge Raad (deel 2). Weekblad voor fiscaal recht. WFR 2022/75.
492-506.
541
See Section 4.3.3.
134
The OECD publications on the BEPS project could sooner be categorised as type two soft
law. This is because, even if the OECD is seen as the setter of standards of international law,
the BEPS project largely concerns itself with rules and recommendations that require
national implementation. This invariably means that they are the outcome of a difficult
political negotiation. In this regard, one might consider the risk that, in such a political
process, a degree of political or economic pressure might be applied to achieve a broad
agreement in the OECD/G20 Inclusive Framework. However, one could also imagine that, if
this is the case, the enthusiasm of such a country to actually adopt the rules and
recommendations it has agreed to in the international agreement would almost certainly be
very small. Even though peer-review might be part of the agreement a country could, in
principle, indefinitely withhold cooperation regardless of the international agreement in
place for reasons of national political incompatibility.
Moreover, Daly assumes that soft law instruments co-exist indefinitely alongside hard law.
Soft law instruments enhance the rule of law by supplementing the underlying law.542 While
this would be true for the (commentary on the) OECD MC, one could argue this is not
(always) the case for many of the OECD/G20 publications on BEPS, where the aim is to
further certain policy goals rather than to give guidance on existing international tax
policy.543
Moreover, there might not be clear dividing lines between the types of soft law that the
OECD produces. As can be observed in the BEPS project, the OECD MC is also used to
introduce new international tax policy.544 The BEPS project, in turn, is about the
international alignment of existing tax policies through the use of best practices and other
clarifications.545 However, it is contended in this study that type one international soft law—
particularly with regard to more established tax rules and practices—are to be considered
much closer to what could be customary international law than type two international soft
law. This is particularly true in cases where the agreement within the international
organisation is relatively recent and/or politically highly sensitive, as this makes the
expectation of state compliance to amend their national rules as agreed more tenuous. In
fact, the more politically uncertain implementation is, the more necessary it is that states
first prove that they will comply with the agreement for it to be relevant for (the spirit of)
international tax law. In other words, this demonstrates that the level of demonstrated
institutional support is a very relevant factor for something to be part of the concept of
law.546
Furthermore, international soft law might have no need to translate into hard international
law in and of its own accord. One of the reasons for this can be found in how the European
Union has transposed large parts of the OECD/G20 agreement into EU legislation, which, in
turn, has been implemented into national legislation by EU Member States. Additionally,
other countries have subsequently implemented large parts of the OECD/G20
542
Daly (2021), at p. 8.
543
See for further discussion Christians (2007), at p. 326 et seq.
544
See OECD. (2015h). Aligning Transfer Pricing Outcomes with Value Creation, Actions 8-10 2015 Final
Reports, OECD/G20 Base Erosion and Profit Shifting Project. OECD Publishing.
545
See OECD (2015c).
546
Also, see Hongler (2019), at pp. 155-156.
135
agreements.547 Moreover, the ECJ regularly takes the considerations of both the OECD and
the European Commission that underpin these directives into consideration in rendering
their judgements.548 This can happen either as (new) legal principles and/or rules, new
interpretations, or a further development of how existing principles and/or rules should be
understood. Furthermore, the OECD publications, particularly those that concern the BEPS
project, are a major source for academic writing, and, in these academic considerations, the
OECD vernacular is used, analysed, criticised, confirmed or rejected. Moreover, the OECD
publications give rise to suggest alternative approaches that might be more fair, effective,
efficient, or less complex and burdensome on (diverse) stakeholders. Finally, the OECD
publications are also widely discussed and commented on by civil society organisations and
other interest groups such as business organisations and trade organisations. In fact, all this
input is the result of (national) implementation, juridical consideration, academic writing
and comments from interest organisations triggering the OECD to further develop and
occasionally reconsider their previous work.
If nothing else, the international agreements at the OECD/G20 level have dramatically
changed the unfolding global narrative on topics such as value creation, tax avoidance, and
tax transparency as well as what is generally to be considered to be unacceptable outcomes
for taxpayers that operate globally. Consequently, even though soft law as it is found in the
in OECD publications on BEPS and other issues, should not be considered a source of
international law directly, there is a trickle-down effect, or even a recursive loop, through
the other primary and subsidiary sources acknowledged by the ICJ Statute.549
5.3.3 General Principles of Law Recognised by Civilised Nations
General principles form the third primary source of international law according to the ICJ
Statute. It is important to note that the ICJ Statute points to general principles of law
recognised by civilised nations. As such, the ICJ is referring to principles of law and not of
international law.550 However, even if they are not general principles of international law,
these principles should relate to international law.551 Moreover, there is an inherent
paradox in the fact that general principles of law are a source for a body of rules for
international law. The more abstract the legal principle is, the less useful it becomes as a
binding rule of international law. However, the more concrete a legal principle is, the more
difficult it is to find a consensus that would qualify it as a relevant legal principle.552 This
paradox particularly becomes apparent in situations where the law is not clear because
there is no suitable law, the rules are vague or unequivocal, the law is not consistent, or the
legal consequences would be widely considered to be unfair or unjust.553
547
See OECD (2018d); OECD (2019f); and OECD. (2021d). Progress Report July 2020-September 2021,
OECD/G20 Inclusive Framework on BEPS. OECD Publishing.
548
See for example, cases C-116/16 and C-117/16. Judgment of the Court (Grand Chamber) of 26 February
2019. Skatteministeriet v T Danmark (C-116/16), Y Denmark Aps (C-117/16). ECLI:EU:C:2019:135.
549
Bederman (2002), at pp. 42 and 45-48.
550
551
Hongler (2019) at p. 189.
552
See Bederman (2002), at p. 29.
553
Hongler (2019), at p. 190.
136
In the earlier section on principles of law,554 it was discussed that one could discern
between structural and ideological principles of law. The former can be viewed as hidden
axioms of the logical structure of the legal system.555 They can be induced from the legal
system itself. As a result, they have strong institutional support. The latter are legal
principles that have evolved from initially non-legal principles. They are made legal by
finding constitutional support through considerations by the courts and by lawmakers.556
The exact scope of Article 38(1)(c) of the ICJ Statute — specifically which principles that are
referred to — is not clear, but one could assume that it would primarily consist of principles
that are structural to international (tax) law.557
Thirlway says on this that there are a number of interpretations on the scope of Article
38(1)(c) of the ICJ Statute. One of these is that these principles contain (only) those
principles that are commonly found in all or a majority of national legal systems.558 Another
is that these also include (self-evident) principles that can directly be applied to
international law such as the principle pacta sunt servanda.559 General principles of
international law could, for instance, involve good faith in the exercise of international
rights, the abuse-of-rights doctrine, due process before international tribunals, state
responsibility, as well as fiscal sovereignty.560
The general principles of law are a primary source of international law, and act as binding
rules for how states interact with each other. This also means that international courts
could, in principle, decide a case solely based on such general principles. In practice,
however, there is very little indication that the ICJ is willing to look (exclusively) to the
general principles where the law is not clear, because there is no suitable law, the rules are
vague, the law is not consistent, or the legal consequences would be widely considered to
be unfair or unjust.561
ICJ does, however, refer to general principles in several decisions.562 Instead of a source of
new legal obligation, general principles rather fill the role of supporting statutory law
interpretation in combination with previous ICJ case law and other primary and subsidiary
legal sources.563 This also fits with the largely statutory nature of tax law. Moreover, it
554
See Section 4.1.3.
555
556
557
Thirlway (2014), at p. 109.
558
Also, see Hongler (2019), at p. 200.
559
Thirlway (2014), at pp. 109-110.
560
See for example, Nuclear Test Cases (Australia/New Zealand v. France). Judgment, ICJ Rep. 1974, 253, at
268; Free Zones of Upper Savoy and District of Gex (France v. Switzerland). Judgement, P.C.I.J. 1932, Ser. A/B,
No. 46; Effects of Awards made by the U.N. Administrative Tribunal Opinion. Advisory Opinion, ICJ Rep. 1954,
47, at 53; Chorzów Factory (Germany v. Poland). Merits, Judgment, P.C.I.J. 1928, Ser. A, No 17, at 28-29; Also
see Bruggen, E. van der (2001). Compulsory Jurisdiction of the International Court of Justice in Tax Cases: Do
We Already Have an International Tax Court'?. Intertax, 29(8/9), at p. 259 for further references from which
the general principle of fiscal sovereignty can be deduced.
561
Thirlway (2014), at pp. 101-109; Hongler (2019), at pp. 190-191; Bederman (2002), at p. 32.
562
Thirlway (2014), at p. 102.
563
Lagrand (Germany v. United States of America), Merits, Judgment, ICJ Rep. 2001, 466.
at paras 99 and 103-104; Border and Transborder Armed Actions (Nicaragua v. Honduras), Judgement, ICJ Rep.
1988, 69, at para. 94.
137
insulates legal principles from arbitrary application, and prevent that a fairness claim is
really than just a “political value-based claim.”564 Legal principles therefore could be viewed
as a “lamp by the light of which international tax law should be read”,565 as they are applied
in constructive interpretation of international (tax) law.566
This also means that even if one concedes that the international tax law might never have
been meant to be based on 100% consent of all states. In practice, general principles should
find their validity in legal argumentation. This means that, on the one hand, “some principles
are indeed valid in every legal relation based on equity and justice considerations”567, on the
other hand, that they complement the validity of a specific rule, as they maintain the
coherence within the legal system as a whole such as in international tax law.
5.3.4 Subsidiary Means for the Determination of Rules of Law
Judicial decisions and other academic writing are not seen as a primary source of
international law but rather as a subsidiary means to determine the rule of law or to
establish evidence of what the norms of international law are.568 One reason for this
differentiation from the primary sources is that, even though there are more or less global
judicial instances such as the ICJ or the European Court of Human Right, the decisions of
these courts do not constitute binding precedents for other international tribunals and, in
many cases, not even for the tribunal that made the decision.569 Even though stare decisis is
common practice in and across international tribunals, there is no obligation to do so.
Another reason is that this is a reflection of the fact that there is not one central lawmaker
in international law. At the same time, this approach puts different lawmakers at a similar
level. For instance, it prevents that international organisations potentially have unlimited
powers as legal actors in international law.570 Moreover, the phrasing “the teachings of the
most highly qualified publicists” means that international law commentary is prolific and
very diversified. Moreover, it is relatively often based on (national) policy preferences and
prescriptions.
In fact, certainly within the field of international profit taxation, organisations like the OECD
have actively encouraged non-governmental organisations such as civil society groups,
business organisations, and other special interest groups to comment on policy proposals to
improve the international tax regime. Additionally, in other international law fields the
development involving specific advocacy groups is observable, for instance, in international
human rights and international environmental standards. The inevitable effect of such a
development, however, is that the “teachings of the most highly qualified publicists” could
564
Hongler (2019), at p. 194.
565
See Section 4.3.
566
Hongler (2019), at pp. 244-245.
567
Hongler (2019), at p. 193.
568
569
570
138
lose some of their position of importance as a subsidiary means to evidence the meaning of
the rule of law.571
Moreover, an intentionalist approach to interpreting treaties is not the standard in

international law.572 A combination of a textualist and purposivist approach seems more
preferred, and preparatory works — including earlier drafts of a treaty, reports and
commentaries — can only be used if the meaning of a text is ambiguous, obscure or would
lead to a result that is manifestly absurd or unreasonable.573 Navarro argues that the OECD
MC commentaries should be seen through a purposivist lens and that the commentaries
should not be viewed as a chain novel574 but rather as a continuum where every preceding
commentary text holds its value.575
The reason why intentionalist treaty interpretation is not preferred is that some countries
might sign a treaty sometime after it has been negotiated.576 Consequently, this will put the
countries that joined the treaty at a later stage at an interpretive disadvantage. This
presents an interesting problem. Navarro points out that by favouring the most recent
commentaries of the OECD MC, one runs the risk of (a) making a non-binding instrument
(quasi-) binding, and (b) this could make the commentaries manipulable and selective.
However, an intentionalist approach that could favour earlier commentaries might be just
as manipulable and selective, as it would favour earlier signatories over later signatories.
Finally, a purposivist approach might be subject to the bias of the interpreter, where the
meaning of what a reasonable person would find reasonable is stretched so far as to
accommodate one’s own position. Therefore, even though article 31 VCLT says that the
interpretation of treaties should be done “in light of its object and purpose” and in the
context of “any relevant rules of international law,”577 these interpretive approaches cannot
be taken too far and should be viewed as an ultimate tiebreaker rather than a starting
point.578 Arguably, this means that Navarro’s suggestion that the earlier versions of the
OECD MC commentaries can also be used to achieve the “most adequate interpretative
outcome” would require robust argumentation. In fact, these imply strong value choices on
the part of the interpreter that need to be affirmed by others as well.
5.4 The Holistic Approach
In international tax law, there has been a gradual move towards a more global, holistic
outlook. Some denote this even as a radical change in international tax policy making.579 The
role of the OECD as the standard-setting body has definitively been established, it seems.
Regardless of the answer to the question of whether the OECD produces hard or soft
international law, the trend in international tax policymaking is to look more at the level of
571
572
United Nations. (1969), Article 31 (1) VCLT; Bederman (2002), at p. 71.
573
United Nations (1969), Article 32 VCLT; Bederman (2002), at pp. 71-72.
574
Compare Section 2.2.1.3 on that Dworkin views the development of law as a chain novel. Also, see Dworkin
(1986), at p. 228 et seq.
575
Navarro (2020), at pp. 848-860.
576
577
United Nations (1969), Article 31 VCLT.
578
579
Mason (2020), at p. 399.
139
the whole global operation of a corporation as one coherent whole rather than focussing
more on each separate entity of that corporation as an autonomous element.
Arguably, the OECD/G20 BEPS project should be understood as a shift away from the idea
that corporate income tax is a purely national issue with cross-border problems towards a
view that there is an international corporate income tax system that also needs to work well
domestically. For example, this resulted in a broad acceptance of the concept of full
taxation.580 Moreover, this means that there can be no doubt that international tax law
must be perceived as international law rather than national law. This is because taxing
multinational corporations in this manner requires very close and intensive interaction as
well as cooperation between states. Where one could argue that earlier OECD projects, such
as the Harmful Tax Competition project,581 were still focussed on aligning national policies of
a limited number of countries on a limited number of cross-border issues,582 the current
OECD/G20 work through the Inclusive Framework is more concerned with the integration of
these national profit tax systems.583
This also means that the focus of international tax law has broadened. Where once the most
important goal was to prevent and resolve situations of juridical and economical double
taxation, it now is clearly also the aim of international tax policy makers to prevent
situations where no corporate income tax is paid. For instance, the hybrid mismatches work
of the OECD shows that these situations of double non-taxation or deduction without
inclusion tend to spring up in cross-border situations.584 Because of this, a holistic outlook
on international tax law is required. From the national perspective of either country
involved, situations of double non-taxation and deductions without inclusion often do not
appear to be problematic at all, as the rules and regulations of each country were adhered
to. In fact, both the letter of the law and its spirit, arguably, are likely respected in each
affected country. However, the end result of these arrangements making use of differences
between legal systems was that portions of the profits of multinational corporations would
remain untaxed. As such, even though the letter and spirit of the national tax laws are
respected, the outcome could and should still be considered undesirable from an
international perspective.
For instance, to resolve these hybrid mismatches the OECD designed so-called linking rules,
making the deduction of a payment in country A contingent on the inclusion of the
corresponding payment in the corporate tax base in country B. Also, the OECD design went
further by also including a secondary or defensive rule. If country A would not deny the
deduction as the primary rule as BEPS Action 2 suggests, country B could go ahead and
include the received payment in the corporate tax base even when its national tax law
580
Mason (2020), at p. 400.
581
See OECD (1998); OECD. (2000). Towards Global Tax Co-operation, Progress in Identifying and Eliminating
Harmful Tax Practices, Report to the 2000 Ministerial Council Meeting and Recommendations by the
Committee on Fiscal Affairs. OECD Publishing; OECD. (2001). The 2001 Progress Report, The OECD’s Project on
Harmful Tax Practices. OECD Publishing; OECD. (2006). The OECD’s Project on Harmful tax Practices: 2006
update on progress in member countries. OECD Publishing.
582
See Avi-Yonah, R. S. (2008). The OECD harmful tax competition report: a tenth anniversary retrospective. U
of Michigan Law & Economics, Olin Working Paper, (08-013), at pp. 793-795.
583
See Peters (2013), at p. 114.
584
See OECD (2015b).
140
would normally not do so. Therefore, the design of these linking rules is such that it does
not necessarily require international cooperation. Countries that continue to insist on
predatory tax policies would still be caught out, as the international tax policy consensus has
shifted towards the standard that there should be full taxation. Further, the consensus is
also that national policy considerations should not be able to stand in the way of this new
normal:
[C]onsidering the impact of the BEPS project, as well as the work of the Global
Forum, it seems that quasi-legislative international bodies have indeed emerged to
limit state sovereignty.585
Globalisation and digitalisation have led to dramatic changes in corporate value chains,
which means that these are value chains that are much less defined by national borders.586
Subsequently, tax legislation — specifically tax legislation that tries to deal with these value
chains — also has to become much more international. Of course, this move towards
multilateralism can take many forms such as big bang multilateralism through full
harmonisation, plurilateralism through multilateral treaties, regionalism through regional
groupings, bilateralism through bilateral treaties based on model treaties, or even
cooperative unilateralism.587 However, regardless of the degree of multilateralism, the shift
can clearly be observed.
In fact, one can observe different international tax policy approaches to operationalise this
holistic approach. Besides these linking rules that follow from the OECD/G20 BEPS project,
the European Commission has attempted to apply this way of thinking through the use of
state aid rules in international tax matters and, specifically, with regard to the use of
advance pricing agreements and other forms of tax rulings by the national tax authorities. In
2014, this led to the opening of three formal state aid investigations by the Commission on
tax rulings granted by Ireland (to Apple),588 Luxembourg (to Fiat),589 and the Netherlands (to
Starbucks).590 These were followed by formal state aid investigations in 2015 on tax rulings
by Luxembourg to Amazon591 and McDonalds592 and by Belgium regarding the Excess Profit
585
Hongler (2019, at p. 261.
586
Christians, A. (2018). Taxing According to Value Creation. Tax Notes International, June 18 2018, 1379, at
pp. 1381-1382.
587
Lennard, M. (2021). The Role of the United Nations in Tax Norm Shaping, Lecture at Peter A. Allard School of
Law at the University of British Columbia, Vancouver, 12 March 2021, at 23m:00s. Retrieved from
https://www.youtube.com/watch?v=wBeddUilsgs&t=2959s.
588
Commission Decision (EU) 2017/1283 of 30 August 2016 on State aid SA.38373 (2014/C ex 2014/NN)
implemented by Ireland to Apple. Retrieved from http://data.europa.eu/eli/dec/2017/1283/oj.
589
Commission Decision (EU) 2016/2326 of 21 October 2015 on State aid SA.38375 (2014/C ex 2014/NN)
which Luxembourg granted to Fiat. Retrieved from http://data.europa.eu/eli/dec/2016/2326/oj.
590
Commission Decision (EU) 2017/502 of 21 October 2015 on State aid SA.38374 (2014/C ex 2014/NN)
implemented by the Netherlands to Starbucks. Retrieved from http://data.europa.eu/eli/dec/2017/502/oj.
591
Commission Decision (EU) 2018/859 of 4 October 2017 on State aid SA.38944 (2014/C) (ex 2014/NN)
implemented by Luxembourg to Amazon. Retrieved from http://data.europa.eu/eli/dec/2018/859/oj.
592
Commission Decision (EU) 2019/1252 of 19 September 2018 on tax rulings SA.38945 (2015/C) (ex 2015/NN)
(ex 2014/CP) granted by Luxembourg in favour of McDonald's Europe. Retrieved from
http://data.europa.eu/eli/dec/2019/1252/oj.
141
exemption.593 The EU Commission takes the view that, as the state aid rules are applied
nationally, they can be triggered when a national tax ruling results in “a method for
determining an integrated group company’s taxable profit in a manner that does not result
in a reliable approximation of a market-based outcome in line with the arm’s length principle
[and] such a fiscal measure results in reduced taxable profit, and thus reduced corporate
income tax liability.”594 Moreover, in 2016, the EU Commission further explained that the
arm’s length principle, which the EU Commission applies in assessing transfer pricing rulings,
is an application of Article 107(1) of the TFEU “independently of whether the Member State
has incorporated this principle into its national legal system and in what form.”595 The EU
Commission, therefore, viewed national rules and their outcome in an international, EU-
wide perspective.
The EU Commission announced on 19 September 2018 that it did not find illegal state aid in
the McDonalds case.596 On 24 September 2019, the General EU Court annulled the EU
Commission’s decision on Starbucks,597 but it upheld the decision in the Fiat case.598 On 15
July 2020, the General EU Court annulled the Commission’s decision in the Apple case,599
and, on 12 May 2021, the General Court annulled the decision in the Amazon case.600
Finally, on 16 September 2021, the Court of Justice confirmed the EU Commission’s decision
that the Excess Profit exemption constituted illegal state aid.601
593
Commission Decision (EU) 2016/1699 of 11 January 2016 on the excess profit exemption State aid scheme
SA.37667 (2015/C) (ex 2015/NN) implemented by Belgium. Retrieved
from http://data.europa.eu/eli/dec/2016/1699/oj.
594
DG Competition. (2016). Internal Working Paper, Background to the High Level Forum on State Aid of 3 June
2016, at para. 4. Retrieved from
https://ec.europa.eu/competition/state_aid/legislation/working_paper_tax_rulings.pdf.
595
European Commission. (2016k). Commission Notice on the notion of State Aid as referred to in Article
107(1) of the Treaty on the Functioning of the European Union, (2016/C 262/01), 2016, at para. 172.
596
See European Commission. (2018f). State Aid: Commission investigation did not find that Luxembourg gave
selective tax treatment to McDonald’s. Press Release, 19 September 2018.
597
Cases T-760/15 and T-636/16. Judgment of the General Court (Seventh Chamber, Extended Composition) of
24 September 2019. Kingdom of the Netherlands and Others v European Commission. ECLI:EU:T:2019:669; also
see, General Court of the European Union. (2019a). The General Court annuls the Commission’s decision on
the aid measure implemented by the Netherlands in favour of Starbucks. Press Release No 119/19, 24
September 2019.
598
Cases T-755/15 and T-759/15, Judgment of the General Court (Seventh Chamber, Extended Composition) of
24 September 2019. Grand Duchy of Luxembourg and Fiat Chrysler Finance Europe v European Commission.
ECLI:EU:T:2019:670; also see, General Court of the European Union. (2019b). The General Court confirms the
Commission’s decision on the aid measure granted by Luxembourg to Fiat Chrysler Finance Europe. Press
Release No 118/19, 24 September 2019.
599
15 July 2020. Ireland and Others v European Commission. ECLI:EU:T:2020:338; also see, General Court of the
European Union. (2020). The General Court of the European Union annuls the decision taken by the
Commission regarding the Irish tax rulings in favour of Apple. Press Release No 90/20, 15 July 2020.
600
12 May 2021.Grand Duchy of Luxembourg , Amazon EU Sàrl and Amazon.com, Inc. v European Commission.
ECLI:EU:T:2021:252; also, see General Court of the European Union. (2021a). No selective advantage in favour
of a Luxembourg subsidiary of the Amazon group: the General Court annuls the Commission’s decision
declaring the aid incompatible with the internal market. Press Release No 79/21, 12 May 2021.
601
Case C-337/19P. Judgment of the Court (Fourth Chamber) of 16 September 2021.
European Commission v Kingdom of Belgium and Magnetrol International. ECLI:EU:C:2021:741; also see, Court
142
One could conclude from this short list of state aid decisions that the European Commission
has been rather unsuccessful in applying the state aid instrument in international tax law.
However, this might be wrong to conclude. The General Court did confirm that, if the
national tax rules on profit taxation do not make a distinction between integrated group
companies and stand-alone companies, Article 107(1) TFEU would apply to fiscal measures
that might be available to these integrated group companies but not to stand-alone
companies. Moreover, it was considered that the arm’s length principle is a tool to assess
whether the price of intra-group transactions is comparable to the price that would have
been negotiated between independent companies, and that this tool falls under the
purview of Article 107(1) TFEU.
Accordingly, even though the General Court found that the Commission failed to adequately
prove that there was state aid in several of these cases, the Court did confirm that the
Commission’s more holistic view of the subject matter is acceptable. Besides, the EU
Commission has not yet accepted the General Court’s decisions as final, as it announced on
25 September 2020 that it would at least bring the Apple case in front of the European
Court of Justice. This is because the Commission claims that the General Court has made a
number of errors of law, and—maybe more importantly for the purpose of this book—the
Commission has reiterated that it remains a top priority to protect fair competition within
the EU internal market by ensuring that all companies pay their fair share of taxes where
they is rightfully due.602 In order to achieve this goal, the Commission will use all the tools at
its disposal.603
In this regard, Mason considers that it is not enough only to look at national legislation if
one is to identify whether certain tax expenditures provide unjustified state aid or not:
When [tax expenditure analysis] relies on a domestic law reference base, tax-
expenditure analysis is underinclusive. For example, under a domestic-law
benchmark, the subsidy adjudicator would regard no structural rules as conferring
illegal subsidies, no matter their actual impact on cross-border commerce.604
At the same time, Mason states that a tax expenditure analysis also should not depend
solely on an international or external reference base, as that carries the risk of identifying
unjustified state aid where there is none:
Tax expenditure analysis [that] relies on a reference base that is external to the
challenged state’s domestic law, [..] is overinclusive. Benchmarking by external norms
of Justice of the European Union. (2021b). Tax exemptions granted by Belgium to multinational companies by
way of rulings: the Commission correctly found that there was an aid scheme. Press Release No 158/21, 16
September 2021.
602
See European Commission. (2020g). Statement by Executive Vice-President Margrethe Vestager on the
Commission's decision to appeal the General Court's judgment on the Apple tax State aid case in Ireland, 25
September 2020; also, see for progress on Case C-465/20 https://curia.europa.eu/juris/liste.jsf?num=C-
465/20.
603
The Fiat-case has also been appealed. See for progress on Case C-885/19 P
https://curia.europa.eu/juris/liste.jsf?num=C-885/19.
604
Mason, R. (2019). Identifying Illegal Subsidies. Am. UL Rev., 69, 479, at p. 562.
143
mistakes mismatches for state aid. Benchmarking by norms also substitutes the tax
policy views of the subsidy adjudicator for those of the legislator.605
With regard to the more holistic view, Sheppard argues that the European Commission is
using the courts to force changes that the political process has rejected.606 To understand
the economic and fiscal reality of an arrangement according to the EU Commission, one
should thus look at the corporate tax base of the group as a whole. This because the
economic effects of the state aid would become visible at the level of the undertaking
rather than at the level of its separate entities.607 The General Court of the European Union
considered with regard to this point that:
In that regard, in contrast to a formalistic approach, whereby each of the

transactions making up the sophisticated financial arrangement are considered in
isolation, it is important, as the Commission did, to go beyond the legal form in
order to understand the economic and fiscal reality of the arrangement.608
Sheppard, however, argues that stringing together transactions across entities of a

corporate group is a novum under EU law. She states that, even though the Commission
“often argues that individual group members do not report enough taxable income,” the EU
Court of Justice has, so far, not departed from the separate entity approach.609
Due to the unprecedented nature of the argument, the General Court also considered the
additional claim by the Commission that failure to apply the abuse of law provision would
(also) constitute illegal state aid.610 The General Court considered that the Commission was
right in demonstrating the selectivity of the tax rulings by referencing the derogation of the
abuse of law provision, as the conditions under Luxembourgish law to apply the abuse of
law provision were actually met.611
According to the General Court, both lines of reasoning of the Commission would, therefore,
be successful in showing that there was illegal state aid in this case.612 However, this case is
currently under appeal before the EU Court of Justice as C-451/21 P – Luxembourg v
Commission.613 The outcome will thus show whether the EU Court of Justice accepts the
General Court’s judgement with regard to the more holistic approach or not.
605
Mason (2019), at pp. 562-563.
606
Sheppard, L.A. (2021). Engie: EU General Court Discovers Groupwide Analysis. Tax Notes International.
Volume 102, 1005-1010, at p. 1005.
607
Cases T-516/18 and T-525/18. Judgment of the General Court (Second Chamber, Extended Composition) of
12 May 2021. Engie Global LNG Holding Sàrl. ECLI:EU:T:2021:251, at para. 87.
608
Cases T-516/18 and T-525/18, ECLI:EU:T:2021:251, at para. 311.
609
See Sheppard (2021), at p. 1008. Presumably the author is referring to (some of) the EU Commission
decisions that were referenced above in notes 586-590.
610
611
612
613
See for progress on Case C-451/21 https://curia.europa.eu/juris/liste.jsf?num=C-451/21&language=en.
144
Another recent case law example where the holistic approach is relevant can be found in
the so-called Danish beneficial owner cases.614 On 26 February 2019, the European Court of
Justice (ECJ) ruled in these cases that the general principle of EU law, the abuse of law
principle, means that EU law cannot be relied on in cases of fraud or abuse. Concretely, this
meant in this case that, even though Denmark did not have any relevant anti-abuse rule in
their national legislation, Denmark could still deny the benefits of the EU Parent-Subsidiary
Directive based on this general principle of EU law.615
Furthermore, the ECJ ruled that objectives and consistent indications could demonstrate an
abuse of rights such as in the case of the existence of conduit companies, which are without
economic justification. The ECJ also ruled that the formal nature of the structure of groups
of companies (including the financial arrangements and loans) is purely put in place to
obtain a tax advantage and/or in order to fulfil the conditions for the application of the
Parent-Subsidiary Directive. Moreover, if these indications have been fulfilled, it is not also
required to identify the entity or entities that are the actual beneficial owner(s) and make
them refuse the Directive’s benefits.
It was argued that, with this decision, the ECJ departed from its earlier decision in the
Kofoed case, which referred to the need for a legal basis in national law to deny the benefits
of the Directive.616 The ECJ, however, held that the Kofoed case could “not be taken to mean
that the national authorities and courts would be prevented from refusing to grant the
advantage [of] the directive in the event of fraud or abuse of rights (see, by analogy,
judgment of 18 December 2014, Schoenimport ‘Italmoda’ Mariano Previti and Others,
C-131/13, C-163/13 and C-164/13, EU:C:2014:2455, paragraph 54).”617
Consequently, on 3 May 2021, the Danish Eastern High Court (Østre Landsret) ruled on two
cases connected to this ECJ conclusion:618
(i) The Netapp case involved a structure where the U.S. parent company (NetApp
Group) had a subsidiary in Bermuda. The Bermudan company held all of the shares
in a Cypriot company, which held all the shares in a Danish company. In turn, the
Danish company held the shares in a company that was resident in the Netherlands.
The Danish company distributed dividend twice—a distribution of 91.5 million USD
in 2005 and another distribution of 16 million USD in 2006.
(ii) In the TDC Case, two Luxembourgish companies were interposed between a Danish
resident company, TDC/T Denmark, and its shareholders. These shareholders were
part of a number of equity funds. The shareholders controlling the equity funds likely
had their residence outside of the EU.
614
Cases C-116/16 and C-117/16. Judgment of the Court (Grand Chamber) of 26 February 2019.
Skatteministeriet v T Danmark (C-116/16), Y Denmark Aps (C-117/16). ECLI:EU:C:2019:135.
615
See Council Directive 2011/96/EU. On the common system of taxation applicable in the case of parent
companies and subsidiaries of different Member States (recast). Retrieved from
616
Cases C-116/16 and C-117/16, ECLI:EU:C:2019:135, at para. 84.
617
Cases C-116/16 and C-117/16, ECLI:EU:C:2019:135, at para. 89.
618
The full text of the Danish Eastern High Court's decision, delivered on 3 May 2021, can be found here (in
Danish only): https://domstol.dk/media/1qnfn3xc/dombog-b198012-og-b217312.pdf.
145
The Danish tax authorities held that, in both cases, the interposed holding companies
(respectively in Cyprus and Luxembourg) were not the beneficial owners of the received
interest or dividend. As the actual beneficial owners were (likely) outside of the EU, a direct
distribution of dividend would have triggered withholding tax payments in Denmark. The
issue, therefore, was whether there was a legal basis on which the benefits of the Parent-
Subsidiary Directive could be denied.
In the Netapp case, the Danish Eastern High Court considered that the Cypriot subsidiary
had to be considered a conduit company that is without economic justification and was thus
only put in place to obtain a tax advantage and/or in order to fulfil the conditions for the
application of the Directive. However, under the tax treaty between the United States and
Denmark, the 2005 dividend could have been distributed directly to the U.S. without
(effectively) triggering Danish dividend withholding tax.619 For this reason, the Court ruled
that the benefits of the Parent-Subsidiary Directive could not be denied for the 2005
dividend payment. Furthermore, the Court ruled that the 2006 dividend payment could not
be considered part of the plan to repatriate funds to the U.S. under the Jobs Creation Act of
2004.620 Thus, the Court found that, for the 2006 dividend distribution, the interposed
conduit companies were to be ignored due to the lack of substance, and, as a result, the
benefits of the Directive should be denied.
In the TDC case, the Eastern High Court found that there was very little economic substance
to support the group structure and that there were no valid business reasons for the
interposed Luxembourgish companies. Moreover, the taxpayer had not argued that, if the
dividends had been distributed directly to the equity funds, no dividend withholding tax
would be due in Denmark. Therefore, the Court held that the primary reason for the
structure was the aim to obtain a tax advantage and deny the benefits of the Parent-
Subsidiary Directive.
With reference to the Kofoed case and the ECJ response to this argument, one could look at
this in two ways. First, the ECJ did not make new law but only expanded on an existing
interpretation in the Kofoed case that the abuse of a law principle is a general principle of
EU law that always is applicable even if there is no national legal basis. Otherwise, the ECJ
did make new law by extending the vertical direct effect of directives to include parts of a
directive that were not implemented in national legislation,621 or even by effectively
applying ATAD retroactively.622 Either way, the Danish cases strengthened institutional
619
This was due to the specifics of the case where this dividend payment was part of a plan to repatriate a
total sum of 550 million USD from Bermuda to the U.S. in 2006 under the Jobs Creation Act of 2004 that
created a temporary incentive for U.S. corporations to repatriate accumulated income earned abroad by
providing an 85% dividend-received deduction for certain dividends from certain non-U.S. subsidiaries.
620
See section 965 of the American Jobs Creation Act 2004, available at
https://www.congress.gov/108/plaws/publ357/PLAW-108publ357.pdf.
621
The issue of vertical direct effects of directives has been a contested point for some time. However, while
on the whole, the ECJ appears to be supportive of direct vertical effects of directives, there does not seem to
be support for horizontal direct effects. See for instance, Case 41-74. Judgment of the Court of 4 December
1974. Yvonne van Duyn v. Home Office. ECLI:EU:C:1974:133; Case 14-83. Judgment of the Court of 10 April
1984. Sabine von Colson and Elisabeth Kamann v Land Nordrhein-Westfalen. ECLI:EU:C:1984:153.
622
Council Directive (EU) 2016/1164 on laying down rules against tax avoidance practices that directly affect
the functioning of the internal market. Retrieved from http://data.europa.eu/eli/dir/2016/1164/oj.
146
support for a more holistic approach through legal precedent. Moreover, as the ECJ also
used the similar language that both the EU Commission and the OECD/G20 Inclusive
Framework use in recent policymaking, this holistic approach is cemented further in the
development of the political and doctrinal discourse.623 In doing so, the ECJ subsequently
has strengthened institutional support for the reasoning of these international
organisations, making their considerations carry (more) legal weight as well.
From the OECD/G20 efforts in the BEPS project, the EU Commission’s approach to state aid
in general, and the CJEU’s judgements in the Engie case as well as Danish ultimate
beneficiary cases, one can observe that the institutional support for looking at international
tax issues in a more holistic manner is becoming more and more the rule. This also means
that the international tax system should be viewed as a similarly cohesive and coherent
whole rather than as a collection of national systems that can suffer from a number of cross-
border issues. Moreover, the state aid cases and Mason’s analysis underline that it is
possible to act in accordance with the letter and spirit of national legislation, while the
outcome could be less than desirable from a more holistic perspective. This shows that one
needs both the national and the holistic view to determine whether certain tax policies or
taxpayer behaviour are in line with the spirit of (international) tax law. One needs to view
the tax system in all its multi-dimensional complexities to be able to provide a satisfactory
answer that is not underinclusive or overinclusive.624
5.4.1 International Tax Policy versus National Tax Revenue
The claim that there is a broad acceptance of the concept of full taxation is also interesting
from another viewpoint than the change from a more nationalist to a more holistic
approach in tax law.625 There is an underlying assumption in the concept of full taxation
that this is a fair and just approach, as if it is based on some sort of generally understood
principle of justice. The question is if this assumption holds.
It is tempting to subscribe to the simple axiom that a corporation’s entire income should be
taxed once. However, Parada shows that there are issues with this concept.626 For example,
the concept is not as clearly defined as it looks on first sight, because (i) it implies that the
global income of a corporation is an incontestable quantity — quod non — and (ii) there is a
circularity to the concept, because, in order to ascertain whether the entire profit is indeed
taxed, one has to know how this income is divided between countries.627
Moreover, the concept of full taxation is inconsistent. It seems to be more about if profit is
taxed highly enough, rather than it is taxed in its entirety. This translates into the fact that
full taxation has a distinct nationalistic feel, as the concept originates from the question of
whether each country in which a corporation is active gets enough tax revenue. Moreover,
full taxation includes an implicit norm that the income should be taxed where that
623
Compare Section 5.3.2; and see Valderrama (2019).
624
See Section 2.3.
625
Mason (2020), at p. 400.
626
Parada (2020), at p. 747.
627
Also see Cui, W. (2021). New Puzzles in International Tax Agreements. Available at SSRN 3877854, at p. 45.
147
corporation has real business activities.628 However, it lacks a principled basis of how the
allocation of taxing right then should occur. There is, therefore, a risk that the concept of full
taxation will justify countries making a tax grab for whatever is deemed to be left lying loose
on the table.629 Such an outcome could be questionable from the perspective of legal
principles of tax certainty and taxpayers’ rights.
If one assumes that the concept of full taxation would eliminate BEPS behaviour, as all
corporate income is taxed at least once, the question is then whether the underlying
international tax standards that are aimed at allocating taxing rights align with the notion of
what a fair share of each eligible jurisdiction should be. In section 4.1.3.1, the benefit
principle and the source principle are briefly discussed as structural principles of taxation on
which the right to tax is based. Vogel states that the benefit principle and the ability-to-pay
principle are the two most historically important theories for justifying taxation,630 whereas
Christians & Van Apeldoorn rather point to the entitlement principle.631 These principles,
however, in and of themselves, do not say how much a fair share would be.632 Currently,
there is no generally accepted mechanism based on concepts of justice and fairness for
what a country’s a fair share should be.633 In fact, the division of taxing rights has, up until
now, not really been a discussion of legal principles, doctrine or even a notion of fair play. It
has rather been a political battleground.634 Moreover, often the outcome of this political
battle is subsequently rationalised after the fact in terms of legal principles.635 This means
that it is likely that the legal rules resulting from of this process do not necessarily give
objectively fair results. For instance, one problem is that a highly integrated global company
simply cannot be carved up into neat country-sized portions easily in a scientific and
normatively neutral manner.636
From the perspective of the spirit of international tax law, this presents interesting
questions. If one accepts that institutional support for looking at international tax issues in a
more holistic manner is becoming the rule more and more, which means that the
international tax system should also be viewed as a similarly cohesive and coherent whole,
should this holistic view also extend to how taxing rights are allocated? Are community
interests only important when it comes to the relation between a state and its taxpayers in
determining how much profit tax is due, or are they equally important when it comes to the
relationship between states, as tax bases are divided between states?
628
See Parada (2020), at p. 747; Mason (2020), at p. 370.
629
Parada (2020), at p. 755.
630
Vogel, K. (1988). The justification for taxation: a forgotten question. Am. J. Juris., 33, 19, at p. 19.
631
Christians & Van Apeldoorn (2021), at pp. 13-15.
632
See Section 5.4.2.3 for several views on mechanisms that could ensure a fair(er) allocation of taxing rights.
633
Peters (2013), at p. 85.
634
Schön, W. (2009). International tax coordination for a second-best world (part I). World Tax Journal, 1(1),
67-114, at p. 93; Hongler (2019), at p. 93 et seq.; Christians (2018), at pp. 1381-1382; Lammers, J. (2019). The
OECD Concept of User Participation and a More Pragmatic Way to Tax Rent Seeking, Tax Notes International,
Vol 96 (7), 611-622, at p. 611; Peters (2013), at p. 83.
635
Schön, W. (2019). One Answer to Why and How to Tax the Digitalized Economy. Working Paper of the Max
Planck Institute for Tax Law and Public Finance No. 2019-10, at p.4; Christians (2018), at p. 1379.
636
148
If the concept of full taxation indeed implies a norm that income should be taxed where a
business has real activities, then the answer to these questions should likely be yes. To
illustrate, the OECD considers that the current international rules on the allocation of taxing
rights are not producing a fair result, because current international tax rules lead to a
situation where certain business models are not subject to appropriate levels of taxation in
each jurisdiction in which they are active.637
Moreover, according to Peters, that to consider community interests, including the

allocation of taxing rights, should be increasingly important, as the international economy is
evolving in a way that will lead to more self-interested competition between states.638
Hongler observed in 2019 that general political morality requires that states have to
consider the interests of the international community as a whole more and more when
designing their national and international tax policies.639 Moreover, major developments in
international tax law over the last two decades also underline the importance of these
community interests. Likewise, the questions on the allocation of taxing rights appear to
become a more politically pressing issue over time.
The first development is the rise of tax transparency through the exchange of tax
information.640 A tool primarily meant to get rid of international tax evasion by attacking
bank secrecy, but, gradually, automatic exchange of tax information has also become more
focussed on tax avoidance.641 Perhaps, the ambition to increase tax transparency did not
also include as a goal to achieve corporate tax policy alignment or to change the allocation
of taxing rights, but the increased levels of insight of where taxes were actually paid most
certainly urged the debate on where tax then should be paid642 and, by extension, on which
country that should have the right to tax.
The second major development is the OECD project on harmful tax competition.643 Here,
the aim was to “develop measures to counter the distorting effects of harmful tax
competition on investment and financing decisions and the consequences for national tax
bases.”644 In fact, the report focuses on the effects of harmful tax competition by attracting
highly mobile capital through tax havens and preferential tax regimes:
[G]lobalisation is creating new challenges in the field of tax policy. Tax schemes
aimed at attracting financial and other geographically mobile activities can create
637
OECD (2019d), at para. 28.
638
Peters (2013), at p. 55.
639
Hongler (2019), at pp. 258-259.
640
See for a historic overview of the development of tax transparency and the automatic exchange of tax
information, OECD, Automatic Exchange Portal, available at https://www.oecd.org/tax/automatic-
exchange/about-automatic-exchange/ (last accessed 07-04-2022). Also, see Section 8.1.5.
641
For instance, this is a result of country-by-country reporting; as of October 2021, over 3000 bilateral
exchange relationships were activated with respect to jurisdictions committed to exchanging CbC reports, and
the first automatic exchanges of CbC reports took place in June 2018.
642
It could also be argued that it was the lack of (public) insight in places where tax was paid and the persistent
call from NGOs to provide such information on a country-by-country basis for all multinational corporations
that were also major drivers of the debate on where tax should be paid. See Section 9.4.
643
See OECD (1998); OECD (2000); OECD (2001); OECD (2006).
644
OECD (1998), at p. 3.
149
harmful tax competition between States, carrying risks of distorting trade and
investment and could lead to the erosion of national tax bases. We strongly urge
the OECD to vigorously pursue its work in this field, aimed at establishing a
multilateral approach under which countries could operate individually and
collectively to limit the extent of these practices.645
This meant that, on a relatively small number of issues, recommendations were made for
international tax policy alignments and rules on how states should engage in tax
competition without it being harmful. However, one could argue that this meant that no
real changes would be made to how taxing rights are allocated.
The third development is the OECD/G20 Base Erosion and Profit Shifting project that was
initiated through the original BEPS Action Plan.646 The BEPS project was designed to take on
the most important causes of corporate tax avoidance through a three-pronged approach:
(i) tax policy alignment on certain issues, (ii) amending transfer-pricing rules to better align
with value creation, and (iii) increased international tax transparency requirements.
Particularly, with the 2015 final reports on Actions 2, 4, 5, 6 and 7,647 the aim was to reduce
predatory tax policymaking by preventing beggar-thy-neighbour policies that would
ultimately leave everyone worse off.
With regard to taxing rights’ allocation, it was made explicitly clear that the BEPS project
was not meant to change much with regard to the existing source and residence rules. In
the 2013 BEPS Action Plan, it is stated that “these actions are not directly aimed at changing
the existing international standards on the allocation of taxing rights on cross-border
income.”648 Thus, it was only in situations concerning tax havens that allocation rights
effectively were changed. Schön and others have argued that BEPS and the notion of value
creation served as new negative source rules and as a way to ensure that no taxing rights
ended up in tax havens.649 The idea was that countering tax avoidance and not allowing tax
bases to disappear in tax havens would lead to more tax revenue across the board. With all
countries except tax havens emerging as winners, a political agreement was made possible.
While source countries could look forward to more tax revenue based on the rules already
in place, there was no need for residence countries to give up any of their tax base.650
However, by now, it has become clear that, in terms of extra tax revenue for source
countries, the BEPS project has turned out to be a bit of a disappointment. This
disappointment is perhaps best illustrated by the emergence of a number of unilateral
measures—chief among them, digital services taxes.651
The final development is the OECD/G20 Inclusive Framework Agreement on the Two-Pillar
645
OECD (1998), at p. 7.
646
OECD. (2013b). Action Plan on Base Erosion and Profit Shifting, OECD Publishing.
647
OECD (2015b); OECD (2015d); OECD (2015e); OECD (2015f); OECD (2015g).
648
OECD (2013b), at p. 11.
649
See Schön (2019), at p. 6; Jiménez, A. M. (2018). BEPS, the Digital (ized) Economy and the Taxation of
Services and Royalties. Intertax, 46(8/9), at p. 612.
650
Lammers (2019), at p. 613.
651
Christians, A., & Magalhães, T. D. (2019). A new global tax deal for the digital age. Can. Tax J., 67, 1153, at p.
1157.
150
Solution.652 Given the above-mentioned disappointment of source countries and the fact
that the original Action 1 on assessing the problems of the digital economy had not yielded
tangible results yet, the OECD had to move forward to develop proposals to deal with tax
challenges following from the digitalisation of the economy. Here, the aim of the proposals
is to change the rules that allocate taxing rights, particularly, for those situations where the
current transfer pricing rules do not provide a satisfactory outcome anymore. The Two-Pillar
Solution, therefore, is aimed at changing the international tax standards that allocate taxing
rights, but do not go so far as to fundamentally reform of the international tax system.
With Pillar One, the OECD has created a new profit allocation rule but also contends that the
current rules based on the arm’s length principle are largely retained. The members of the
OECD/G20 Inclusive Framework widely regard the arm’s length rules to work as intended,
except in a few particular cases due to the digitalisation of the economy (such as cases
involving non-routine profits from intangibles). For that reason, the Pillar One proposals do
not replace the current arm’s length rules, but they do augment them with a formula-based
solution in those areas where the tensions in the current system are highest.653
With regard to Pillar Two, it could be argued that, even though the UTPR would give
developing countries more access to tax revenue in principle. However, due to the design of
the new rules, Pillar Two will likely only give more tax revenue in source countries if they
themselves decide to raise their domestic tax rate (by raising the nominal tax rate or by
introducing a QMDDT).654 In this respect, Cui argues that the 2021 agreement on the Two
Pillars is widely presented as the end of tax competition. However, the rationale for
international cooperation to end tax competition is far from self-evident, as the need for a
holistic approach that will lead to a socially optimal outcome of the sharing of taxing rights is
not felt strongly enough by all countries so far.655
In the previous section, it has been argued that the holistic view seems to apply more to tax
policy coordination than to tax revenue distribution. In fact, in how countries design the
rules on distribution of tax revenue, the self-interests of countries still seem to prevail over
the interests of the international community as a whole. The notion that the benefit of all
countries could be maximised if some tax revenues were to be redistributed still seems to
meet a lot of resistance. The Pillar One and Pillar Two proposals can perhaps be seen as a
first small step towards a more holistic view with regard to allocating taxing rights. However,
otherwise the allocating taxing rights dynamic very much seems to be approached as a dog-
652
OECD (2021b).
653
OECD (2019d), at paras. 15-18.
654
See OECD (2021c), at p. 64. QMDTT or Qualified Domestic Minimum Top-up Tax means a minimum tax that
is included in the domestic law of a jurisdiction that specifically applies to entities that would fall under the
GloBe rules by:
(a) determining the Excess Profits of the Constituent Entities located in the jurisdiction (domestic Excess
Profits) in a manner that is equivalent to the GloBE Rules;
(b) operating to increase domestic tax liability with respect to domestic Excess Profits to the Minimum Rate for
the jurisdiction and Constituent Entities for a Fiscal Year; and
(c) being implemented and administered in a way that is consistent with the outcomes provided for under the
GloBE Rules and the Commentary, provided that such jurisdiction does not provide any benefits that are
related to such rules.
655
Cui (2021), at pp. 50-51.
151
eat-dog world, where states appear to focus more on short-term revenue maximalisation
than on long-term value creation.
Perhaps, this should not be very surprising, as redistribution on an international level

collides with the principle of sovereignty.656 However, several scholars as well as NGOs are
critical of the effects of the current international tax standards that allocate taxing rights
and/or the phenomenon of tax competition in general and are thus suggesting that there is
a need for fundamental tax reform with regard to different methods for allocating taxing
rights.657 Therefore, one could also argue that the morality on this issue might be changing
but that the political and doctrinal morality have not caught up yet.
From the perspective of the spirit of international tax law a holistic approach on both
elements should be considered. Firstly, the outcome of taxpayers applying the legal rules
and international tax standards should be in line with both their original objective and
purpose as well as the political and doctrinal morality at that time. Secondly, the outcome of
applying rules and the international tax standards on allocating taxing rights – also absent
BEPS behaviour – should reflect the political and doctrinal morality at that time.658 The
following section will examine this second element of the spirit of international tax law in
more detail.
5.4.2 Should States Consider Justice and Fairness?
States are almost never self-sufficient.659 They are increasingly dependent on each other as
economies have integrated as a result of digitalisation and globalisation. However, the
internationalisation of the global economic system has also led to growing inequality
between advanced economies and developing countries.660 Arguably, globalisation and
digitalisation in combination with the international tax system has exacerbated this
inequality. Hence, the divide between richer and poorer regions has grown wider. This
raises the question of whether the OECD/G20 Inclusive Framework can come to a global
political agreement that is considered fair by everyone. In other words, if the least
advantaged party would affirm the result, one could say that the system is to everyone’s
advantage. Therefore, this could be in line with Rawls’ second principle of justice.661
However, a system that systemically is to a greater advantage of capital-rich states while
leaving capital-poor states increasingly further behind might not be considered fair by those
that benefit the least.
From an economic standpoint, the need for national redistribution could be explained
because it comes with efficiency gains. Redistribution could increase the welfare of all in a
656
See for instance, Christians, A. (2009). Sovereignty, taxation and social contract. Minn. J. Int'l L., 18, 99, at
pp. 104-114; Van der Bruggen (2001), at p. 259.
657
See Section 5.4.2 for further analysis.
658
To clarify, the outcome of the current rules on allocating taxing rights should be considered in the light of
the current political morality for which there is a high enough level of institutional support, rather than more
abstract notions of what a fair allocation of taxing rights could look like.
659
Nussbaum, M. C. (2004). Beyond the social contract: capabilities and global justice. An Olaf Palme lecture,
delivered in Oxford on 19 June 2003. Oxford Development Studies, 32(1), 3-18, at p. 6.
660
Nussbaum (2004), at p. 7; Hongler (2019), at p. 338.
661
See Section 3.2.
152
state.662 As a state has the responsibility for all people within its borders, one could say that
there is a duty to do so. By analogy, if national redistribution can increase the collective
welfare of the people within a given state’s borders, it should follow that distribution
between states could increase the collective welfare of those states. The question is then
whether states should have such a responsibility towards each other at the international
level.
There are two general views with regard to this question: the statist view and the
cosmopolitan view. The former holds that there is no distributive duty between states,
while the latter holds that there should be distributive justice between states.
5.4.2.1 Statist versus Cosmopolitan Viewpoints
Statists hold that, under international law, all states should be on an equal footing. There
are no superior states or lesser states, and each state’s freedom and independence are to
be respected by other states.663 Arguably, states do not have an inherent moral duty
towards other states, as there is no social contract between states — comparable to a state
and its citizens — from which this duty should emerge.
For example, Nagel argues that states have no moral duty towards each other. He claims
that “international treaties […] have quite a different moral character from contracts
between self-interested parties within a sovereign state. […] [C]ontracts between sovereign
states […] are ‘pure’ contracts, and nothing guarantees the justice of their result.”664
Blake argues to this effect that one state cannot exercise its coercive powers towards
another state in the same way that it can towards its citizens. In this regard, Blake reflects
that there might be weaker and stronger states, but he considers that, as there is no
justification for coercion, the relation between states is not governed by morality in the
same way as when there is a social contract.665 In a similar vein, Hongler argues that there is
no legally based coercive power between independent states and that the lack of coercive
power means that there is no basic international structure in place that is not so different
from a national structure. Therefore, there is no distributive duty between independent
states beyond humanitarian duties.666 However, with a supranational organisation with
coercive powers such as the EU, Hongler considers that redistributive duties do exist.
Rawls’ view is generally considered to be statist. However, he does consider that there are
662
See for instance, Ostry, J.D., et al. (2014) Redistribution, Inequality and Growth, IMF Staff Discussion Note,
SDN/14/02; Berg, A., et al. (2018). Redistribution, inequality, and growth: new evidence. Journal of Economic
Growth, 23(3), 259-305.
663
Rawls, J. (1999b). The Law of Peoples. Cambridge, Mass: Harvard Univ. Press, at p. 37.
664
Nagel, T. (2005). The Problem of Global Justice. Philosophy & Public Affairs, 33(2), 113–147, at p. 141.
665
Blake, M. (2001). Distributive justice, state coercion, and autonomy. Philosophy & public affairs, 30(3), 257-
296, at pp. 289-294; Hongler (2019), at p. 315.
666
Hongler (2019), at p. 352.
153
certain moral duties at the international level.667 Rawls identifies eight principles that should
apply between states (or peoples):668
1) Peoples are free and independent, and their freedom and independence are to be
respected by other peoples.
2) Peoples are to observe treaties and undertakings.
3) Peoples are equal and are parties to agreements that bind them.
4) Peoples are to observe a duty of non-intervention.
5) Peoples have a right to self-defence but no right to instigate war for reasons other
than self-defence.
6) Peoples are to honour human rights.
7) Peoples are to observe certain specific restrictions in the conduct of war.
8) Peoples have a duty to assist other peoples living under unfavourable conditions
that prevent their having a just or decent political and social regime.
The first seven principles hold that the sovereignty and integrity of a state and its citizens
should be respected. The eighth principle stands out, because this principle indicates that
Rawls does believe that states have a duty of assistance to other states that live under
unfavourable conditions.
However, these conditions that Rawls point to focus on the functioning of the social and
political systems of a state and not on the level of wealth and prosperity of the people in
that state.669 This means that, as soon as a decent political and social order is restored and
“the least advantaged state [has] sufficient all-purpose means to make intelligent and
effective use of their freedoms and to lead reasonable and worthwhile lives,”670 the duty of
assistance of the other state is fulfilled.
Rawls sees no duty for international redistribution in its own right, because inequalities
between states might not be unjust. Rawls considers that these inequalities mainly come
from the conditions within the states themselves. As such, when political and social order is
restored, states should be able to deal with these harmful (economic) conditions and, thus,
position themselves to improve the wealth and prosperity of their people. The welfare of a
state’s people is the sole responsibility of that state, as long as that state has the proper
resources to provide for that welfare. Whether a state chooses to apply those resources to
indeed provide welfare should be of no (moral) concern to other states.
Humanity is under a collective obligation to find ways of living and cooperating

together so that all human beings have decent lives.671
Cosmopolitans argue that there is a system of international distributive duties between

states. For example, Beitz argues that, in a situation where trade exists, there is
interdependence. Therefore, if states do not rely solely on their own labour and resources,
667
Rawls (1999b), at p. 113.
668
Rawls (1999b), at p. 35.
669
Rawls (1999b), at p. 107 et seq.
670
Rawls (1999b), at p. 114.
671
Nussbaum (2004), at p. 13.
154
there is need for a global distribution principle.672 The increasing global economic
interdependence also implies that there is a basic international institutional structure within
which this trade takes place.673 Additionally, if this basic structure is there, then states must
abide by it. In a similar vein, Peters discusses the development of the tax law market. He
argues that states are increasingly affected by “market-induced voluntary limitations”674 and
that this means that, even if there are national justifications to implement a tax, states
might refrain from such tax policies because of external factors such as tax competition with
other jurisdictions.675
Christians considers that the OECD describes itself as the market leader in developing
standards and guidelines and that these standards have global impact.676 This means that
the space of global trade in which sovereign states operate is not completely free.677 As a
result, their sovereign autonomy is limited by the existence of this basic institutional
structure of global trade:678
Moreover, the global structure is evolving, and the direction of its future
development is to some extent open to political choice. This means that there is a
practical as well as a theoretical reason to take an interest in principles of
international distributive justice.679
These practical and theoretical arguments are further underlined by the fact that many
advanced economies depend heavily on natural resources for both their international trade
and their national levels of welfare. However, these natural resources are typically not
available in their own jurisdictions but rather come from developing countries. Pogge argues
that, in reality, the relationship between advanced economies and developing countries is
far from equal. This is particularly true when it comes to natural resources and the
distribution of the wealth that they generate. While advanced economies are very
dependent on the natural resources in developing countries, the distribution of the
proceeds from those natural resources does not reflect this dependency. Pogge contends
that a small global elite enforces a global property scheme to claim natural resources for
themselves and distributes these among rich countries under favourable terms. The local
population is thus effectively robbed of these natural resources by way of, allegedly, free
and fair agreements with corrupt tyrants.680 Thus, Pogge thinks that, in the face of these
outcomes, there is a normative moral duty for international redistribution that should
emerge from these international agreements.
672
Beitz, C. R. (1999a). Political theory and international relations. Princeton University Press., at p143-153;
Beitz, C. R. (1999b). Social and cosmopolitan liberalism. International affairs, 75(3), 515-529, at p. 526; Rawls
(1999b), at p. 116.
673
Beitz (1999b), at p. 522.
674
Also, see McLure, C. E. (2001). Globalization, tax rules and national sovereignty. Bulletin for International
Fiscal Documentation, 55(8), 328-341, at pp. 328-330; and Schön (2009), at p. 93.
675
Peters (2013), at pp. 48-50.
676
Christians, A. (2010). Networks, norms, and national tax policy. Wash. U. Global Stud. L. Rev., 9, 1, at p. 8;
Christians, A. (2014). Avoidance, evasion, and taxpayer morality. Wash. UJL & Pol'y, 44, 39, at p. 51.
677
Beitz, C. R. (2005). Cosmopolitanism and Global Justice. The Journal of Ethics, 9(1/2), 11–27, at p. 25.
678
Beitz (1999b), at p. 517.
679
Beitz (1999b), at p. 524.
680
Pogge, T. (2005), World Poverty and Human Rights. Ethics & International Affairs, 19: 1-7, at p. 7.
155
5.4.2.2 Between Statism and Cosmopolitanism
One could argue that Rawls’ argument that inequalities between states are not unjust,
because these inequalities mainly come from the conditions within the states themselves
might be true in a predominantly closed economy. However, today, the welfare within
states is very much dependent on the international trade between states. Globalisation and
digitalisation have led to a situation where there is a complex and multi-layered
interconnection between states both in their immediate region and at the global level.
International trade has increased strongly over the last 50 years.681 Moreover, not all states
have benefited equally from the rise in global trade. Inequality between states can,
therefore, be the direct outcome of these complex interactions within a globalised
economy.682 It is important to note here that these interactions might not even include the
state that is negatively affected and/or that the negative effects might not occur until some
unknown point in the future.683
This means that the argument that there are no moral (distributive) duties between states
because they are independent, and that the welfare of their peoples are dependent on the
conditions within the states assumes a level of autarky that might no longer exists in today’s
economy.
Furthermore, concerning the argument that distributive duties exist if there is a

supranational organisation with coercive powers such as the EU, the following might be
considered:
First, the EU might have coercive powers that flow from the TFEU, but—particularly in the
area of the (structural) transfer of assets between richer and poorer EU Member States—
these coercive powers are in practice almost non-existent. The European Commission can
demand national economic and social reforms for access to these funds. However, as such
reforms require national political decisions, these reforms effectively remain voluntary
because national sovereignty cannot just be superseded. Therefore, one could argue that
the EU basic structure, in many ways, is also quite different from a national basic structure.
Moreover, while formal coercive powers do not exist at the level of the OECD/G20 Inclusive
Framework, it is difficult to support the case that agreements at this international level can
just be ignored as ‘not law’.684 It is equally difficult to claim that the international tax laws
do not limit state sovereignty to a certain extent.685 Additionally, the recursive loop
between international organisations, lawmakers, the judicial system and countless
681
To illustrate: the global export of goods and services in percentage of world GDP has more than doubled
from about 12,8% in 1970 to 26,5% in 2020. See
https://data.worldbank.org/indicator/NE.EXP.GNFS.ZS?end=2020&start=1960.
682
Also, see, in this respect, Ozai (2020), at p. 74 on the dynamics of the international tax system in relation to
the explanatory pluralism view, which contests that global poverty can be wholly explained through either
domestic or international factors.
683
Hayward, T. (2006). Global justice and the distribution of natural resources. Political studies, 54(2), 349-369,
at p. 368.; Pogge (2005), at p. 7; Sen, A. (2009), The Idea of Justice. Harvard University Press, at p. 403.
684
See Section 5.3.2.
685
156
commentators ensure that the work that the OECD does on developing international tax
standards finds its way to become legal and enforceable. Moreover, from the international
agreements at the level of the OECD, it also follows that those countries that do not
conform to the internationally agreed framework will not be rewarded for their free-rider
behaviour. Effectively, these elements constitute an international basic structure so that
individual states are not free to just ignore these internationally agreed-upon rules. This
speaks to a rather extensive pallet of (indirect) coercive possibilities regarding non-
compliance.
This means that an argument such as that there are no moral (distributive) duties between
states, as one state cannot exercise coercive powers over another state, denies the level of
international cooperation that has developed with regard to the international tax system.686
At the same time, it must be acknowledged that such an international basic structure is not
the same as a domestic basic structure. It would, therefore, not make sense to assume that
the distributive duties in place within states also would exist between states.
In practice, the truth might lie in between statism and cosmopolitanism. Support for a
middle view also seems to be growing among scholars.687 For instance, Benshalom states
that, in a global arena that is multistate and economically integrated, there is little point in
clinging to either the pure statist model or the cosmopolitan model.688 Additionally, Ozai
points out that this third way does not subscribe to the notion that the national and
international basic structure create the same level of duties. International (distributive)
duties do not extend as far or quite in the same way as within national borders, because the
basic international structure just is not the same as the national basic structure.
Nonetheless, there is a basic international structure that warrants the safeguarding of the
broader community interest and, thus, justifies redistribution between states to promote
global justice. Accordingly, even though the content and scope of these duties differ on an
international level, they should still include duties of justice and global redistribution.689
5.4.2.3 Views on How to Distribute Between States
The effects of increasing globalisation and digitalisation have shifted the tax policy
discussions in the OECD/G20 Inclusive Framework to some extent from how multinationals
should be made to pay their fair share of taxes to where this fair share of taxes should be
paid.690 This shift is, for instance, visible in the Pillar One proposals691 which aim effectively
to redistribute a portion of that tax revenue from cross-border trade from states where the
headquarters of multinationals are to states where their client bases are located. Some
scholars see this shift as an indication that the international communis opinio is moving
686
See also Section 5.4.2.1 for arguments that similar reasoning would also apply in relation to international
trade.
687
Valentini, L. (2011). Justice in a globalized world: a normative framework. Oxford University Press, at p. 3.
688
Benshalom, I. (2010). The New Poor at Our Gates: Global Justice Implications for International Trade and
Tax Law. NYUL Rev., 85, 1, at p. 25.
689
Ozai (2020), at p. 71.
690
See Ozai (2020), at pp. 75-76, for an overview of recent academic writing on problems with the concepts of
residence and source, the application of the arm’s length standard through transfer pricing and the effects that
this has on the global distribution of tax revenue.
691
OECD (2021b); OECD (2022a); OECD (2022b); OECD (2022c).
157
towards the idea that international redistribution corresponds with concepts of fairness and
justice.692
If one accepts that there is growing support to consider the possibility of global distributive
concepts, the question is what the basis for a form of distribution might be.
A generally accepted starting point to consider the question of international distribution is

to look at this from the perspective of inter-nation equity.693 The concept of inter-nation
equity focuses on the national gains or losses for states as a consequence of cross-border
activities between them, and it looks at how these gains and losses should be captured.
Inter-nation equity thus considers the fairness of the share of taxes that goes to each
participating country that has a connection to the particular gains from cross-border
activities. Inter-nation equity would suggest that the source country has a legitimate claim
to some of the revenue coming from the cross-border activities.694 It is important to note
that inter-nation equity cannot answer the question of the size of the legitimate claim.
Inter-nation equity is only an instrument that is intended to expose prevalent (in)equity.
Inter-nation equity is thus the start of the conversation on how tax shares should be divided
and not the conclusion.695
The heart of the problem, according to Peters, is that there is no generally accepted
mechanism of international (re)distribution that reflects an agreed-upon view of justice and
fairness to solve the problem by which norm the taxing rights are to be allocated.696 In this
regard, there are several scholars that have suggested various ways of approaching this
issue. For example, it has been suggested that low-income source countries should be able
to levy a much higher tax rate on the source income than higher-income source countries.697
According to the Musgraves, the best solution, though, would be “[to tax] such income on
an international basis with subsequent allocation of proceeds on an apportionment basis
among the participating countries, making allowance for distributional consideration.”698
Benshalom concludes that the distributional duties between states should be connected to
those countries that have (direct) economic relations. In other words, countries that trade
with each other should also have a responsibility towards each other—especially in the case
where developed countries unfairly trade with disadvantaged developing countries.699
692
See, for instance, Dean, S. A. (2021). A Constitutional Moment in Cross-Border Taxation. Financing for
Development, 1(3), 1-15, at p. 13; or Mason (2020), at p. 394 et seq.
693
Musgrave, R. A., & Musgrave, P. B. (1972). Inter-nation equity. Modern Fiscal Issues: Essays in Honour of
Carl S. Shoup, 63-85, at p. 71.
694
Musgrave & Musgrave (1972, at p. 71; Brooks, K. (2009). Inter-nation equity: The development of an
important but underappreciated international tax policy objective. Tax Reform in the 21st Century: A Volume in
Memory of Richard Musgrave, 34, 471, at pp. 475 and 492.
695
Brooks (2009), at p. 493.
696
Peters (2013), at p. 85.
697
Brooks (2009), at pp. 476-477; Christians & Van Apeldoorn (2021), at pp. 34-35; Ozai (2020), at p. 74 et seq.
698
Musgrave & Musgrave (1972), at p. 85.
699
Benshalom (2010), at pp. 31-37 and 81.
158
Christians & Van Apeldoorn contend that, when there is international trade, there are
synergy effects that would not exist without the international trade.700 Under the current
international tax rules, the profit resulting from these synergy effects typically end up in the
residence state. However, they argue that the principles of fair cooperation and the duty of
assistance in international law require a fair distribution between states that enable cross-
border trade. To operationalise this distribution, they formulate two principles—the
entitlement principle and the equal benefit principle. Both principles underline that the net
benefits of cross-border economic activities do not belong exclusively to one of the
cooperating states. The entitlement principle legitimates the right to tax of source states for
income that arises within their territory even though the income might be hard-to-source.
The principle holds that “states have an entitlement to their ‘national endowment,’ that is,
the wealth of their territory.”701 This entails that “states that host cross-border investment
(commonly if imperfectly referred to as source states) are entitled to tax the income from
such investment and moreover, given the principle of fair cooperation, they are entitled to
an international tax system that enables them to exercise this entitlement.”702
The equal benefit principle consequently suggests how these legitimate entitlements should
be divided. The second principle states that, when states agree to cooperate with each
other, they should be entitled to an equal share of the net benefits of that cooperation
regardless of either state’s economic size or strength.703 The end result is, according to the
authors, that the better-off states will have to give up some of their claim on the global tax
revenue to enable states that are suffering from subsistence rights deficits to enable their
own entitlement to tax.704 The benefits that arise from cross-border trade trigger
responsibilities in richer countries to create a more equitable international tax system. This
is done through the mechanism of redistribution between states, as the equal benefits
principle, arguably, furnishes poorer states with a relatively larger share of the tax base than
what could have been thought to have arisen in their territory if there had been cross-
border trade with (much) richer states. The authors consider this relatively larger share for
poorer states justified, because they contend that the principle takes into account the
opportunity costs of cooperation, “since larger and wealthier [states] would have gained
more in autarky than smaller and poorer states, they must receive a larger share of the gross
gains from trade for the net gains to be equally distributed.”705
Ozai considers that one of the central maxims in international law is that countries are
equal. However, it is a fact that countries are not equal at all, as states do not have the same
resources or capabilities.706 Ozai describes several approaches outside international tax law
how one could reconcile these differences and then suggests applying a differential
700
Christians & Van Apeldoorn (2021), at pp. 11-13 and 28.
701
Christians & Van Apeldoorn (2021), at p. 13.
702
703
704
Christians & Van Apeldoorn (2021), at pp. 116 and 166-167.
705
Christians & Van Apeldoorn (2021), at p. 13 and p.169; also, compare James, A. (2012). Fairness in practice:
A social contract for a global economy. Oxford University Press, at p. 18.
706
In the sense that countries do not have the same economic, political, and social starting position, nor the
same potential and opportunities for future development.
159
principle.707 This principle is made up of two components—the entitlement component and
the differential component, which are listed below:
(i) States are entitled to tax income that is generated in their territories or income
arising from resources they control.
(ii) Whenever allocation, according to the entitlement principle, is ambiguous, taxing
rights should be assigned on the basis of the differentiation as a way to promote
international distributive justice.
While different in both scope and content, this differential principle appears to be derived
from Rawls’ difference principle. To paraphrase Rawls, distribution should be unequal if it is
to everyone’s advantage. Ozai argues that, for this principle to lead to an equitable
distribution of taxing rights, a normative base is needed. If left up to some form of dispute
resolution or political negotiation, chances are that the outcome would be most favourable
to the more powerful countries. To operationalise this, Ozai looks to a combination of (i)
horizontal equity, (ii) vertical equity and (iii) consistency.
The first normative element, horizontal equity, aims to treat low-income countries with
similar levels of income as the same. As such, low-income countries that are equally poor
should see the same increase in taxing rights with regard to hard-to-source income when
applying the differential principle. The second element, vertical equity, aims to ensure that
the countries with the lowest incomes see the greatest increase in their access to taxing
rights with regard to the second component of the differential principle. Finally, the third
element, consistency, aims to take into account other factors than income, such as level of
economic development, population size, access to natural resources, to more precisely
target the granting of taxing rights in a more equitable manner.708
In a sense, Ozai’s approach is comparable to that of Christians and Van Apeldoorn. Both
start from the assumption that global justice demands that a larger share of tax revenue
should go to lower-income source countries. It is then argued that the source countries are
entitled to levy tax on the income that arises in their territory. Finally, it is noted that hard-
to-source income that is generated in cross-border activities is to be divided more to the
benefit of the source country than what is currently the case about how the international
tax rules are generally understood. Christians and Van Apeldoorn quantify this by applying
the equal benefit principle, and thus they state that 50% of net gains in cross-border
activities should be allocated to the source country. Ozai does not quantify this, but he lays
the groundwork for a formulary division (without filling in the concrete parameters).
5.4.3 Justice for All
Above, it is argued that there is a strong case for how recent developments in international
tax policy and academic writing are showing signs of a growing acceptance that global
justice considerations should be considered part of the international system of profit
taxation. These global justice considerations should be considered from a position in
between statism and cosmopolitanism, meaning that states have a responsibility towards
707
Ozai (2020), at p. 77.
708
Ozai (2020), at pp. 78-80.
160
each other that would include distributive duties between states but that this responsibility
does not go as far as within the domestic setting.
Moreover, scholars that are proponents of global distributive justice, by and large, argue
that a distributive mechanism should be based on or derived from Rawls’ difference
principle, 709 following the notion from welfare economics that the minimum share should
be maximised as compensation for differences in opportunities. Accordingly, the result of
this is that there can be differences in how much (poor-capital) source countries and (high-
capital) residence countries each benefit, as long as the (re)distribution of taxing rights is
such that it benefits everyone.710
If one accepts that this development is observable, then the question that arises is why it is
so problematic in practice to achieve a more just and equitable division of taxing rights.
Perhaps, the answer to this question is that the abovementioned approach primarily
highlights one side of the equation. It seems to assume that, because the outcome is (more)
equitable and just for those least advantaged, those more fortunate should naturally accept
this. For that reason, those with a larger share in the global corporate tax take should agree
to part with some of their tax revenue for the benefit of those least advantaged. However,
in practice, the dynamic appears to be different. There might be a fundamental lack of
understanding of the dynamic between states regarding international cooperation in tax.
For instance, Cui says on this point:
[E]conomist and other tax scholars have foregone a basic and near universal
template of explaining actual and proposed cooperation: (i) identifying what
countries do in the absence of cooperation, (ii) what they can all gain from
cooperation, and (iii) what incentive mechanisms would secure mutually beneficial
cooperation.711
Therefore, the question is whether finding the right parameters to divvy up the tax revenue
globally in such a way that the minimum share is maximised is the most pertinent problem
in achieving global justice through international redistribution. This is possibly the easiest
problem to solve, as this is where the winners of international redistribution and
international cooperation are to be found. The more difficult question to answer is how
much the maximum share can be minimised before those that benefit more under the
current system can or will no longer agree. In other words, the question is how one can get
all actors to want to come to a socially optimal outcome.712
Rawls recognised this problem but did not address it properly.713 He considered that
maximising the minimum share could come at great costs to the shares of those in the
middle. Subsequently, he stated that “those who are better off should not have a veto over
the benefits available for the least favoured. We are still to maximize the expectations of
709
Rawls (1999a), at pp. 72-73.
710
Rawls (1999a), at p. 54.
711
Cui (2021), at p. 4.
712
Cui (2021), at p. 33.
713
Also, see Section 3.2.
161
those most disadvantaged.”714 This normative statement, however, does not seem to be
readily obeyed in modern-day international politics.
This might be the case, because, the OECD/G20 proposals for Pillar One and Pillar Two do
not come at a great cost for those in the middle but rather to a relatively small group of
countries that are currently able to collect the maximum share of taxing rights. One could
argue that, if the costs landed more in the middle, in a political negotiation, the more
powerful countries would be able to use their power over the rest to come to an equitable
compromise that would be in line with the principles of justice. Moreover, the difference
principle was designed to operate within a national setting, so, in case those in the middle
would refuse to comply, one could imagine that the state’s coercive powers could also be
factored in to force an agreement where the benefits of the least favoured would not be
(completely) vetoed. However, in the international OECD/G20 arena, this also does not
apply.
Nozick also takes this problem on in some detail. He does so by discussing the principle of
fairness.715 This principle holds that “when a number of persons engage in a just, mutually
beneficial, cooperative venture according to the rules and thus restrain their liberties in a
way necessary to yield advantages for all, those who have submitted to these restrictions
have a right to similar acquiescence on the part of those who benefitted from their
restriction.”716 The principle of fairness, therefore, is an argument against free-riders; one is
not allowed to oppose the rules of the cooperative practices from which they benefit, as it is
morally wrong to take advantage of everyone else’s restraint solely for one’s own advantage
over the others in the cooperative practice.
Nozick opposes such an argument, as it makes unanimous consent to a coercive

government unnecessary. Moreover, he refutes that such an agreement within a
cooperative practice suddenly triggers rights of enforcement against free-riders, unless all
the actors in the cooperative practice — including the free-riders — have agreed to these
rights of enforcements in the original agreement.717 One can only have one’s rights limited if
one has consented to these limitations beforehand.
However, Nozick is not entirely consistent regarding this argument against prohibiting free-
riders,718 as Nozick also argued that unanimous prior consent might not always be required.
So-called independents could be coerced to participate in this minimal state,719 as long as
these independents could be compensated in a way that would leave everyone in the
minimal state better off.720
714
Rawls (199a), at p. 70.
715
The principle of fairness was first considered by Herbert Hart and later adopted by John Rawls. See Hart,
H.L.A. (1955) Are There Any Natural Rights? Philosophical Review, Volume 64 (2), 175, at pp. 190-191; Rawls
(1999a), at pp. 93-98; Nozick (1974), at p. 90 et seq.
716
Nozick (1974), at p. 90.
717
Nozick (1974), at p. 95.
718
See Section 3.3.
719
Even though Nozick claims that personal rights should be respected and that the state should not interfere
in areas where there is a deep plurality of values.
720
Nozick (1974), at p. 87.
162
Nozick also offers a second argument that prohibition of free-riders is problematic. When
Nozick discusses the difference principle, he argues against Rawls’ assertion that, in the
original state, everyone would subscribe to a maximin approach. He initiates the argument
by saying that the maximin approach means that someone well-off would be less well-off so
that others may prosper.721 Nozick, subsequently, asks why the well-off would be bound by
duty to assist the worse-off. The natural advantages that the well-off enjoy do not violate
the rights of the worse-off. Consequently, the well-off should have a right to these.722 Nozick
concludes that the worse-off could thus also be obligated to accept the inequality and
benefit the well-off.
Nozick considers that social cooperation benefits both those that are well-off and those that
are worse-off. Under the difference principle, the argument would be that the worse-off
would deny these benefits of cooperation to the well-off, unless the minimum share is
maximised. The argument could, however, also be reversed, whereas the well-off would
deny the benefits of cooperation to the worse-off unless the maximum share would be
maximised.723 Nozick points out that Rawls’ defence of how the position of the worse-off
entity should be favoured over the position of the well-off entity is one-sided. The weight of
the objections of the well-off having to give up part of their share are not diminished only
because the share of the worse-off is maximised.724 However, Rawls does not consider these
objections at all in The Theory of Justice. Therefore, Nozick contends that the preference of
assisting the worse-off over the well-off is morally arbitrary in and of itself.725 Before
concluding whether the well-off or worse-off should yield their rights, according to Nozick,
the question should be: what would be terms that would constitute a fair agreement for
both the worse-off and the well-off? Moreover, the question should not be how the well-off
can be forced to comply to an agreement that is (only) fair for the worse-off.
Compare this line of reasoning with the earlier remarks on how to reconcile competing legal
rights.726 When reconciling legal rights, the main idea is that all competing rights must be
protected and that it should be avoided that one group would have to yield its rights
completely to another group.727 The importance of protecting all competing rights comes
from the notion that no rights are absolute, that the full context of the competing rights
should be considered, that the extent of interference must be weighed, and that it matters
whether it is the core of the right or rather its margins that might have been violated.
Nozick also touches upon some of these notions when he discusses the symmetricity of the
benefits of social cooperation.728 However, the differences in degree to which the well-off
and worse-off benefit from the cooperative practice do not lead him to conclude that this
721
The maximin approach is at the core of Rawls’ difference principle, see Section 3.2.
722
Nozick (1974), at p. 195.
723
Nozick (1974), at p. 195.
724
Nozick (1974), at p. 196.
725
Nozick recognises that his argumentation is based on a situation where the actors know whether they are
well-off or worse-off and thus that these considerations are not done in the original state from behind the veil
of ignorance but argues that the same should be true if one argued for these points from the perspective of
someone in the original position.
726
727
Iacobucci (2003), at pp. 140 and 164.
728
Nozick (1974), at p. 192 et seq.
163
might be a consideration in the question of how much the rights of either the well-off or the
worse-off could justifiably be limited. Nozick simply concludes in the absolute that the
concept of fairness is not a very good justification for constraining voluntary cooperation.729
However, justification might be found in the consideration of the relative degree of

infringement of each group’s taxing rights. Moreover, instead of constraining voluntary
cooperation, this could be framed as finding a path to ensure the maximum preservation of
everyone’s rights within the application of the difference principle. In other words; finding a
path to the socially optimal outcome to the benefit of everyone. In the interest of fairness,
one cannot only consider the position of those that are being treated unfairly. It is also
necessary consider the interests of those who are deemed to benefit at the expense of
others. For example, from a perspective of fairness and justice, it could be relevant to
consider whether their benefit comes from a more or less coincidental position of privilege
(as a result of the international tax system’s fundamental design) or from deliberate actions
in order to come into this position of privilege (as a result of national predatory tax policies).
5.4.4 Mechanisms Blocking Socially Optimal Outcomes
It must be noted again that Rawls intended the difference principle to be applied to the
basic structure on the national level and that Rawls was against the idea of international
distributive justice. However, if one accepts that there is an increasingly interconnected
global economy and that corresponding global rules also imply that there is a basic structure
on an international level, this basic structure could resemble the national basic structure
enough to warrant international distribution. Moreover, if one also accepts that there is
broad and growing acceptance that global justice is — or at least should be — considered
part of the international system of profit taxation, one should also view Nozick’s critique of
Rawls’ difference principle in the context of the international system of profit taxation. This
means in essence that it is not enough to articulate what would constitute justice only from
the position of the underdog. The two seemingly diametrically opposed interests of the
(low-capital) source countries and the (high-capital) residence countries have to be
reconciled, since a fair and just agreement should be affirmed by all who are party to it.
At first glance, this looks like a game theory problem where one is looking to achieve a Nash
equilibrium. Game theory looks at decisions that are made in a system of interactions. It
considers that each actor chooses their strategy simultaneously, that each actor is rational
in the sense that their objective is to maximise their own result, and that each actor has
common knowledge of the game and of each other’s rationality. In short, the question is
how individuals or groups make choices that also affect the choices of others. The Nash
equilibrium subsequently is the condition where all parties have optimised their outcome
from their own perspective. This means that all actors are happy with the outcome.
However, this does not mean that the Nash equilibrium is automatically the same as the
socially optimal outcome, i.e., the desired state of affairs for society.730 It rather means that
this is as far as a (political) compromise might go. It is a reflection of what is attainable
rather than what is desirable.
729
Nozick (1974), at p. 194.
730
See Cui (2021), at p. 33.
164
Cui argues that it is puzzling that countries do not completely Nash-optimise in international
tax.731 However, even if they did, moving from the Nash equilibrium to the social optimal
outcome seems to be blocked by two intellectual obstacles. The first is that there is an
unjustified supposition that the international economic impact of the corporate income tax
is mostly on highly mobile capital, and the second is that the effect of the corporate income
tax on cross-border transactions is self-evident.732 These two assumptions, according to Cui,
stand in the way of countries overcoming their national focus on tax revenue effects of
international cooperation that could reflect the social optimal outcome rather than the
Nash equilibrium.
Another important aspect blocking a socially optimal outcome – one that perhaps follows
logically from Cui’s conclusions – is that the division of taxing rights between countries is
generally considered to be a zero-sum game. This means that it is thought that the tax base
that is gained by one (source country) is lost by the other (residence country).
Interestingly, in a national setting, inequality of income and wealth is generally seen as

something that impedes growth. Redistributing income and wealth to achieve more equality
can therefore be inducive of growth, which, in turn, possibly could lead to a larger share for
everyone.733 However, the notion that redistribution could lead to overall efficiency gains
for all countries involved is not generally used when assessing the effects of changes to
international tax policy with regard to the allocation of taxing rights. As a consequence,
whether different distributions of taxing rights would achieve a socially optimal situation
and/or improving long-term tax revenues across countries is not highlighted.
Therefore, the conceptual architecture within which the international tax policymaking
discussion takes place is aimed at reaching a Nash equilibrium outcome rather than
cooperating towards a socially optimal outcome. This architecture is kept in place by on the
one hand a number of truths that are held to be self-evident with regard effects of the
corporate income tax on cross-border transaction, and on the other hand the nature of
international political negotiations. Therefore, the focus on the national tax revenues means
effectively that the interests of advanced economies are likely to be favoured over the
interests of developing countries.
This means that the worse-off in reality might consider the Nash equilibrium outcome as too
little too late. Perhaps, the scales could be tipped more in favour of the socially optimal
outcome if countries were to re-examine the objective validity of these assumptions and/or
if they were to consider the long-term economic effects on the international level more
explicitly rather than focusing on the short-term revenue effects on a national level. If a
more holistic approach would also be applied with regard to the allocation of taxing rights,
731
See Cui (2021), at p. 37, where he argues that, based on optimal tax theory, it would not be in a country’s
self-interest to tax foreigners. However, countries tend to tax foreigners nonetheless. Cooperation is not
needed to lower the tax on this income, as that is what they should do according to optimal tax theory without
cooperating. cooperation is not needed to raise taxes on foreigners, as they already do tax the income. It is,
therefore, not clear how cooperating makes countries better off.
732
Cui (2021), at p. 45.
733
See Section 5.4.2.
165
this would make it possible to better protect and uphold all competing (taxing) rights
simultaneously while finding a fair and just agreement for all actors involved that closely
resembles the socially optimal outcome.
5.4.4.1 International Tax Neutrality
To explore the self-evident truth of assumptions that stand in the way of a more holistic and
global approach to the allocation of taxing rights, it is interesting to take a closer look at the
notion of tax neutrality. In international tax policymaking, neutrality is the normative
universe of both policymakers and scholars,734 as it is often equated with economic
efficiency.735 For example, Peters makes the point that it is generally taken for granted that
“the maximization of global welfare is an appropriate goal of tax policy and that taxation by
distorting economic decisions reduces welfare.”736 The question is whether this always
holds. There are two problems with the notion of neutrality being the holy grail in
international tax policymaking. First, neutrality is an unattainable goal. Second, neutrality
promotes the status quo in the allocation of taxing rights.737
From an international tax policy perspective, neutrality concepts such as Capital Import
Neutrality (CIN), Capital Export Neutrality (CEN) and Capital Ownership Neutrality (CON)
have been very influential on policy design, as it is believed that taxation should not distort
economic choices. One could, however, question whether neutrality should be the only
tenet of international tax policymaking. Peters gives a comprehensive analysis of
international neutrality concepts and their historical context and concludes that both (CIN)
and (CEN) concepts assume a rather strict division of the national and international domain,
while this strict division might no longer exist.738 Moreover, Hongler argues that CEN would
lead to a different neutral outcome than CIN or CON, as all three rely on assumptions that
would not occur in the real world.739 For instance, this is because CIN and CEN goals cannot
be reconciled simultaneously in a world where countries can have different national
nominal tax rates.740 Absent full international harmonisation, the fundamental choice of a
country for CIN or CEN, is driven mostly by what might fit that country’s economy best.
734
Peters (2013), at p. 13; Hongler (2019), at p. 418; De Wilde (2010), at p. 288.
735
Neutrality in this context means that it reflects what economists refer to as a Pareto-optimal outcome. This
is a situation where all production factors are allocated in a way that the only way to make one actor better off
is when all other actors are worse off. The problem, however, is that this Pareto-optimal state is a theoretic
position in welfare economics that does not necessarily occur in real-life situations. Moreover, welfare
economics and other disciplines offer other optimal outcomes that might have more bearing on real-life
situations, especially in an international setting. For example, in Section 5.4.3, it was discussed that, if it was
possible to compensate a certain actor in a way that would leave everyone better off, it could also be a
legitimate outcome. This outcome is referred to as the Kaldor-Hicks efficiency. Moreover, in Section 5.4.4, the
differences between a Nash equilibrium and a socially optimal outcome are discussed.
736
Peters (2013), at p. 75.
737
See Graetz, M. J. (2000). The David R. Tillinghast lecture Taxing International Income: Inadequate principles,
outdated concepts, and unsatisfactory policies. Tax L. Rev., 54, 261, at p. 271; Knoll, M. S. (2010).
Reconsidering international tax neutrality. Tax L. Rev., 64, 99, at p. 99; Peters (2013), at p. 13; Li, J. (2009).
Improving Inter-Nation Equity through Territorial Taxation and Tax Sparing. All Papers. 252, at p. 10; OECD
(2015a), at pp. 30-31.
738
Peters (2013), at p. 109.
739
Hongler (2019), at pp. 419-420.
740
Knoll (2010), at p. 125.
166
This means that the international tax system does not achieve optimal allocation of global
production efficiency, global equity or maximising global welfare.741 CIN, CEN and CON
should function as overarching principles aimed at the utopian ideal of the Pareto-optimal
outcome.742 In reality, CIN, CEN and CON are instruments for national tax competition
aimed at maximising national welfare. These concepts serve to attract foreign investment
while protecting the national tax base as much as possible by defending against predatory
tax policies drawing national investments away to other countries. For example, one can
observe that, particularly, countries with FDI outflows choose a system that combines both
CIN and CEN, as many have some form of territorial system in combination with CFC rules.
Tax neutrality relies on the belief that fairness will emerge as a result of the invisible hand of
the market. However, as tax neutrality — as it occurs in practice — is not neutral, it does not
lead the optimal allocation of production factors globally. Rather, tax neutrality essentially
acts to preserve the status-quo where the allocation of taxing rights is concerned. Neutrality
is therefore not value-free or agnostic in international tax policymaking.743 It is an active
policy choice and a moral one at that.
To illustrate this point, the 2013 BEPS Action Plan stated that the BEPS actions did not have
as their goal to change the allocation of taxing rights between source countries and
residence countries.744 At that time, the OECD seemingly supposed that the political
morality regarding allocating taxing rights had not changed sufficiently to warrant that
source countries should be entitled to more tax revenue. Of course, there were already
commentators in 2013 that were calling for exactly that,745 but a widely-accepted more
global outlook on international distribution between countries and inter-nation equity had
not emerged yet.746 A reason for this could be that it was generally assumed to be self-
evident that cross-border trade is subject to the law of the fiscal jungle,747 as well as that the
short-term tax revenue effects of such a policy change would be politically unacceptable.748
However, the 2019 OECD policy note on the tax challenges of the digitalisation of the
economy contained an indication that this political morality has been changing. The
document reads: “A solution would therefore require comprehensive work that covers the
overall allocation of taxing rights through revised profit allocation rules and revised nexus
rules, as well as anti-BEPS rules.”749 This four-page document forms the basis for the
October 2021 agreement on the Two-Pillar Solution.750 Moreover, this could be seen as the
741
See Devereux, M. P. (2008). Taxation of outbound direct investment: economic principles and tax policy
considerations. Oxford Review of Economic Policy, 24(4), 698-719, at p. 716 stating that to achieve global
production efficiency, taxes on source or a residence basis would need to be fully harmonised.
742
Peters (2013), at p. 75.
743
Even though economists might mean the term neutrality to be value-free.
744
OECD (2013b), at p. 11.
745
For example, Hearson, M., & Brooks, R. (2010). Calling Time: Why SABMiller should stop dodging taxes in
Africa. ActionAid UK. Also see Section 9.4.1. for more examples.
746
See Section 5.4.2. and Section 5.4.3.
747
Cui (2021), at p. 33; Van Brunschot (1995), at p. 141.
748
See Section 5.4.4.
749
OECD (2019a), at p. 1.
750
OECD (2021b).
167
first step towards a more global outlook with regard to the allocation of taxing rights and,
with that, a departure from the notion of neutrality, as it exists today. Perhaps, these are
the first steps away from the abovementioned self-evident truths that have been
instrumental for tax neutrality to become the normative universe of tax policymakers.
International tax law should provide the conditions and side constraints to ensure that both
fairness and justice between states are not only possible but likely. By setting and upholding
the rules for the governance of the international tax system, international tax law can also
perform a function to tilt the playing field towards certain policy goals. Such governance
rules could entail that the distortive effects of profit taxation should be embraced rather
than that they should be prevented or negated.
Economic efficiency as a main tenet of international tax policymaking therefore effectively

stands in the way of a more global and holistic outlook—in particular with regard to the
allocation of taxing rights. In practice, tax neutrality works to optimise national welfare, and
as such might actually fan tax competition between states, which, in turn, prevents the level
of cooperation needed to reach socially optimal outcomes over the Nash equilibrium.
Moreover, more intensive tax competition resulting from national efforts to optimise
domestic welfare, almost certainly triggers taxpayer behaviour that would require further
fiscal fail-safes such as anti-abuse measures, which lead to more complexity in the
international tax system.
If tax neutrality can be wielded as a policy instrument, the same applies to economic
distortion. One could tilt the playing field to utilise the international tax system to promote
fairness and justice; to employ some of the earlier-discussed suggestions by scholars that
look to Rawls’ difference principle to change the allocation of taxing rights.751 However, to
get international agreement on new rules to allocate taxing rights aimed at improving the
long-term economic development of (developing) jurisdictions, one has to bypass the
political focus on the (changes in the) amount of tax revenue that countries collect on the
short term.
International tax law is a part of international law. This means first and foremost that
international tax law consists of rules of conduct of the behaviour of states when it comes to
transactions and problems that transcend national borders.752 International tax law-making
is, to a great extent, based on a consensus-oriented political process, and, in this political
process, a whole range of actors, including international organisations and special interest
groups, play a significant role.
Globalisation and digitalisation are key drivers for the enormous development in
international tax policymaking in international organisations, especially with regard to the
OECD. Moreover, the development does not only pertain to the content of tax policy but
also to those involved. Where tax policymaking formerly was exclusive to 37 member
751
752
168
countries, the OECD/G20 Inclusive Framework has, since its creation in 2016, extended to
include over 140 jurisdictions, which are now involved in the process of tax policymaking at
the OECD. This more inclusive approach to global tax policy has established the OECD as the
main forum for international standard-setting and policy developments in taxation,
particularly in the area of profit taxation.
Even so, this supranationalisation of the OECD as a standard-setting body does not — and
also should not — lead to the conclusion that the agreements regarding international tax
policy at the level of the OECD are to be viewed as a formal source of international tax law
that is customary international tax law in and of themselves. However, both the ongoing
work and the concluded agreements by the OECD/G20 Inclusive Framework are extremely
relevant for the design of international tax law as well as national tax rules. Given this direct
impact that the OECD work has on international tax law, it can hardly be ignored as not-law.
Moreover, as the OECD work finds its way into national legislation, academic writing, special
interest groups’ commentaries and judicial decisions, it also demonstrates levels of
institutional support that would make the developed international tax standards legal even
if the original international agreements that they are based on are not.
Furthermore, this chapter demonstrates that the political discourse on (the morality of)
international taxation has shifted towards a global view on profit taxation as an integral and
coherent international system that requires close and intensive cooperation between states
to prevent both double taxation and double non-taxation.
Globalisation and digitalisation have led to dramatic changes in corporate value chains and
highly internationally integrated multinational corporations. These developments are also
reflected in the development of international tax law, as there has been a move towards a
more global, holistic outlook on tax. This means that the focus of international tax law has
been broadened, and the work of the OECD/G20 has become more comprehensive and
inclusive. Some claim that this has entailed a broad international acceptance of the concept
of full taxation.753
This more global perspective can also be observed outside of the OECD BEPS project. For
example, the EU Commission viewed the effects of national tax rules from an international
perspective in a number of state aid cases. The CJEU subsequently confirmed that this
international perspective is acceptable under Article 107 of the TFEU. Also, the CJEU
confirmed the view of the Commission that one should look at the consolidated corporate
tax base of the multinational corporation to understand the economic and fiscal reality of
business decisions. In fact, from EU case law, one could conclude that the European
Commission is using the EU courts to change European tax policy effectively. This is
underlined by the fact that the European Commission has stated that it will use every tool
available to view the outcome of national tax rules from an international perspective.
International tax policymakers, therefore, use different methods and different instruments
to achieve such a more integrated, holistic approach to international tax policy.
753
Mason (2020), at p. 400.
169
In this context, the development towards a holistic approach in international tax law is
decidedly less visible regarding the allocation of taxing rights amongst states. At the same
time, the issue of the allocation of taxing rights has become a more pressing political issue in
considering the fairness of the international tax system. Given that the current international
standards for allocating taxing rights are the outcome of a political process driven by the
self-interests of countries rather than first principles, these standards are not necessarily
effective in delivering an objectively fair and just fair share of the global tax base to every
country.
Moreover, it is likely that the Two-Pillar Solution will not be the end of tax competition.
Instead, the Pillar One and Pillar Two proposals are more likely to be a first step towards a
more global holistic view with regard to the allocation of taxing rights, and, as such, they are
likely not the end of the (political) discussion on this issue.
The question of whether a country receives a fair share of tax revenue is, in part, dependent
on the development of political and doctrinal morality with regard to the fairness of
international standards for allocating of taxing rights. From the perspective of defining and
understanding the spirit of international tax law, it therefore should also be analysed if and
to what extent the holistic approach of international tax law also extends to the allocation
of taxing rights.
Recent developments in international tax policy and academic writing show that there is a
growing acceptance that global justice considerations should be considered part of the
international system of profit taxation. These global justice considerations should be
considered from a position in between statism and cosmopolitanism. This third way is based
on the notion that there is a basic international structure that would trigger duties between
states but that distributive duties between countries as a result of this structure do not go
as far as they would in a domestic setting, as the national basic structure is fundamentally
different.
If there are distributive duties between countries, the question is how these should
translate to the allocation of taxing rights. Proponents of global distributive justice, by and
large, argue that a distributive mechanism should include an approach based on Rawls’
difference principle, dividing tax revenue equally unless everyone benefits from an unequal
division. However, is has been argued that applying the difference principle to maximise the
minimum share might not give enough consideration to the fact that international law-
making is, to a great extent, based on a consensus-oriented political process. In order to
reach a consensus on a more just outcome, one would need for all actors to agree. In this
regard, it was argued that there is a need to simultaneously safeguard the two seemingly
diametrically opposed interests of the capital-rich residence countries and the capital-poor
source countries. An outcome that reflects the Nash equilibrium would, in this regard, be
suboptimal. This is because such an outcome reflects what is politically attainable rather
than what is socially desirable or optimal.754
754
In this context, socially optimal should be defined as the optimal distribution of resources in global society,
where all external and internal costs and benefits are taken into account. Socially optimal differs, in this
context, from the Nash equilibrium, as, in the latter, only the internal costs and benefits (in each country
separately) are taken into account.
170
To achieve a socially optimal outcome over a Nash equilibrium, it is required that countries
do not only see the need to cooperate, but also that a level of cooperation could actually be
more beneficial for the welfare of both the well-off and the worse-off combined if this
cooperation is aimed at increasing the welfare of the worse-off in the longer term over the
national self-interests of the well-off of how much tax revenue that might be lost in the
shorter term.
However, there are several arguments in the international tax debate that are considered
self-evident, which lead to the fact that the policy debate is reduced to a zero-sum game
based on the short-term effects on tax revenue at a national level.755 At present, these
arguments are almost impossible to overcome. This is because national parliaments are
presented with a political choice of trading their own constituents’ welfare for the welfare
of those in other countries, rather than the duty to compensate for the external costs that
national policies cause and that these external effects leave everyone—including their own
constituents—worse off in the longer term.756 It is unrealistic that this national perspective
could be completely ignored or forgotten in international tax law.
The upshot of this is that international tax law is, in effect, struggling to maintain and/or to
develop a truly integral holistic global perspective. Currently, there appear to be two spirits
inhabiting the same body; a global outlook on aligning international tax policy regarding
taxpayer behaviour and a national perspective on the tax revenue to be collected. Taking
measures to correct taxpayer behaviour based on the global outlook appears to have more
institutional support than where it concerns finding solutions to align the allocation of
taxing rights to a more global socially optimal outcome. Moreover, this study suggests that
there are truths that are held to be self-evident in international tax policymaking that are
standing in the way of countries achieving a more global outlook on distributive justice and
the allocation of taxing right, which foster the status quo—chief among them, the
(unattainable) ideal of economic efficiency through tax neutrality.
The question is if, instead of striving for the absence of economic distortions, the
international tax system could also harness economic distortion and achieve better results.
For example, this could be the case if the international tax system strived to tilt the playing
field towards long-term policy goals that better allow developing countries to catch up to
advanced economies. Consequently, international tax law that is more purpose-driven could
increase in institutional support for a more global outlook on the allocation of taxing rights
perspective.
755
See Section 5.4.4, where it is argued that there are unjustified suppositions (i) that international economic
impact of the corporate income tax is mostly on highly mobile capital and (ii) that the effect of the corporate
income tax on cross-border transactions is self-evident.
756
One could argue that compensating other countries for the external costs that national tax policies cause is
not some form of charity based on an international duty of assistance but that one should rather compare this
to the polluter-pays-principle in environmental tax policy following from the notion that one country has a de-
facto obligation to do no harm to another country (especially not if these externalities have the potential to
leave all countries worse off in the process). Also, compare Section 5.1. on the shared interests in international
society that are of vital importance to virtually all states.
171
6 Defining the Spirit of International Tax Law
The overarching aim of the previous sections was to provide building blocks that can be
combined to define the spirit of international tax law. The starting point for this were the
questions what the concept of law precisely includes and where the concept of law draws its
legitimacy from. The underlying assumption here is that the spirit of the law cannot be an
arbitrary or subjective power.757 For it to be legally enforceable, the spirit of the law needs
to be part of the concept of law. Therefore, the first section has focused on whether a
boundary between law and not-law could be identified. This led to the conclusion that even
though many of the natural law theories are fundamentally incompatible with legal
positivism,758 it is also undeniable that morality plays a major role in all legal theories.
In fact, Gardner asserts that it would be absurd to believe that legal positivists — or any
legal philosophy — would contend that there is no necessary connection between morality
and law. He claims that there are many considerable essential links between law and
morality in explaining the different qualities of the nature of law.759
There are substantive moral debates to be had—independently of the normative inert

[creation of the law]—about the attitude one should have to legally valid norms. In
these debates the whole gamut of possible attitudes is on the table.760
Along similar lines, Hart also thought that one should not just blindly accept a legal norm,
exclusively on the grounds that the correct procedure was followed to create that law.761
For instance, Hart contends much like Finnis,762 that legally valid laws should not be
followed if they are grossly unfair or morally reprehensible.763
757
Raz (1979), at p. 219.
758
Raz (1979), at p. 158.
759
Gardner (2001), at p. 223.
760
Gardner (2001), at p. 210.
761
Hart (2012), at pp. 202-211.
762
763
172
An important point, therefore, is that there is more to the concept of law than the question
of the validity of a legal rule at the singular point in time in which it was enacted. Arguably,
considering how the life of a legal rule might take form after its enactment is much more
important, as the legal rule then has to be able to develop in such a way it can maintain its
relevance as a part of the legal system as well as its role in sound legal reasoning.
Dworkin also looks at the concept of law as a continuous development rather than as a
single point in time.764 He sees the use of moral and legal principles in legal cases as a key
part to the development of the concept of law. The legal authority of law comes from the
application of such (legal) principles in such a way that it is consistent with the existing legal
standards and so that it leads to the morally best solution.765 As such, this morally best
solution is not a permanent idea either. It is the morally best solution at the time of its
application through the use of interpretive constructivism. In that sense, morality becomes
part of the interpretative legal narrative and can also change in accordance with how
cultural or political morality change over time. Only as the concept of law evolves over time
in step with changes in moral and legal paradigms, can it retain its authority over a long
period of time.766
It also follows logically from Dworkin’s theory that interpretive constructivism is based on
legal sources as much as possible. It is based on legal facts and legal argumentation using a
common legal taxonomy. It assumes that the same legal expressions consistently mean the
same and that legal provisions respect the general use of legal maxims. Moreover, if one
must resort to (legal) principles to arrive at the morally best solution, these principles need
to be consistent with the existing legal standards, and this solution must connect to these
existing standards as a coherent whole to preserve law’s inherent integrity. Interpretive
constructivism, therefore, should not lead to the law being applied as an arbitrary or
subjective instrument. Rather, it seeks to make the integrity of the system sustainable by
anchoring the development of the political and legal discourse in the underpinning legal
principles from which the system is built.
One prominent problem in the discussion of how morality and law are connected is that the
fluidity of this connection is not appreciated enough. Law should be viewed as a river in flow
that moves with the changes in the (political and philosophical) landscape and not as a
stagnant pool of water that eternally casts the same reflection. In that way, it becomes
apparent that morality always is an integral part of the development of law. Moreover, this
means that morality and law should not be considered two completely distinct and
independent norm systems, but rather as an interdependent and harmonious system in
constant symbiosis. So instead of two external and opposing forces that sometimes meet in
certain specific cases and then must be reconciled, law and morality have to apply
simultaneously,767 as law and morality are continuously intertwined and should always
apply as equal parts of an interconnected whole.
764
765
Dworkin (1986), at pp. 61-62.
766
Dworkin (1986), at p. 104.
767
See Kelsen & Trevino (2017), at p. 391 et seq.; Raz (1979), at p. 143.
173
A second important point with regard to defining the spirit of international tax law that has
been discussed, is the question of if there is an objective mechanism that can differentiate
between moral convictions that are widely held and moral convictions that are personal
preferences. The underlying assumption here is that for a moral conviction to have any legal
standing, it needs to be widely held enough to enjoy institutional support. Moral conviction
that are merely personal preferences cannot raise legal rights and obligations.
This question has been approached from different angles. It has been considered how
concepts of justice and fairness have developed within political philosophy and how these
have translated into principles for the basis of a fair and just society. A central point that has
been discussed with regard to political philosophies is to which extent the rights of an
individual can be limited for the benefit of the whole of society. Even though the extent to
which the limitation of individuals’ rights might be considered legitimate, one could argue
that there is a shared notion that a comparative harm approach could be considered
morally legitimate. This means that a solution that leaves everyone better off should be
found even if this would mean that an individual’s rights are encroached upon.768
It has been concluded that in differentiating between widely held moral convictions and
personal moral beliefs, one might have to accept that around the boundary between the
two, there is a range of moral propositions that can be true and false simultaneously.
Several devices were considered to narrow the bandwidth of this range as much as possible.
For instance, the statutory nature of tax law combined with its converging legal culture—
particularly with regard to the development and design of rules to govern the taxation of
profit of multinational corporations—should ensure a more uniform approach to legal
interpretation and the underlying moral considerations across borders. Moreover, the work
of the OECD/G20 Inclusive Framework means that, more and more, a common legal
language and shared taxonomy in international profit taxation emerge, which are widely
implemented in national legislation. Such dissemination of meta-language also ensures a
more consistent legal interpretation across borders.
In addition, it has been argued that the application of the fiction of remedial effect could
help to further eliminate personal moral preferences from the act of interpreting
(international) tax law.769 Moreover, applying the fiction of remedial effect rather than
taking an interpretivist or purposivist interpretive approach could be beneficial to better
attune the interpretation of (international) tax law to the development of the political
morality, the doctrinal discourse and the relationship with other normative systems in
society. The fiction of remedial effect, therefore, could be a helpful expository device to
better identify parts of the system for which institutional support is waning due to the fact
that the legal principles underpinning (specific) current tax rules are no longer fully aligned
with the (legal) principles that drive and support the change in the political and legal
discourse. This could be helpful to better prevent that the inherent integrity of the system
might come under pressure in the long term because of changes in this discourse. In other
768
Under Utilitarianism actions are morally right if they increase (overall) utility. Rawls considers that
resources should be distributed equally unless unequal distribution is to everyone’s advantage. Finally, Nozick
considers that the rights of independents can be limited as long as they could be (theoretically) compensated
in a way that leaves everyone better off. See also Section 3.1., 3.2. and 3.3.
769
See Section 4.3.3.
174
words, the fiction of remedial effect could be an extra interpretive tool that would enhance
the temporal relativity of legal rules, as they would profit from a built-in longitudinal
outlook by seeing legal texts as an inherent societal discourse in and of itself.770
Specifically with regard to international tax law, it has been considered what the different
sources of international tax law are, and how the agreements within the OECD/G20
Inclusive Framework should be viewed in that respect. It is concluded that the OECD/G20
publications are not sources of international tax law in and of themselves and likely should
also not be viewed as international soft law. Even so, it has been argued that the
demonstrated level of institutional support for the OECD/G20 Inclusive Framework is a very
determining factor as to its relevance as a subsidiary means for the determination of the
rules of international tax law.771 It is undeniable that the OECD/G20 Inclusive Framework —
and the BEPS project in particular — have been incredibly important in changing and
directing the global political discourse on international profit taxation. This can be observed
both in terms of the narrative in the broad sense as well as in terms of a narrower sense in
the specific terminology that is generally used to discuss certain tax matters by media
outlets, in government publications, in court decisions and in academic writing.
In part, one observable effect of this changing discourse is that this has led to a more global
and holistic outlook on international tax policy. However, it has been argued that this
holistic vantage point is mostly taken when there is a need for a corrective mechanism for
taxpayer behaviour.772 For instance, this could apply in situations where a taxpayer has
engaged in tax planning to the extent that the national tax rules are fully respected, but,
from the perspective of the whole corporate value chain, profits are not taxed at an
appropriate level overall, and/or it could be that the jurisdictions where the corporate
income tax liabilities effectively arise are deemed not to be congruent with the jurisdictions
where the value is created. One can observe that countries see the need to cooperate on
the matter of making sure to prevent that corporate income remains untaxed as a result of
double non-taxation or deduction without inclusion.
However, in allocating taxing rights between countries, it has been observed that countries
appear not to see the need for cooperation as clearly. A holistic outlook on international tax
policy does not seem to encompass taxing right allocation. Instead, the allocation of taxing
rights is still a political issue driven by the self-interest of countries and the external costs of
these national self-interested tax policies are still largely ignored. This is problematic on
several levels. First, it is a fallacy to carve up highly economically integrated multinational
corporations that operate as one entity on a global level into neat country-sized fragments
as if each of these fragments were an independently operational piece of this
corporation.773 It does not matter how well-designed the transfer pricing rules and fiscal fail-
safes are to allocate the income based on the arm’s length principle. The premise of the
separate-entity-approach inevitably makes the whole exercise into a struggle resembling
the action of pushing around a round peg through a square hole, as it (no longer) reflects
the economic reality of the taxpayer. It is inescapable that taxpayers will also incorrectly
770
Niemi-Kiesiläinen, et al. (2016), at p. 81.
771
See Section 5.3.2.
772
See Section 5.4.1.
773
175
identify or underestimate their sources of income in each country.774 This might be
intentional, for example, as a result of tax planning, but this could also happen
unintentionally. Moreover, countries might also not accept that the (objectively correct)
outcome of the division of taxing rights based on the arm’s length principle is fair and just,
because the arm’s length rules do not sufficiently take into account the negative spill-over
effects that the current international tax system allows for.
Furthermore, the self-interested focus on national tax revenue fuels the implementation of
potentially predatory tax policies in order to attract and/or retain certain types of
investments. Such predatory policies have an inherent risk of exacerbating the external cost
effects. The efforts by the OECD and the EU to curb harmful tax competition have had an
effect in guard-railing such policies and thus in reducing the negative spill-over effects.
However, optimal tax theory claims that particularly small open economies should not tax
foreign income but rather focus on taxing capital that is not mobile.775 This means that,
fundamentally, the interests between countries are not aligned and that cooperation where
both internal and external costs and benefits are considered is not simply given.
Game theory suggests that, if every country pursued their unilateral self-interest based on
optimal tax theory, this would likely lead to suboptimal results. So, countries’ interests are
much more aligned when it comes to considering other countries’ strategies, as these
directly impact the internal costs and benefits, i.e., the tax revenue collected. The need for
cooperation thus follows logically from the fact that a Nash equilibrium would mean that
each country could optimise their outcome relative to that of all other countries.776 As
argued, the Nash equilibrium, however, might not be the same as what could be considered
the socially optimal outcome.777 This self-interested focus, therefore, stands in the way of a
more holistic approach with regard to the allocation of taxing rights. Consequently, it stands
in the way of a more just and legitimate as well as more efficient international tax system
that effectively prevents one country from doing harm to another country through harmful
tax policies. However, this self-interested attitude correspondingly means that the spirit of
international tax law must also incorporate national interests and how both the global
outlook and the national interests might have changed over time.778
These building blocks are meant to maximise the rationality of what is interpreted and how
it is interpreted.779 With regard to what is interpreted, it is contended that morality is part
of the concept of law. This is true at the moment of the enactment of a legal rule and even
more so in its further development. This means that the letter of the law cannot be seen as
separate from its context, its place in the legal system, its purpose or its consequences.
From this, it automatically follows that, when political or legal morality changes with regard
774
Christians, A., & van Apeldoorn, L. (2018). Taxing income where value is created. Fla. Tax Rev., 22, 1, at p. 4.
775
Cui (2021), at pp. 26-27; Van Brunschot (1995), at p. 141; Snel, F. P. (2013). What Is Wrong with (the Rules
of) the Game. Intertax, 41, 614, at p. 618.
776
Cui (2021), at p. 33.
777
See Section 5.4.4.
778
As it is, not as it should be.
779
Filipczyk, H. (2014). ‘Spirit of the Law’ for Non-Believers: Tax Avoidance and (Legal) Philosophy. Available at
SSRN 2517906, at p. 4.
176
to a certain subject, the morality part of the legal rule changes even if the legal text does
not.
In practice, one can observe fragmented explanations of what the spirit of the law is.
Usually, these focus on how one should interpret a legal rule, often with a reference to the
intent of the legislator or the purpose of the law. Also, it is possible that focus goes towards
the perceived intent/purpose of the law or a logic of common-sense justice about what
reasonable people would find equitable.780 As argued, the problem with many of these
interpretive techniques is that there is an inherent problem in separating personal moral
preferences from widely held moral values that enjoy sufficient institutional support.
Because of this, the concept of the spirit of (international) tax law is often dubbed to be too
vague or too subjective to have much practical meaning.
This notion of vagueness is augmented by the term spirit. It implies something esoteric,
metaphysical, immaterial, and uncatchable. By focusing solely on how one should interpret
the law, this sense of catching smoke with your fingers is enhanced. This might lead one to
conclude that the spirit of the law is obscure, void, and vacuous.
However, as the spirit is not and cannot be separate from the letter, it should also not be
considered as such. The reverse is also true, the letter of the law can also not exist in
isolation. No legal text can be understood without looking at its context, its place in the legal
system, its purpose or its consequences. Even the clearest of legal rules requires
interpretation even if we do not realise it. Often, it is routine practice that determines how a
rule is and should be understood, or how it should be supported by legal taxonomy, legal
culture, legal doctrine, and social norms and expectations. 781 All of which people generally
and implicitly know, understand and follow when it comes to most of the rules that they
encounter.
When it comes to a specialist legal area such as international tax law, these somewhat
mundane mechanisms are mystified. Some taxpayers act like (international) tax law, unlike
other areas of law, is not an inherent societal discourse and that it thus allows for wilful
gaming of the system. However, commentators of the behaviour of these taxpayers wilfully
also set international tax law apart by claiming that the societal discourse also includes their
personal preference on how the law should be rather than what institutional support would
suggest that the law should be.782 In both examples, the spirit of the law is somehow
assumed to be disconnected from the letter of the law. Subsequently, the spirit is (mis)used
as a device to ignore legal sources that determine the external boundaries of interpretation
of tax statutes. The result of this is that the first example expresses a too narrow view of
what the concept of law includes, and the second expresses a too wide view.
780
See Section 4.3.4.
781
Filipczyk (2014), at p. 6.
782
The use of the term should be is intentional, as it is this author’s contention that the law – also keeping in
mind that it is a continuous inherent societal discourse – should be interpreted in a manner that aims to
achieve the best possible solution at any given time, as it is supported by generally accepted methods of
interpretation. The law cannot be construed based on the personal preferences of the interpreter. Also, see
Devereux, M. P., Freedman, J., & Vella, J. (2012). Tax avoidance. Available at SSRN 3754562, at p. 14.
177
This line of argumentation leads to the conclusion that the spirit of (international) tax law
does not exist as a separate concept. The spirit is part of the concept of law, and the
concept of law is inextricably connected to both the spirit and the letter of the law. The
spirit is at the core of the law, and the letter is the tangible product of the legislator. This
tangible product has very little meaning on its own and is an empty shell without the spirit.
Simultaneously, the spirit without the letter does not have any meaning to it either. The
letter and the spirit are one and exist in symbiosis with one another.
Secondly, it follows that the spirit cannot be seen as a buffer zone between what is legal
based on interpretation using legal sources and what would be considered (il)legitimate
based on the interpretation of other norm systems. The spirit does not and cannot bind
outside of the boundaries of legal interpretation of statutory tax law, as that would mean
that the spirit of international tax law would exist beyond the concept of law. The spirit can
also not be narrower than the legal interpretation of the law, as the spirit is an inextricable
part of this interpretation. The letter and the spirit together form the rationalisation of the
law, and, as a result, it would be a logical fallacy to assume that the spirit of the law or the
letter of the law could or should be viewed separately. This means that the two cannot be
interpreted separately, while one still claims to have an accurate understanding of the law.
This would simply be an incomplete legal interpretation. It would be comparable to reading
only the first half of a novel and then claiming to precisely know how it ends.
It also means that the spirit of (international) tax law can be determined through normal
interpretive methods based on (all) existing legal sources. For example, a purposivist or
pluralist interpretive method would include modes of reasoning that (also) look to legal
history, the development of the political and legal moral discourse, moral values and
concepts such as justice and fairness.783 Raz’ concerns that courts would base their legal
reasoning on “sourceless considerations” that are not based in law is overstated.784 If there
are gaps between law and judicial jurisdiction, these gaps are bridged, firstly, by exhausting
all legal sources, interpretive methods and legal arguments in order to find a way to explain
the law to achieve an equitable outcome. Secondly, this argumentation can be supported by
general principles of law, and these can be both structural and ideological legal principles.785
Thirdly, if this would not suffice, a court can give a non-legal ideological principle legal status
to bridge the gap fully but only to an extent in which such an ideological principle would
enjoy sufficient institutional support. Moreover, such (non-legal) ideological principle must
be consistent with the existing legal standards and must connect as a coherent whole to
preserve the law’s inherent integrity. In short, the margins of freedom or variation outside
of (regular) legal sources would be relatively small even if the courts were to make use of
their competence to make new law. This also means that the spirit of international tax law is
not a very exotic concept. However, this might be a slightly unsatisfactory conclusion in light
of the entire discussion on corporate tax avoidance over the past decade or more.
If one accepts that the boundaries of what that is to be interpreted — which is that the
concept of law must include both the letter and spirit of the law simultaneously — then the
question is rather if how law is interpreted takes both the letter and the spirit sufficiently
783
See Sections 4. and 4.1.
784
Raz (1979), at p. 59.
785
See Sections 4.1.3. and 4.4.
178
into consideration. In other words, when it is claimed that the spirit of the law is violated,
perhaps this is, in fact, a manifestation of that the, thus far, commonly accepted
interpretation of tax law no longer satisfies the principles of justice that have come to be
widely held. As such, there is either a problem with the typical interpretation or with the
actual underlying legal rule (or even the legal system).786
Knowing that the dimensions of the spirit perfectly overlap with the concept of law, still
does not provide an answer as to what the dimensions of the concept of law are. However,
from such a perspective, one could argue that the spirit of international tax law could also
be defined by its movement — meaning how the discussion about the spirit can change the
interpretation of law even though the legal text stays the same — rather than its (static)
dimensions. It has been argued in the beginning of this study that the boundaries of vague
concepts could be seen as ranges rather than where a proposition could be both true and
false at the same time.787 At several points in the study, it has been pointed out that, for
instance, the OECD/G20 Inclusive Framework publications have changed the global
narrative on international tax and that it should be expected that this work will find more
and more institutional support, as it works its way into national legislation, academic
writing, special interest groups’ commentaries and judicial decisions. This means that,
insofar this narrative is built on non-legal arguments, these will likely find legal status, as this
process progresses.
Moreover, many have argued that legal measures to fight corporate tax avoidance and curb
harmful tax competition find their cause in changes in public opinion.788 Even though one
could argue that the direct causal relationship should be nuanced,789 the suggestion that a
change in public opinion might be an important step for the development in political
morality seems to be accurate.790 One could thus argue that the discussion on whether
something is in violation with the spirit is an indication of whether the currently accepted
political and doctrinal moral positions are under pressure and could be about to change. In
other words, unrest about the spirit of international tax law is a sign that the boundaries of
the legal rules governing international tax law — including on how taxing rights are
allocated — are about to shift.
Moreover, discussions about the spirit of international taw law are (almost) always meant as
a corrective mechanism. Commentators very rarely affirm that certain tax policies or
taxpayer behaviour are indeed in line with the spirit of international tax law or compliment
corporations with their adherence to the spirit. Therefore, such discussions mark the
moment in time where new (ideological) legal principles are being formed, while, at that
786
See Section 4.3.3.
787
See Section 2.1.
788
For instance, Picciotto, S. (2021) The METR, a Minimum Effective Tax Rate for multinationals. Tax Justice
Network; Becker, J. & Englisch, J. (2019). The German proposal for an effective minimum tax on multinational’s
profits. Tax Justice Network; González-Barreda, P. A. H. (2018). A Historical Analysis of the BEPS Action Plan:
Old Acquaintances, New Friends and the Need for a New Approach. Intertax, 46(4), at p. 278; Fung, S. (2017).
The Questionable Legitimacy of the OECD/G20 BEPS Project. Erasmus L. Rev., 10, 76, at p. 78; Dover, R. (2016).
Fixing financial plumbing: Tax, leaks and base erosion and profit shifting in Europe. The International
Spectator, 51(4), 40-50, at p. 44.
789
Lammers (2021), at p. 1011.
790
See Sections 9.4. and 9.5.
179
precise moment in time, these budding legal principles do not quite have enough
institutional support from the courts and policy makers to be considered legally enforceable
yet. However, it is an indication that the sell-by-date on the societal acceptance of an old
behaviour has been reached.
From this perspective, the spirit of international tax law could be equated with the fuzzy
boundary between law and non-law. The bandwidth where propositions are can be both
not-false and not-true. This is also the area where moral choice might still be seen as
personal preference rather than the widely held morality, as it is affirmed by courts and
lawmakers. However, at the same time, support for such a position can be observed in the
media as an indicator of the wider public opinion and/or in the (preliminary) political
discussions of national and international policymakers. In that sense, the event horizon or
policy frontier of international tax policymaking is very relevant in the development of the
spirit of international tax law.
This perspective that looks at (the interpretation of) law as a continuously developing
discourse rather than as a fixed quantity also means that the spirit could be said to expand
the concept of law ahead of the letter of the law. This timing difference might be negligible
when a legal provision does not actually need to be changed, as a legal rule might just be
interpreted in such a way that it includes the changed political morality. In those instances,
the spirit and letter change (almost) instantaneously after each other. This also makes
sense, as it was just argued that the spirit and the letter are one.
However, if legal provisions do need to be changed as a result of changes in political or

doctrinal morality, they might not be able to affect these legal changes at precisely the same
moment as the political morality change has garnered enough institutional support to be
considered the new norm. Technically, the spirit and the letter of the law then are both still
one, as the legal rule has not been changed yet. One could thus argue that (both the spirit
and the letter of) the law itself is no longer in line with political and doctrinal morality. This
perspective on law as a continuous developing discourse shows that the situation where
political and doctrinal morality have moved but where the necessary legal changes have yet
to be affected present a problematic situation. This is because the legal provision no longer
reflects the core of the concept of law. In other words, the legal provision would not yet
reflect this, as legal changes would be forthcoming.
Therefore, a better conclusion might be that, legally speaking, the expansion of the spirit of
international tax law does not exist. It is not unequivocally part of law (yet). At the same
time, there are strong indications that what is discussed as the spirit of the law today will be
made legal through policy institutions and courts within a relatively short time frame. As
such, one cannot simply say that one can ignore something as vague as the spirit of the law.
This is because there is always a lag time in law-making and even more so in tax
policymaking that require agreements within the OECD/G20 Inclusive Framework or the
European Commission. Both policy makers and taxpayers can count on the fact that, once
enough political momentum is reached with regard to moral preferences, these moral
preferences tend to turn into ideologies, and, after that, they turn into ideological legal
principles. Therefore, one is wise not to discount the spirit of international taw law, as the
spirit is the canary in the coalmine and the harbinger of legal change.
180
In fact, the expansion of the spirit of international tax law is the wrong term, as, technically
speaking, it is not the spirit of the law that is changing or expanding. In fact, it is the political
and doctrinal morality that is changing. It is this change in moral thinking that is effectively
referred to when it is asserted that corporations are not acting in accordance with the spirit
of the law and/or are not paying their fair share.
Such a view would also be in line with the principles of legality of Fuller.791 In this regard, if
one were to include the change of political or doctrinal morality in the concept of law
(before the underlying rules have been changed), this would mean that such a practice
would be in breach of at least four of Fuller’s eight principles of legality, i.e., (i) that rules
have to be knowable, (ii) that rules must only affect future behaviour, (iii) that rules must
make up a consistent system, and (iv) that rules must be administered in line with their
apparent meaning. Also, this approach fits with Kelsen’s claim that a legal order can
incorporate moral rules and that an individual from his personal viewpoint can regard both
legal and non-legal norms as valid. In fact, from an individual’s perspective, both come
together as their personal normative system. From the point of view of legal science,
however, only the law is valid, as both perspectives mean that non-legal arguments first
need to be made legal through institutional support to become legally relevant.792 At the
same time, the changing political or doctrinal morality can be a reason for some to no
longer see the legal rule as fully law, as Finnis would argue, as it no longer enjoys the (full)
support of political or doctrinal morality.793 While this might not be reason enough to
dismiss the legal validity of the rule and/or assume that the changed political morality has
any legal validity before the underlying legal rules have changed, it might be a reason to
accept—as Hart puts it—that a representation of legal positivistic thinking that concludes
that also unfair rules are still law to be obeyed is an overly simplistic one.794
The main point is that the change in political morality after a legal rule is enacted cannot be
ignored, but, for this change in moral thinking to have (full) legal effect, it must be made
legal first. Furthermore, even though this change in moral thinking is formally speaking not
the same as (a change in) the spirit of the law, the meaning of the colloquial use of the spirit
of international tax law is this changed moral thinking that is not (fully) part of the concept
of law yet. Paradoxically, therefore, the colloquial use of the spirit of international law, in
fact, indicates precisely where the spirit of international tax law is not (yet). It is the
boundary between law and non-law, where ideological principles are transformed from
non-legal into legal arguments.
Consequently, if the use of the term the spirit of international tax law should be equated
with the change in moral thinking in a society, then the act of violating the spirit of
international tax law should also be viewed as behaviour that actively seeks to ignore the
change in the societal moral discourse.795 Much like Fuller’s view that law is not something
that is but something that you do, one could also view the act of not paying one’s fair share
791
792
Raz (1979), at pp. 143-144.
793
794
795
This type of behaviour can be found in both taxpayers and policymakers.
181
or implementing predatory tax policies not as something that is but as something that one
does. This requires action with the intent to utilise, specifically those elements of moral
thinking that are not sufficiently covered—in the sense that they are neither explicitly
confirmed nor denied—by current legal sources, including legal principles of both national
and international tax law. Or conversely, it requires action with the intent to promote the
existence of self-evident truths that govern legal and/or tax policy discussions that lead to
outcomes that might uphold the status-quo, while the moral thinking might be changing
with regard to accepting this status-quo as the desirable outcome.
182
Part II
Discourse Analysis
183
7 Introduction
The aim of Part I of this study has been to define the spirit of international tax law.
Throughout the search for this definition, the boundary between law and non-law has been
a central point of discussion. It has been argued that determining where the boundary
between law and non-law lies is important, since no legal rights and duties can arise except
under the authority of law.796 Given this important tenet, Part I has concluded that the
definition of the spirit of international tax law can be viewed in two ways:
Firstly, it is possible to define the spirit of international tax law based on the concept of law
as it exists as a fixed quantity. This approach leads to the conclusion that the spirit of
international tax law cannot be defined as something stand-alone, as this would be a logical
fallacy. The letter and the spirit of the law are inextricably connected, and these exist in
symbiosis with one another. This means that, in the legal sense, the spirit of international
tax law can be determined through normal interpretive methods based on (all) existing legal
sources. There is no buffer zone between what is legal as based on interpretation using all
available legal sources and what would be considered unlawful as based on the
interpretation of some other set of norms. The spirit does not and cannot bind outside of
the boundaries of legal interpretation of statutory tax law, as that would mean that the
spirit of international tax law would exist beyond the concept of law.
Secondly, it is possible to define the spirit of international tax law based on the concept of
law as a continuous discourse. This approach leads to the conclusion that the spirit of
international tax law should be defined as the fuzzy boundary between law and non-law.
This is where new (ideological) legal principles are being formed, as political and doctrinal
morality are changing, even though at that precise moment in time these budding legal
principles do not quite have enough institutional support to be considered legally
enforceable yet. Therefore, the colloquial use of the spirit of international tax law is
somewhat confusing, as it actually refers to the change in political morality that is not yet
encompassed by the concept of law. For this change in moral thinking to be part of the spirit
of international tax law and, thus, have full legal effect, the ideological principles
796
184
underpinning the change in political morality must first be transformed from non-legal into
legal arguments; they have to be made legal.
This second perspective, which looks at (the interpretation of) law as a continuously
developing discourse rather than as a fixed quantity, means that the discussion on the spirit
of international tax law is a sign that the boundaries of the legal rules governing
international tax law are about to shift. To this, it is clear that there has not been a shortage
in discussion regarding international (corporate) taxation.
Legal comparative studies also show that, very often, it is not so much the legal rules that
are at the heart of the comparison but rather the legal discourse. This means that the way in
which legal professionals and society at large discuss and perceive legal rules is as much part
of the legal system as the rules these systems are made up of.797
This means that a discourse analysis is the best approach to examine the change in the use
of the concept of the spirit of international tax law by different stakeholders, because it lays
bare how each actor views (the changes in) political and doctrinal morality as well as their
notions on where the applicable law itself is or is not in line with this changed political and
doctrinal morality. In the discourse analysis in Part II, the term the spirit of international tax
law is thus considered in its colloquial use, where it refers to the discourse on changing
political and doctrinal morality.
Mostly, the spirit of international tax law is not debated outright by the different
stakeholders in the debate. Most of the public discussion on (corporate) tax avoidance and
the international tax system directly concerns questions of the political and doctrinal
morality in international tax law. The discourse analysis, therefore, has a particular focus on
these issues. The intention is to do this without looking at the actual argumentation of the
different actors in the debate. The discourse analysis aims to evaluate how different actors
speak about the subject and how this relates to the development of the legal discourse in
international tax law. The intention is not to evaluate if they are right or wrong in the way
they speak or in the argumentation they utilise. When observations are made regarding the
content, this is not meant to criticise the actors in the debate. Such comments aim to
provide a context that should be helpful for basing conclusions on how to interpret the
direction of the discourse in general or of a specific group of actors participating in the
discourse.
797
Van Hoecke & Warrington. (1998), at p. 495.
185
8 Analysis of Official OECD and EU Publications
In section 5.4.1, several major developments were very briefly described, which show that
states are considering the combined interests of the global community more and more
when designing national and international tax policies. These developments are (i) increased
tax transparency through international exchange of tax information, (ii) the OECD project on
harmful tax competition, (iii) the OECD/G20 Base Erosion and Profit Shifting Project, and (iv)
the OECD/G20 Inclusive Framework Agreement on the Two-Pillar Solution addressing the
challenges of the digitalisation of the economy.798 In this section, the official publications of
the OECD and the EU will be examined with the aim of performing a discourse analysis. To
structure the analysis, the OECD and the EU publications will be examined following those
same developments, firstly, in order to understand these developments and, secondly, to
understand how they relate to one another.
8.1 International Exchange of Information

The first development is the rise of the exchange of information for tax purposes and tax
transparency. A general starting point in the discussion on international exchange of
information can be found in the OECD Recommendation of the Council of 21st September
1977 concerning tax avoidance and evasion.799 The Recommendation states the
following:800
[C]onsidering that tax avoidance and evasion are contrary to fiscal equity, have
serious budgetary effects and distort international competition;
Noting that tax avoidance and evasion schemes involving international
transactions have become increasingly complex and more difficult to detect;
Considering that effective action against such schemes requires strengthened co-
operation between oecd member countries;
798
See section 5.4.1.
799
OECD, Recommendation of the Council of 21st September 1977 concerning tax avoidance and evasion,
OECD/Legal/0158.
800
Such a recommendation is not binding for the OECD member countries. It does, however, represent a
political commitment and entails the expectation that the OECD member countries will do their best to
implement the content of the recommendation.
186
Recommends governments of member countries:
i) to strengthen, where necessary, their legal, regulatory or administrative

provisions and their powers of investigation for the detection and prevention of
tax avoidance and evasion, with regard to both their domestic and international
aspects, and to exchange experiences with respect to such action;
ii) to facilitate, improve and extend exchanges of information between their
national tax administrations, with a view to combatting tax avoidance and
evasion, notably by making more intensive use of international conventions or
instruments in force and by seeking new arrangements of a bilateral or
multilateral character, with due regard to the provision of adequate safeguards
for taxpayers;
iii) to exchange experiences on a continuing basis on tax avoidance and evasion
practices, on techniques for detecting and preventing them and on ways and
means of improving tax compliance in general.
Instructs the committee on fiscal affairs to pursue its work with a view to
facilitating the achievement of the above aims and to submit to the council, as
appropriate, specific proposals for increased co-operation between member
countries in this field.801
The text of this Recommendation shows that tax avoidance and evasion were thought to be
problematic from an equity perspective to a similar extent as considerations of a budgetary
nature as well as the distortion of fair competition between economic actors.
8.1.1 OECD Standard Magnetic Format
The 1977 Recommendation led to the development of an OECD standard magnetic format
for the exchange of information in 1992.802 In 1997, this standard was revised and the
Recommendation on the Use of the Revised OECD Standard Magnetic Format for Automatic
Exchange of Information was adopted by the OECD Council on 13 March. 803 The (revised)
OECD Standard Magnetic Format facilitated the exchanges of information between the
OECD Member countries.
The 1997 Recommendation was repealed in 2014 and was thus replaced by the OECD
Recommendation on the Standard for Automatic Exchange of Financial Account Information
in Tax Matters.804 Interestingly, the 2014 Recommendation no longer contains
considerations of fiscal equity for the exchange of information. It states that “international
801
OECD. (1977). Recommendation of the Council of 21st September 1977 concerning tax avoidance and
evasion, OECD/Legal/0158.
802
OECD. (1992a) Recommendation of the Council on the Use of the OECD Standard Magnetic Format for
Automatic Exchange of Information. OECD/Legal/0270.
803
OECD. (1997). Recommendation of the Council on the Use of the Revised OECD Standard Magnetic Format
for Automatic Exchange of Information. OECD/LEGAL/0288.
804
OECD. (2014a). Recommendation of the council on the Standard for Automatic Exchange of Financial
Account Information in Tax Matters. OECD/Legal/0407.
187
cooperation is critical in the fight against tax fraud and tax evasion and in ensuring tax
compliance” and that “implementation of a single standard by all financial centres will
ensure a level playing field.”805 The budgetary and distortion of fair competition concerns,
therefore, remain as considerations, while equity has vanished from the text as a separate
concern.806
8.1.2 Model Agreement on Exchange of Information on Tax Matters
In 2002, the Model Agreement on Exchange of Information was released by the OECD.807
The Model Agreement is not a binding instrument. However, a large number of bilateral Tax
Information Exchange Agreements (TIEAs) have been based on this Model. As such, the
Model Agreement became the international standard of effective exchange of information
with the aim to promote international cooperation about the exchange of information in tax
matters. The Model Agreement was developed by the OECD Global Forum Working Group
on Effective Exchange of Information. This Working Group is part of the Global Forum on
Transparency and Exchange of Information for Tax Purposes, which consists of 163
members, which are all states, as well as 21 observing international organisations.808 The
Model Agreement was a spin-off of the work that the OECD did on addressing harmful tax
practices, which is further discussed in the next section of this study.809
In 2015, the OECD approved a Model Protocol to the Agreement. The Model Protocol is
meant to let jurisdictions include the automatic and spontaneous exchange of information
provisions in a new TIEA. In addition, jurisdictions will further be able to extend the scope of
their existing TIEAs to also cover the automatic and/or spontaneous exchange of
information. In doing so, jurisdictions are thus able to base a bilateral competent authority
agreement on a TIEA for the automatic exchange of information in accordance with
the Common Reporting Standard or the automatic exchange of country-by-country
reports.810
8.1.3 The U.S. Foreign Account Tax Compliance Act
In 2010, the United States enacted the Foreign Account Tax Compliance Act (FATCA) after
the banking scandal involving the UBS bank had revealed that U.S. citizens failed to report
their income on savings abroad in their U.S. tax declarations. To curb this form of tax
evasion by U.S. residents, the United States required financial institutions across the world
to report information on the foreign assets held by their U.S. account holders (or be subject
805
OECD. (2014a). Recommendation of the council on the Standard for Automatic Exchange of Financial
Account Information in Tax Matters. OECD/Legal/0407.
806
That is to say that the term ‘equity’ can still be found in the Recommendation, but it is only used in the
financial sense. Moreover, fair competition could also be understood as considerations of inter-taxpayer
equity; however, in this case, it appears to refer to the level playing field within the financial sector.
807
OECD (2002b). Model Agreement on Exchange of Information in Tax Matters (Model TIEA), OECD Publishing.
808
See a comprehensive overview of all the members of the Global Forum on Transparency and the Exchange
of Information for Tax Purposes https://www.oecd.org/tax/transparency/who-we-are/members/.
809
See section 8.2.
810
Insofar it is not (yet) possible to automatically exchange information under a relevant Multilateral
Competent Authority Agreement.
188
to a 30% withholding tax) to the United States Internal Revenue Service (IRS).811 The HIRE
Act also requires U.S. persons to directly report information on their foreign financial
accounts and foreign assets to the IRS if these assets meet certain criteria.812
FATCA requires foreign financial institutions to report the information about the financial
accounts held by U.S. taxpayers to the IRS. For this purpose, the financial institutions are
encouraged to directly register with the IRS to comply with the FATCA regulations. However,
because it was necessary to change domestic legislation to comply with FATCA in several
countries as well as several countries wanting reciprocity in the information exchange, two
FATCA Intergovernmental Agreements (IGAs) were developed.813 In 2012, the five biggest
European countries agreed with the United States on a reciprocal exchange of FATCA
information under the Intergovernmental Agreements (the IGAs).814 Currently, 113 IGAs are
in place with just under 100 including (some level of) reciprocity with regard to the
automatic exchange of information. Consequently, financial institutions in countries with an
IGA in place can report the required information to their own government rather than
having to report to the IRS directly.
8.1.4 Automatic Exchange of Information at OECD
Up until this point, the discussion on automatic exchange of information (AEOI) at the level
of the OECD was primarily aimed at deterring and identifying offshore tax evasion by
holding financial assets abroad. It calls on jurisdictions to obtain information from their
financial institutions and automatically exchange that information with other jurisdictions
on an annual basis.815
In 2012, the OECD presented the report Automatic Exchange of Information: What It Is, How
It Works, Benefits, What Remains to Be Done. This 2012 Report on the automatic exchange
of tax information laid the foundation for the systematic and periodic transmission of ‘bulk’
taxpayer information by the source country to the residence country concerning various
categories of income, including dividends, interests, royalties, salaries, pensions, etc.816 The
Report concerns tax information that would be routinely collected by a source country. This
information could then be consolidated by the relevant countries of residence,
subsequently, to be sent to the tax authorities of each country of residence where it could
811
See the Foreign Account Tax Compliance Act (FATCA), as part of the Hiring Incentives to Restore
Employment (HIRE) Act. Retrieved from https://www.govinfo.gov/content/pkg/PLAW-111publ147/pdf/PLAW-
111publ147.pdf#page=27.
812
See IRS, Foreign Account Tax Compliance Act (FATCA). Retrieved from
https://www.irs.gov/businesses/corporations/foreign-account-tax-compliance-act-
fatca#:~:text=The%20Foreign%20Account%20Tax%20Compliance,to%20withholding%20on%20withholdable%
20payments.
813
Knobel, A., & Meinzer, M. (2014). 'The End of Bank Secrecy'? Bridging the Gap to Effective Automatic
Information Exchange. Available at SSRN 2943979, at p. 10.
814
The United Kingdom, France, Spain, Italy and Germany.
815
Compare OECD. (2013c). A Step Change in Tax Transparency, OECD report for the G8 Summit Lough Erne,
Eniskillen, June 2013. OECD Publishing, at para. 10; and OECD. Automatic Exchange Portal. What is the CRS.
Retrieved from https://www.oecd.org/tax/automatic-exchange/common-reporting-standard/.
816
OECD. (2012b). Automatic Exchange of Information: What It Is, How It Works, Benefits, What Remains to Be
Done. OECD Publishing, at p. 7.
189
be used to match the information already available from the residence country. As such,
automatic information exchange was positioned much more as a tool to assist in improving
general compliance than targeting concrete tax evasion problems.
The 2012 Report also shows that many separate automatic information exchange initiatives
and agreements already existed within the EU and on a bilateral basis and that their number
was increasing. For instance, Denmark exchanges information automatically with as much as
70 countries.817 In addition, as part of its benefits, it is argued that automatic exchange of
information provides information timelier, has deterrent effects, and increases voluntary
compliance. Moreover, it is further mentioned how this might also help to “increase tax
revenues and thus lead to fairness – ensuring that all taxpayers pay their fair share of tax in
the right place at the right time.”818 Therefore, the OECD has decided to identify some of the
main success factors for an effective model for automatic information exchange. In addition,
the OECD identified that this area could benefit from more international coordination to
better achieve these successes.
This international coordination should include the providing of a sound legal basis and
measures for how to safeguard the confidentiality of the shared information. As part of the
OECD project on automatic exchange of information, the OECD put out a separate report in
2012 that focused on questions of the legal basis for the automatic exchange of information
across borders as well as the need for adequate protection in order for the shared
information to remain confidential.819 This report provided the best practices to ensure
confidentiality, and it underlined that, essentially, all OECD member countries already have
national rules in place to safeguard the confidentiality of taxpayer information when in the
hands of the government.
The 2012 Report was endorsed by the 2012 G20 summit in the Government Leaders’
Declaration:820
In the tax area, we reiterate our commitment to strengthen transparency and

comprehensive exchange of information. […] We welcome the OECD report on the
practice of automatic information exchange, where we will continue to lead by
example in implementing this practice. We call on countries to join this growing
practice as appropriate and strongly encourage all jurisdictions to sign the
Multilateral Convention on Mutual Administrative Assistance.821
In 2013, the OECD published a report for the G8 summit in June to deliver a standardised,
secure and cost-effective model of bilateral automatic exchange of information for the
multilateral context.822 This report built on the 2012 Report,823 and it stated that the key
817
OECD (2012b), at p. 15.
818
OECD (2012b), at p. 19.
819
OECD. (2012c). Keeping it Safe, The OECD Guide on the Protection of Confidentiality or Information
Exchanged for Tax Purposes. OECD Publishing.
820
G20. (2012). Leaders Declaration Los Cabos Mexico 2012, G20 Summit Documents, 18-19 June 2012.
821
G20 (2012), at para. 48.
822
OECD (2013c).
823
OECD (2012b).
190
features of an effective model should include an international agreement on a common
scope for the information to be exchanged, a common legal basis and common rules for
confidentiality,824 and a common plan of implementation ensuring consistency across
borders.
In this regard, the G8 Lough Erne Final Communiqué of 18 June 2013 expressed that the G8
“commit[s] to establish the automatic exchange of information between tax authorities as
the new global standard, and will work with the OECD to develop rapidly a multilateral
model which will make it easier for governments to find and punish tax evaders. On tax
avoidance, we support the OECD’s work to tackle base erosion and profit shifting. We will
work to create a common template for multinationals to report to tax authorities where they
make their profits and pay their taxes across the world.”825
At the following G20 Summit in September 2013, the G20 Leaders called upon the OECD to
develop a “single global standard for automatic exchange of information by February 2014
and to finalizing technical modalities of effective automatic exchange by mid-2014.”826 The
Common Reporting Standard (CRS) was developed in response to the G20 request and was
approved by the OECD Council on 15 July 2014.827 Subsequently, CRS documents were
further updated in 2017.828
CRS consists of the following elements:

1. the Common Reporting Standard (CRS) that contains the due diligence rules and
reporting procedures for financial institutions to follow;
2. the Model Competent Authority Agreement (CAA) that specifies the CRS information
to be exchanged and forms the international legal basis for the automatic exchange
between jurisdictions;
3. the Commentaries that illustrate and interpret the CRS and the CAA; and
4. guidance on technical solutions, standards in relation to data safeguards as well as
confidentiality, transmission, and encryption.
By the end of 2014, over 50 jurisdictions signed the Multilateral Competent Authority
Agreement, which outlines the rules and conditions for exchanging information based on
CRS.829 In addition, this fixed Article 6 of the Multilateral Convention on Mutual
Administrative Assistance in Tax Matters as the legal basis for the automatic exchanged of
824
Based on the OECD, & Council of Europe. (2011). The Multilateral Convention on Mutual Administrative
Assistance in Tax Matters: Amended by the 2010 Protocol, OECD Publishing.
825
G8. (2013). Lough Erne Final Communiqué, G8 Summit, 18 June 2013, at para 3.
826
G20. (2013). Leaders Declaration Saint-Petersburg 2013, G20 Summit Documents, 5-6 September 2013, at
para 51.
827
OECD. (2014b). Standard for Automatic Exchange of Financial Account Information in Tax Matters. OECD
Publishing; OECD. (2015n). Standard for Automatic Exchange of Financial Information in Tax Matters -
Implementation Handbook. OECD Publishing.
828
OECD. (2017b). Standard for Automatic Exchange of Financial Account Information in Tax Matters, Second
Edition. OECD Publishing; OECD. (2018a). Standard for Automatic Exchange of Financial Information in Tax
Matters - Implementation Handbook - Second Edition. OECD Publishing.
829
OECD. (2014c). Multilateral Competent Authority Agreement. Retrieved from
https://www.oecd.org/tax/automatic-exchange/international-framework-for-the-crs/multilateral-competent-
authority-agreement.pdf.
191
information.830 Over 100 jurisdictions, including all the major international financial centres,
have started the automatic exchange of information under the CRS between 2017 and
2019. As of October 2021, there are over 4500 bilateral exchange relationships activated in
more than 110 jurisdictions.
The focus of automatic exchange of information at the OECD level, therefore, has been on
offshore tax evasion and “vast amounts of money that are held offshore [and] taxpayers fail
to comply with tax obligations in their home country.”831 This means that automatic
exchange of information has been mostly about enforcing the law, as it is clear that the law
is violated by tax evasion.832 As such, it therefore is less about situations where one might
consider the question of whether the behaviour is legitimate or that it might be in conflict
with a changing political morality that is not (yet) made legal. At the same time, the G8 Final
Communiqué shows that, from 2013 and forward, the reporting requirements for
multinationals to curb international tax avoidance—which would also be automatically
exchanged—are considered a separate area of work by the OECD. This particular area is part
of the BEPS project, which is discussed in more detail further on.833
8.1.5 Automatic Exchange of Information in the EU
The fundamental freedoms of the EU Internal Market allow EU citizens and businesses to
move freely – i.e., without tax consequences – operate and invest in every EU Member
State. However, as direct tax systems in the EU are not harmonised, there is a clear need for
administrative assistance between tax authorities in EU Member States to help to “ensure
that all taxpayers pay their fair share of the tax burden, irrespective of where they work,
retire, hold a bank account and invest or do business.”834
8.1.5.1 Mutual Assistance Directive
This need was already identified in 1977 with the Mutual Assistance Directive.835 In the
considerations of this Directive, it says that “practices of tax evasion and tax avoidance
extending across the frontiers of Member States lead to budgetary losses, violations of the
principle of fair taxation and are liable to bring about distortions of capital movements and
of conditions of competition.”836 For this reason, the collaboration between EU tax
authorities should be strengthened. The Directive, therefore, enables Member States to
request information from other Member States.837 Member States should spontaneously
exchange information in those cases where there appears to be an artificial transfer of
830
OECD & Council of Europe (2011), at p. 14.
831
OECD (2013c), at p. 5.
832
The real issue here is that there is need for better access to information to shed light on the illegal
behaviour.
833
See section 8.3.
834
See European Commission, Administrative cooperation in (direct) taxation in the EU. Retrieved from
https://ec.europa.eu/taxation_customs/taxation-1/tax-co-operation-and-control/general-overview/enhanced-
administrative-cooperation-field-direct-taxation_en, (last accessed 28-04-2022).
835
Council Directive 77/799/EEC. On mutual assistance by the competent authorities of the Member States in
the field of direct taxation. Retrieved from http://data.europa.eu/eli/dir/1977/799/oj.
836
Council Directive 77/799/EEC, consideration (5).
837
Council Directive 77/799/EEC, Article 2.
192
profits between companies across EU borders or in cases where there is an interposed
company in a third country that might be used for avoiding or evading taxes in an EU
Member State.838 The Directive also mentions the possibility for an automatic exchange of
information, but it leaves this option up to the Member States to apply or not.839
8.1.5.2 The EU Savings Directive
The first operational system for automatic exchange of information for tax purposes in the
world followed from the 2003 EU Savings Directive.840 This Directive entered into force in
2005 and required EU Member States automatically provided information on interests paid
to a beneficial owner that was a resident in another EU Member State to this other EU
member state.841 Article 10 of the Directive, however, allowed Belgium, Austria and
Luxembourg to apply a withholding tax on interests paid at a rate progressing to 35%
instead of having to automatically exchange the information. This derogation would apply
for the duration of the transition period, which effectively ended in 2014.842
From the consideration of the Savings Directive, it is clear that the preventing of tax evasion
by primarily individuals was its main objective. Since there was no coordination between
national tax systems for taxations of savings income, residents of an EU Member State could
easily evade effective taxation of savings income. The Commission considered that this led
to distortions in capital movements between EU Member States that were incompatible
with the EU Internal Market, and thus it should be solved by the automatic exchange of
information between EU Member States.843
8.1.5.3 Directives on Administrative Cooperation (DAC1-DAC7)
In 2011, the Mutual Assistance Directive was replaced with the Directive on Administrative
Cooperation (DAC).844 In the considerations of the latter Directive, it is mentioned that the
Member States’ need for mutual assistance in the field of taxation is growing rapidly in the
globalised era. Globalisation has led to an increased mobility for taxpayers, an increased
number of cross-border transactions as well as the development and application of
international financial instruments. Therefore, the Directive claims that, without further
administrative cooperation, Member States can no longer manage their internal tax
systems. The scope of the Directive is thus expanded to include “all taxes of any kind” within
838
Council Directive 77/799/EEC, Article 4.
839
Council Directive 77/799/EEC, Article 3, and Article 9.
840
Council Directive 2003/48/EC. On taxation of savings income in the form of interest payments. Retrieved
from http://data.europa.eu/eli/dir/2011/16/2020-07-01.
841
Council Directive 2003/48/EC, Article 8 and Article 9.
842
With the adoption of Council Directive 2014/48/EU. On taxation of savings income in the form of interest
payments. Retrieved from http://data.europa.eu/eli/dir/2014/48/oj.
843
Parallel to the Savings Directive, the European Commission also entered into savings taxation agreements
with 5 third countries: Switzerland (2004 and 2015), Andorra (2004 and 2016), Monaco (2004 and 2016),
Lichtenstein (2006 and 2015) and San Marino (2004 and 2016).
844
Council Directive 2011/16/EU. On administrative cooperation in the field of taxation. Retrieved from
http://data.europa.eu/eli/dir/2011/16/2020-07-01.
193
the EU.845 Moreover, the Directive sets more precise rules governing the exchange of
information with five categories for which mandatory automatic exchanges of information
should apply.846 Moreover, the Member States have to provide reports to the Commission
on the volume of automatic exchanges.847 In addition, the Directive has opened up the
possibility for Member States to engage in joint audits.848 Finally, the Directive also has set
new rules designed to prevent ‘fishing expeditions’ by Member States849 as well as further
rules to protect taxpayers’ rights.850
In December 2014, the DAC was amended for the first time (DAC2).851 The scope for
mandatory automatic exchanges of information was broadened to include financial account
information to prevent tax fraud and evasion with regard to unreported and untaxed
income.852 With DAC2, the EU Savings Directive was repealed, and instead the EU
framework for the OECD Common Reporting Standard CRS was introduced.853 Additionally,
DAC2 covered the (upcoming) IGAs between Member States and the United States due to
FATCA.854 In 2016, DAC5 subsequently ensured that the tax authorities could access
beneficial ownership information as collected by financial institutions as part of their
customer-due-diligence procedures under the anti-money laundering framework.855
The second amendment to the DAC was adopted in December 2015 (DAC3).856 This
amendment was brought about largely due to the LuxLeaks scandal of November 2014,857
and it was the first step in the Commission’s Tax Transparency Package that was presented
in March 2015.858 The amendment includes cross-border tax rulings and advance pricing
agreements as categories of information that must be exchanged automatically between tax
authorities. DAC3 considers that “the challenges posed by cross-border tax avoidance,
845
Council Directive 2011/16/EU, Article 2. This however excludes VAT, excise duties and customs duties as
these are already covered by other EU provision of administrative cooperation. Also, compulsory social
security contributions are out of scope of the DAC.
846
Council Directive 2011/16/EU, Article 8. Automatic exchange of information is mandatory as of 1 January
2014 the categories (i) income from employment, (ii) director’s fees, (iii) life insurance products, (iv) pensions,
and (v) ownership of and income from immovable property.
847
Council Directive 2011/16/EU, Article 8(4).
848
Council Directive 2011/16/EU, Article 12.
849
850
851
Council Directive 2014/107/EU. On mandatory automatic exchange of information in the field of taxation.
Retrieved from http://data.europa.eu/eli/dir/2014/107/oj.
852
European Commission. (2019). Commission Staff Working Document, Evaluation of the Council Directive
2011/16/EU on administrative cooperation in the field of taxation, SWD(2019)327 Final, 12 September 2019,
at p. 10.
853
Council Directive 2014/107/EU, Article 1(2) and Article 1(3).
854
See Section 8.1.3.
855
Council Directive (EU) 2016/2258 on access to anti-money-laundering information by tax authorities.
Retrieved from http://data.europa.eu/eli/dir/2016/2258/oj; Directive (EU) 2015/849. On the prevention of the
use of the financial system for the purposes of money laundering or terrorist financing. Retrieved from
856
Council Directive (EU) 2015/2376. On mandatory exchange of information in the field of taxation. Retrieved
from http://data.europa.eu/eli/dir/2015/2376/oj.
857
European Commission (2019), at p. 10; also see section 9.4.2. for further details on the LuxLeaks scandal.
858
European Commission. (2015c). Communication on tax transparency to fight tax evasion and avoidance,
COM(2015) 136 final, 18 March 2015.
194
aggressive tax planning and harmful tax competition has increased considerably and has
become a major focus of concern within the Union and on a global level. […] [Tax] [r]ulings
concerning tax-driven structures have, in certain cases, led to low levels of taxation of
artificially high levels of income in the country issuing […] the advance ruling […]. An increase
in transparency is therefore urgently needed.”859
With DAC3, the language and tone of voice in the Directive have undergone a significant
change. This reflected the reinforced efforts of the Commission in this area, as stated in the
Tax Transparency Package.860 Here, the focus was firstly on tax evasion through unreported
income by individuals. Today, it very much also includes tax avoidance through state-
sponsored incentives that are utilised by corporations. Moreover, by directly borrowing
terms and concepts from the ongoing work of the OECD/G20 BEPS Project, one can also
observe how the efforts of the OECD are finding their way into legal sources, even though
there was no firm agreement within the OECD. Moreover, the precise scope of such terms
and concepts, at the time that DAC3 was adopted, was not fully fleshed out yet.861 The
effect of this was two-fold. On the one hand, this invited discussions in which elements of
political morality should and should not be considered to be included as part of the
Directive. On the other hand, the considerations in the Directive on the scope and
conditions helped to define the new boundaries of the (spirit of the) Directive more closely,
and, in doing so, they minimise the range of propositions for which the boundaries might
still be fuzzy. In other words, this uncertainty concerning the scope is conducive to the
iterative process of developing new conceptual international tax rules both in terms of what
the rules are and in terms of how they should be interpreted.862
DAC4 was adopted in May 2016863 and extended the categories for which mandatory
automatic exchanges applied to also include country-by-country reports of multinational
corporations.864 Moreover, the Directive also sets forth what should be included in these
country-by-country reports. In this regard, the EU closely follows the OECD
recommendation in the BEPS 2015 Final Report on Action 13 on transfer pricing
documentation and country-by-country reporting.865
The language and tone of voice in DAC4 developed more or less in step with how the
discussion on tax avoidance in the media changed in the same period.866 Where in DAC3,
the main concern was directed primarily at the possible loss of revenue of tax avoidance
and aggressive tax planning practices, DAC4 appeared to consider possible revenue loss as
something that is of secondary importance, as inter-taxpayer equity, with regard to a level-
859
Council Directive (EU) 2015/2376, at consideration (1).
860
European Commission (2015c), at p. 2.
861
Compare section 5.3.2.
862
Also see in this regard Valderrama (2019), at p. 466; Geringer, S. (2022). Dissemination of tax good
governance standards by the EU and the OECD: A comparative analysis of changes in treatment and
tone. Available at SSRN 4138157, at p. 14; Sections 4.2.1.3 and 6.
863
Council Directive (EU) 2016/881 on mandatory automatic exchange of information in the field of taxation.
Retrieved from http://data.europa.eu/eli/dir/2016/881/oj.
864
Council Directive (EU) 2016/881, Article 1(1).
865
Council Directive (EU) 2016/881, Article 1(2); OECD (2015k).
866
See Section 9.4.3.
195
playing field, firstly was considered a policy concern. For example, the second consideration
of DAC4 states:
As multinational enterprise groups (MNE Groups) are active in different countries,

they have the possibility of engaging in aggressive tax-planning practices that are not
available for domestic companies. When MNE Groups do so, purely domestic
companies, normally small and medium-sized enterprises (SMEs), may be particularly
affected, as their tax burden is higher than that of MNE Groups. On the other hand,
all Member States may suffer revenue losses and there is the risk of competition to
attract MNE Groups by offering them further tax benefits.867
The third consideration of DAC4 pointed to the benefits of automatic exchange of

information of country-by country reporting. It states that “[the country-by-country]
information will enable the tax authorities to react to harmful tax practices by making
changes in legislation or by undertaking adequate risks assessments and tax audits, and to
identify whether companies have engaged in practices that have effect of artificially shifting
substantial amounts of income into tax-advantaged environments.”868 The language in the
Directive seems to depart somewhat from the OECD work in this respect. Firstly, the OECD
points out that the country-by-country information is helpful for “high-level transfer pricing
risk assessment purposes [and] evaluating other BEPS related risks,” but that this data does
not constitute conclusive evidence of a problem.869 DAC4 and its underlying documents did
not speak with the same level of clarity as the OECD on this point.
DAC6 was adopted in May 2018870 and aimed to implement the mandatory disclosure rules,
as it had been recommended in the 2015 BEPS Action 12 Final Report.871 The overall aim of
DAC6 is to have access to information on tax structures that potentially constitute harmful
tax practices and to discourage tax advisors and other intermediaries from designing,
marketing, and implementing such potential harmful tax structures. Interestingly, DAC6
does not include inter-taxpayer equity in its considerations at all. This is in spite of the fact
that much of the same reasoning can be found in the DAC4 considerations, which also seem
to apply with regard to the potentially harmful tax practices that are to be reported on.
Instead, it appears that tax revenue concerns are the primary reason (again) to amend
Directive 2011/16/EU. For, it is considered that “Member States find it increasingly difficult
to protect their national tax bases from erosion as tax-planning structures have evolved [to]
take advantage of the increased mobility of both capital and persons within the internal
market.”872 The consequent reductions in tax revenue, according to DAC6, hinder Member
States in applying growth-friendly tax policies.873
867
Council Directive (EU) 2016/881, consideration (2).
868
869
OECD (2015k), at para. 25.
870
Council Directive (EU) 2018/822. On mandatory automatic exchange of information in the field of taxation
to reportable cross border arrangements. Retrieved from http://data.europa.eu/eli/dir/2018/822/oj.
871
OECD (2015j).
872
873
This could be understood as to refer to inter-taxpayer equity. If so, it is not clear why DAC6 takes does not
include the same or similar more explicit consideration to inter-taxpayer equity, as DAC4 does.
196
Furthermore, the use of terms, especially, in the considerations of DAC6 seemed once again
to be more strongly worded than the previous of the DAC iterations. To illustrate, in the
considerations of DAC1 through DAC4, terms such as ‘tax avoidance’ or ‘aggressive tax
planning’ typically only appear once or twice,874 however, the considerations of DAC6
mention the term ‘tax avoidance’ eight times and ‘aggressive tax-planning practises’
eighteen times. Likely, this is partly due to the subject matter that DAC6 covers, but it
appears that such a stronger wording is a more common phenomenon from about 2016 and
onwards than it was in earlier years.875
Finally, DAC7 was adopted in March 2021.876 This amendment to Directive 2011/16/EU
expanded the categories of information that were to be exchanged automatically once
more. The aim of DAC7 was to ensure that those who engage in (cross-border) commercial
activities through the intermediation of a digital platform pay the correct amount in income
taxes and value-added taxes. To this end, DAC7 requires digital platform operators to report
on the commercial activities of all sellers who are active on their platform, and this
information is then to be exchanged automatically to other Member States. For reasons of a
level playing field, and to prevent that DAC7 would easily be sidestepped, these
requirements also extended to platform operators that perform commercial activities in the
EU but have no physical presence in one of the Member States.877 The DAC7 rules are, to a
large extent, equal to – or at least compatible with – the OECD Model by Platform Operators
with respect to Sellers in the Sharing and Gig Economy (hereinafter: OECD 2020 Model
Rules).878 This connection between the OECD 2020 Model Rules and DAC7 is to ensure that,
when digital platform operators report to their own non-EU jurisdiction, this information is
equivalent in relation to relevant activities that are in the scope of both DAC7 and the OECD
2020 Model Rules. This means that the information also can be exchanged between a third
country and the EU, preventing the digital platform operator to report the same information
multiple times. DAC7 and the OECD Model Rules, therefore, are yet another example of how
digitalisation and globalisation push to converge legal rules on taxation more and more
across borders.879
There is a noteworthy contrast in the language used in DAC7 compared to the OECD Model
Rules. The OECD 2020 Model Rules point out that the primary focus of these rules is to
facilitate and enhance compliance of platform sellers with regard to their direct and indirect
tax obligations.880 The OECD Model Rules do not mention tax avoidance or tax evasion at all,
and they do not mention that there is unreported income by platform sellers. As such, the
OECD Model Rules are formulated quite neutrally. DAC7, on the other hand, positions the
reporting requirement and the subsequent automatic exchange of information squarely as
necessary measures against tax fraud, tax evasion and tax avoidance. For instance, DAC7
874
DAC5 is left out of this comparison due to its slightly different nature, but to be complete; DAC5 neither
mentions the terms tax avoidance or aggressive tax-planning practices or variations thereof.
875
Also see Section 9.4.
876
Council Directive (EU) 2021/514 of 22 March 2021 amending Directive 2011/16/EU on administrative
cooperation in the field of taxation. Retrieved from http://data.europa.eu/eli/dir/2021/514/oj.
877
878
See OECD. (2020h). Model Rules for Reporting by Platform Operators with respect to Sellers in the Sharing
and Gig Economy. OECD Publishing.
879
Compare Section 4.2.1.3.
880
See OECD (2020h), at p. 8.
197
states: “There is a lack of tax compliance and the value of unreported income is
significant.”881
Moreover, the OECD 2020 Model Rules saw these reporting requirements primarily as a tool
for taxpayer matching purposes. The tool was mostly developed due to the digital platforms
facilitating transactions in the sharing and gig economies on a global scale, which meant
that there were inherent limitations to the effectiveness of domestic reporting rules.882 As
such, these commercial activities through digital platforms might also provide an advantage.
Where such transaction (without the intermediation of a digital platform) previously might
have been carried out in the informal cash economy, the payments through the digital
platform would be electronic, and, therefore, this might draw such activities further into the
formal economy.883 However, DAC7 did not consider such arguments. Instead, DAC7 places
emphasis entirely on that, for reasons of preventing tax fraud, tax evasion and tax
avoidance, it is crucial to ensure that the reporting obligation of digital platforms applies
regardless of the legal nature of the seller, and that it applies to a very wide range of
commercial activities.884
The analysis suggests that, in essence, the OECD 2020 Model Rules and the DAC7
considerations do not differ fundamentally. However, c'est la ton qui fait la musique, and
the more confrontational tone of voice of the EU does stand out in comparison to the more
balanced notes that the OECD puts forward in this regard, and, even more so, the EU’s tone
of voice in each of the subsequent DAC Directives can be observed to become increasingly
confrontational over time, while this is much less true for the OECD publications. Moreover,
the underlying motif across these directives seems to focus mostly on national tax revenue
maximalization. Tax transparency and the information it uncovered were to be used to find
(corporate) income that perhaps remained untaxed in order for countries to stake their
claim with regard to the taxing rights to that income. There is some consideration for inter-
taxpayer equity in this regard, but it appears to play a rather subordinate role to the tax
revenue concerns.885 Inter-nation equity concerns between EU Member States do not
appear to play a role at all.
8.2 Harmful Tax Competition
In 1998, the OECD published the report Harmful Tax Competition; an emerging global
issue.886 Its goal was to strengthen and improve tax policies internationally by “develop[ing]
a better understanding of how tax havens and harmful preferential tax practices, affect the
location of financial and other service activities, erode the tax base of other countries, distort
trade and investment patterns and undermine the fairness, neutrality and broad social
acceptance of tax systems generally.”887 The report was meant to include harmful tax
881
882
See OECD (2020h), at p. 3.
883
See OECD (2020h), at pp. 3-4.
884
Council Directive (EU) 2021/514, consideration (11) and (18).
885
With the possible exception in the considerations of DAC 4.
886
OECD (1998).
887
OECD (1998), at para. 4.
198
practices in both OECD member countries as well as non-member countries,888 and it
focuses specifically on activities and capital that is highly mobile, such as financial
instruments and intangible assets. Tax incentives aimed at investments in tangible assets
were not within the scope of the report.889
The report points out that globalisation and the liberation of cross-border trade have been
the most important driving forces of economic growth and in improving living standards
globally. This increased global economic integration has also fundamentally changed the
relationship between domestic tax systems.890 This means that changes in the tax policy
strategy of one country directly affects other countries. These effects have been both
positive and negative.891 Where the positive effects may result in a more optimal allocation
of global production efficiency, the negative effects do the opposite. Moreover, both effects
lead to a shift of tax burden to less mobile factors and/or consumption. Further, they might
hamper (national) redistributive goals.892 As such, the report addresses policy concerns with
regard to economic efficiency and the national tax mix.
The report considers the difference between tax incentives that stimulate new investments
and tax incentives that divert real investment decisions in a distortive manner. Where tax
competition efforts serve to level the playing field between countries, they might be
justifiable, as they aim to compensate for specific structural disadvantages, such as a poor
geographical location, a lack of natural resources, and/or the size of the market.893 The
report, however, recognises that one country’s justified tax incentive would easily be
viewed by another country as “poaching” the tax base that rightly belonged to that other
country.894
The report fundamentally changed the international debate on tax competition.895 This
change is summarised in the report as follows: “Countries should remain free to design their
own tax systems as long as they abide by internationally accepted standards in doing so.”896
With this, it is clear that the OECD was of the opinion that state sovereignty should be
limited by international tax standards (as designed by the OECD). At the same time, the
report did not seem to want to go as far as saying that such limitations apply to all countries
in the world – possibly, this was to prevent too strong political reactions.897
888
889
890
891
Positive effects include that globalisation has pushed the reformation and modernisation of domestic tax
systems by broadening tax bases and lower tax rates as well as making continuous efforts to improve the fiscal
climate for investments and reducing tax barriers to cross-border capital flows. Negative effects include
situations where domestic tax policies are purposely designed to divert mobile activities and capital to a
degree that they cause opportunities for taxpayers to minimise and/or avoid paying taxes on such activities or
capital.
892
893
894
895
Morriss, A. P., & Moberg, L. (2012). Cartelizing Taxes: Understanding the OECD's Campaign against Harmful
Tax Competition. Colum. J. Tax L., 4, 1, at p. 43.
896
897
Morriss & Moberg (2012), at footnote 244.
199
The language in the report made it obvious that the harmful tax practices and the negative
spill-over effects of these practices were first and foremost aimed at tax havens. It identified
tax havens as jurisdictions that have no income taxes or only nominal income taxes, and at
least one of three key factors; (a) lack of effective exchange of information, (b) lack of
transparency, and/or (c) no substantial activities.
Even so, harmful tax-preferential regimes were formulated generally, as the four key factors
that were to be used to identify harmful tax practices were:
(i) The regime imposes a low or zero-effective tax rate on the relevant income.
(ii) The regime is “ringfenced”.898
(iii) The operation of the regime is non-transparent.899
(iv) The jurisdiction operating the regime does not effectively exchange information
with other countries.900
These factors all have to be evaluated in assessing whether a preferential tax regime is
harmful. At least a combination of a low rate or zero-rate and one or more of the other key
factors was supposed to be included.901 Even though there is an overlap between the tax
haven characteristics and those of preferential tax regimes, the latter can also occur outside
of tax havens.
In the report, the OECD also identifies that the dialogue on the problem of harmful tax
competition should include as many countries as possible.902 Governments around the
world “cannot stand back while their tax bases are eroded through the actions of countries
which offer taxpayers ways to exploit tax havens and preferential regimes to reduce the tax
that would otherwise be payable to them.”903 As such, the report recommends action in
three categories: recommendations concerning domestic legislation, recommendations
concerning tax treaties, and recommendations concerning intensification of international
co-operation.
While the first two categories are meant to attack harmful tax practices in specific tax
regimes and practices, the third category is meant to provide a wide safety net to ensure
that these preferential regimes did not simply (re)appear in other – non-member –
countries. Part of the reason for this third set of recommendations is to ensure that a
subsidiary body to the Committee of Fiscal Affairs was created to monitor the
898
Ringfencing in this regard means that the regimes’ benefits are only available to non-residents, or that the
foreign investors using the regimes are denied access to the domestic market. OECD (1998), at para. 62.
899
For example, because the regime includes favourable tax rulings for which ruling-criteria are unknown
and/or are not available to all taxpayers; and/or it includes administrative practices that do not conform with
the law; and/or it includes that domestic legislation is deliberately not enforced. OECD (1998), at para. 63.
900
OECD (1998), at paras. 59-67.
901
In addition to these key factors, the report also considers “other factors’: (v) An artificial definition of the
tax base, (vi) failure to adhere to international transfer pricing principles, (vii) foreign source income exempt
from residence country tax, (viii) negotiable tax rate or tax base, (ix) existence of secrecy provisions, (x) access
to wide network of tax treaties, (xi) regimes which are promoted as tax minimisation vehicles, and (xii) the
regime encourages purely tax-driven operations or managements. OECD (1998), at paras. 68-79.
902
903
200
implementation of the recommendations, the Forum on Harmful Tax Practices. The
mandate of the Forum also includes to involve non-member countries, to encourage
mutually reinforcing responses to harmful tax practices in all countries involved in the
Forum, and to prevent that any country can gain an unfair competitive advantage by failing
to comply with the recommendations.904
In 2000, the OECD published the first progress report with regard to the Harmful Tax
Practices Project.905 The report starts off with the statement that “[the] project is not
primarily about collecting taxes and is not intended to promote the harmonisation of income
taxes or tax structures generally within or outside the OECD, nor is it about dictating to any
country what should be the appropriate level of taxes. Rather, the project is about ensuring
that the burden of taxation is fairly shared and that tax should not be the dominant factor in
making capital allocation decisions.”906 However, this statement is followed by another
statement mentioning that both OECD and non-OECD member countries were concerned
about significant revenue losses as a result of harmful tax practices, and that this especially
can be a threat to developing economies. For that reason, the Project promotes a
framework to assist OECD and non-OECD member countries to eliminate these harmful tax
practices.
In the 2000 progress report, the OECD identifies 35 jurisdictions as potential tax havens as
well as 47 potentially harmful preferential tax regimes in 21 OECD member countries. 907 Of
these 21 countries, 12 were EU Member States. Interestingly, the EU Code of Conduct for
Business Taxation Group sent a report to the EU ECOFIN meeting on 29 November 1999
with a list of 66 potential harmful tax regimes in 15 EU Member States and their offshore
dependent or associated territories.908 This means that the EU had identified harmful
preferential tax regimes that the OECD did not include, namely, tax regimes in Austria,
Denmark and the United Kingdom. The OECD 2000 report states that holding company
regimes had not been included in the OECD report, even though such regimes may
constitute harmful tax competition. Work on such holding regimes would be part of the
ongoing work of the Forum. However, this was only a partial explanation of the difference in
the identified regimes. For example, Austria was also listed on the EU list for certain
exemptions in the corporate income tax, Denmark was also listed for their shipping regime,
and the United Kingdom was also listed for their cost-plus rulings.909
Furthermore, both the OECD report and the EU report talked about the significance and/or
impact of the preferential tax regimes without much in the way of quantitative data. To
clarify, one could argue that a category of preferential tax regimes that manage to poach 1%
of the global tax base should be considered more harmful than regimes that (combined)
regard 0.1% of the global tax base. With this in mind, there could be a precedence as to
904
OECD (1998), at paras. 139, 143 and 145.
905
OECD (2000).
906
OECD (2000), at p. 5.
907
OECD (2000), at p17. (“This listing is intended to reflect the technical conclusions of the Committee only
and is not intended to be used as the basis for possible co-ordinated defensive measures. Rather, as discussed
below, a further list will be developed in the next 12 months for this purpose”).
908
Council of the European Union. (1999). Primarolo Report, 23 November 1999, SN 4901/99.
909
All regimes that also feature in the OECD 2000 report.
201
which preferential tax regimes that should be targeted first or most vigorously. However,
even though the OECD report lists preferential tax regime category by category, the report
offers no sense of magnitude of the tax base involved overall or per category. The
seriousness of the problem is only emphasised in qualitative terms.
To avoid inclusion on the OECD list of Uncooperative Tax Havens, jurisdictions had to issue a
political commitment to meet certain deadlines in progressively eliminating harmful tax
practices. Also, the jurisdictions had to agree on a standstill.910 The 2001 OECD progress
report showed that, after Bermuda, the Cayman Islands, Cyprus and Malta made such
commitments in 2000, another five additional jurisdictions had given such commitments,
and many of the 35 jurisdictions, as previously mentioned in the 2000 Progress Report,
would follow suit to avoid being included on the list of uncooperative tax havens.911 This led
to the situation that, when the List of Uncooperative Tax Havens was first published in 2002,
the list consisted of only seven jurisdictions.912
One can observe a difference in both the orientation and the tone of voice in the 1998 and
2000 reports. Firstly, the 2001 progress report focuses much more on the tax haven work
and only briefly mentions the work on harmful preferential tax regimes. Secondly, the 1998
report mentions that “countries cannot stand back while their tax bases are eroded through
[…] preferential regimes”913 and that “countries should remain free to design their own tax
systems as long as they abide by internationally accepted standards in doing so.”914 The
2001 progress report, however, states that “each OECD Member country retains the right to
apply or not to apply any defensive measure as appropriate, either within or outside a
framework of co-ordinated defensive measures.”915 This change in tone was possibly the
result of statements by the United States’ Secretary of Treasury that the new U.S.
administration would not participate in any initiative to harmonise world tax systems and
that the OECD harmful tax practices project “[i]n its current form [is] too broad and […] not
in line with this administration's tax and economic priorities.”916
The subsequent 2004 progress report and 2006 update on the progress in OECD member
countries showed that the potentially harmful preferential tax regimes that were identified
in the 2000 report had all been either abolished, amended or had been deemed not to be
harmful.917 The 2006 report consequently declared this part of the project as a success and
that future work would focus on monitoring (new) preferential tax regimes.918 In fact, the
910
OECD (2000), at p. 19.
911
OECD (2001), at p. 9.
912
These jurisdictions were Andorra, Liechtenstein, Liberia, Monaco, Marshall Islands, Nauru and Vanuatu. See
OECD. (2002a). The OECD Issues the List of Unco-operative Tax Havens. Retrieved from
https://www.oecd.org/ctp/harmful/theoecdissuesthelistofunco-operativetaxhavens.htm (last accessed on 03-
05-2022).
913
OECD (1998), at paras. 85 and 89.
914
915
916
O’Neill, P. (2001), Confronting OECD’s ‘Harmful’ tax approach, Commentary, The Washington Times, 11
May 2001, at A17, available at http://www.uniset.ca/microstates/oneill.pdf; Morriss & Moberg (2012), at pp.
48-49; Avi-Yonah (2008), at p. 785.
917
OECD. (2004). The 2004 Progress Report, The OECD’s Project on Harmful Tax Practices. OECD Publishing, at
paras. 11-18; OECD (2006), at para. 15.
918
202
work on preferential regimes and international tax policy harmonisation was taken up again
as part of the OECD/G20 BEPS work, which will be discussed in the next section.919
The efforts aimed at tax havens were revived by the G20 statement of 2 April 2009. As a
result of the financial crisis and several scandals on tax evasion involving bank secrecy rules
and, most prominently, the largest bank in Switzerland, UBS Bank,920 the G20 states that it
has agreed to “take action against non-cooperative jurisdictions, including tax havens. We
stand ready to deploy sanctions to protect our public finances and financial systems. The era
of banking secrecy is over. We note that the OECD has today published a list of countries
assessed by the Global Forum against the international standard for exchange of tax
information.”921
On the same day, the OECD published a progress report on the implementation of the tax
standards regarding transparency and information exchange.922 The one-page report
consists of three lists. These lists focus on whether countries had concluded and
implemented at least 12 TIEAs that meet the OECD standard. On the whitelist, there are 40
jurisdictions that had done so, while, on the greylist, there are 31 of the 35 jurisdictions that
were identified as tax havens in the 2000 report as well as eight other financial centres hat
had committed to implementing the OECD standards but had yet to fully complete this
commitment. The blacklist includes four jurisdiction that had not implemented the standard
and also had not committed to doing so. Within a few days, this progress report caused the
four jurisdictions on the blacklist to issue the necessary political commitment to move up to
the greylist, and, within half a year, 12 jurisdictions had moved from the greylist up to the
whitelist.923
8.2.1 The EU Code of Conduct for Business Taxation
An important turning point for the work in the EU on harmful tax practices is the so-called
Ruding Report,924 which, at the request of the Commission, considers the following
questions:
1. Do differences in taxation among Member States cause major distortions in the
internal market, particularly with respect to investment decisions and competition?
Special attention is focused on those distortions considered discriminatory.
2. In so far as such distortions arise, are they likely to be eliminated simply through the
interplay of market forces and tax competition between Member States, or is action
at the Community level required?
919
See section 8.3.
920
Also see Section 8.1.3; and Section 9.4.1.
921
G20. (2009). Leaders Declaration London 2009, G20 Summit Documents, 2 April 2009, at para. 15.
922
OECD. (2009). Progress Report on the Jurisdictions surveyed by the OECD Global Forum in implementing the
internationally agreed Tax Standard. OECD Publishing.
923
Also see Nicodème, G. (2009). On recent developments in fighting harmful tax practices. National Tax
Journal, 62(4), 755-771, at p. 764.
924
Commission of the European Communities. (1992). Conclusions and Recommendations of the Committee of
Independent Experts on Company Taxation, Luxembourg: Office for Official Publications of the European
Communities. ("Ruding report").
203
3. What specific measures are required at the Community level to remove or mitigate
these distortions?925
The Ruding Report considers that it is likely that differences in cost of capital as a result of
different tax systems in the EU have an effect on business decisions, especially, in the case
of marginal projects.926 According to the Ruding Report, these tax differences appear to
affect a company’s financial and legal structure much more than its underlying investment
decisions. These include decisions on whether to set up a branch or a subsidiary, how to
finance the new investment locally or through a parent company, and whether to channel
income through holding companies in other jurisdictions than where the parent company is
located.927 In addition, taxation is an important consideration in the decision in which form
profits are transferred to the parent company (i.e. as dividends, interest payments, or other
payments).928 Moreover, the Committee expresses concern about preferential tax regimes
designed to attract mobile capital, as these could cause considerable losses in tax revenue in
the country from which the investment is attracted.929
The Committee also considers that they find no evidence that enacting a tax preferential
regime in one Member State likely would trigger “unbridled tax competition among Member
States, nor that it would lead to a drastic and undesirable erosion of corporate tax revenues.
On the contrary, there has been a noticeably upward trend in taxes on corporate income as a
proportion of GDP since 1965.”930 However, the Committee warns that setting up an Internal
Market in the EU could increase the sensitivity of investments to tax differences among
Member States. As the existence of the Single Market is not included in past evidence, the
Committee considers it dangerous to make assumptions on the level of tax competition that
might occur in the future.
The Ruding Report argues that there are three main reasons as to why a complete atrophy
of corporate tax revenues due to tax competition is unlikely:
First, there is the necessity for countries to maintain the corporation tax as an
adjunct to their personal income taxes. Second, in some cases it is in countries'
interest to take advantage of the fact that taxes levied on multinational firms are
often creditable abroad in so far as profits are repatriated. A third reason is the
obvious fact that taxation is only one, albeit an important, determinant of firms'
location decisions.931
However, competition may lead to changes in a company’s financial and legal structure that
could lead to a reallocation of tax revenue from high-tax to relatively low-tax countries. The
Committee thus concludes that “[t]he case for tax harmonization therefore largely rests on
925
Commission of the European Communities (1992), at p. 9.
926
927
Also see UNCTAD. (1995). World Investment Report 1995, Transnational Corporations and Competitiveness.
United Nations, at p. 177 for a more nuanced view on this point.
928
929
930
931
204
the extent to which it removes major distortions in resource allocation and competition, and
to a lesser extent on whether it enhances the fairness, administrative feasibility, simplicity,
certainty, and transparency of taxation in Member States.”932
The Ruding Report recommends that the Commission should take several steps.933 The first
step was to remove discriminatory and distortionary national tax regimes. The second step
was to set a minimum statutory tax level as well as common rules for a minimum tax base to
safeguard future national tax regimes vying for mobile capital. The third step was to
encourage transparency as to the tax incentives Member States offer to promote
investments.934
In particular, the first recommendation laid the foundation for the forming of the EU Code
of Conduct for Business Taxation as an intergovernmental, legally non-binding instrument
that is used to identify and assess possible harmful preferential tax measures in EU Member
States (hereinafter the Code).935
The Code was a key part of the package to tackle harmful tax competition,936 and it was
agreed upon in the Council on 1 December 1997.937 The tax package stated:
Tax competition in itself is generally to be welcomed, as a means of benefiting

citizens and of imposing downward pressure on government spending[, unrestrained]
competition for mobile factors can both bias tax systems against employment and
make an orderly and structured reduction in the overall tax burden difficult. It also
reduces the room for manoeuvre to meet other Community objectives, such as the
protection of the environment. [It] can hamper efforts to reduce budget deficits.
[And it] is putting increasing restraints on Member States’ freedom to choose the
appropriate tax structure, including by broadening the base and lowering rates.938
Therefore, the main reason to act is that “the issue of harmful tax competition [threatens]
both to reduce revenues and to distort taxation structures.”939 With this in mind, the
language of the 1997 tax package does not completely follow the Ruding Report, as the
argumentation for tackling harmful tax competition goes somewhat wider. However, the tax
package appears to embrace the remarks in the Ruding Report that the need for tax co-
932
933
Commission of the European Communities (1992), at pp. 27-28.
934
See also Devereux, M. (1992). The Ruding committee report: An economic assessment. Fiscal Studies, 13(2),
96-107, at p. 107. (“However, the second set of proposals — the wider measures — have less support from the
reasoning presented by the Committee itself, would set in concrete a distorting tax base, and are, in any case,
likely to fall foul of individual Member States' unwillingness to give up too much sovereignty on the question of
setting taxes within their own jurisdiction”)
935
Nouwen, M. F. (2020). Inside the EU Code of Conduct Group: 20 years of tackling harmful tax
competition (Doctoral dissertation, NARCIS), at p. 27.
936
European Commission. (1997). Communication on Towards tax co-ordination in the European Union, A
package to tackle harmful tax competition, 1 October 1997, COM(97) 495 final, at para. 14.
937
Council Conclusions (1997), at p. 1.
938
European Commission (1997), at para. 3; compare in this regard Section 8.2 on the comments in OECD
(1998) that in some cases tax competition could serve to level the playing field between countries.
939
European Commission (1997), at para. 22.
205
operation mostly comes from considerations on economic efficiency, tax revenue concerns,
and less from inter-taxpayer and inter-nation equity concerns.
In March 1998, the Council established the Code of Conduct Group (business taxation)
(CoCG) to assess the tax measures that may fall within the scope of the Code as well as to
oversee the provision of information on those measures without prejudice to the respective
competences of Member States and the Community.940 As Nouwen underlines, the Code
performs a para-law function through the CoCG, as it performs to coordinate tax policy as
an alternative to the hard law option of harmonising tax rules.941 Even though the
Commission has no vote in the CoCG, the Commission is effectively leading the process in
the CoCG. Moreover, as the decision-making rules in the CoCG require a quasi-unanimity as
opposed to the formal unanimity in the Council, the CoCG was an important forum on
matters of EU tax policy coordination.942 Since the Code was established, over 400 tax
regimes have been assessed in the EU and around 100 of these were found to be harmful.943
8.2.1.1 Extending the Code’s Application Beyond the EU
Paragraphs K and L of the Code give the CoCG a lot of leeway in the area of tax avoidance
and evasion.944 Nouwen states that the CoCG increasingly has been involved in two-or-more
country issues, which could not be dealt with (only) by issuing a decision on a potential
harmful tax regime of an individual Member State. To deal with such situations, concerted
action of Member States is necessary. This means, in practice, that the CoCG has the power
to design common taxation policies through soft law. Often, such situations have been
confirmed in EU legal instruments at a later stage and/or in the later OECD/G20 BEPS work.
Nouwen gives several examples of such common tax policy designs, such as exchange of
information on rulings, common tax ruling policies, how to deal with hybrid mismatches,
and transfer pricing issues.945 This makes the Code a powerful instrument in correcting (tax
policies that encourage) certain taxpayer behaviour from a more holistic, global perspective.
In 2012, the Commission recommended that Member States looked to the Code to assess
third-country tax systems for potential harmfulness. Additionally, as the OECD/G20 BEPS
project has been promoting new international standards for fair tax competition, the EU
also has meant to apply these consistently across Member States. For this reason, the
Commission has suggested that core elements for a renewed good governance clause
should be included in all negotiated proposals for relevant agreements with third countries.
These core elements are: 946
940
941
Nouwen (2020), at p. 60.
942
Nouwen (2020), at pp. 87 and 293.
943
European Commission. (2020f) Communication on Tax Good Governance in the EU And Beyond, 15 July
2020, COM(2020) 313 final, at p. 3.
944
945
Nouwen (2020), at p. 303.
946
European Commission. (2016e). Communication on an External Strategy for Effective Taxation, 28 January
2016, (COM)2016 24 final, at p. 6; European Commission. (2016f). Annexes to the Communication on an
External Strategy for External Taxation, 28 January 2016, COM(2016) 24 final, at p. 5.
206
(i) the core minimum standards of good governance—transparency, exchange of
information and fair tax competition;
(ii) the new OECD/G20 global standard on Automatic Exchange of Information (AEoI) in
relation to financial account information;
(iii) the additional standards based on OECD/G20 BEPS; and
(iv) the Financial Action Task Force’s (FATF) international standards on Combatting
Money Laundering and the Financing of Terrorism and Proliferation.
Additionally, the Commission has worked to include state aid provisions in negotiating
proposals for agreements with third parties to ensure a level playing field for EU exporters
by preventing that access to third-country markets is limited in any way.947
In order to be able to also have an impact on harmful tax practices outside of the EU, the
Commission has included an External Strategy for Effective Taxation in the 2016 Anti-Tax
Avoidance package.948 The External Strategy document considers that “effective taxation in
relation to third countries is mainly tackled through national anti-avoidance measures,
which tend to vary considerably. Among the different national approaches are white, grey or
black lists, specific provisions for low/no tax jurisdictions or case-by-case provisions against
abuse. The basis for deciding which jurisdictions should be subject to these measures, and
when, also differs from one Member State to the next.”949
To boost the effectiveness of these external strategies in third countries, the Council
established the EU list of non-cooperative jurisdiction for tax purposes in 2017. While the
Commission did much of the preparatory work for the periodical revision of the EU list, the
CoCG conducted much of the technical work, screenings and assessments of third-country
jurisdictions on the basis of the screening criteria and the agreed geographical scope. In
March 2019, the Council decided to limit the maximal yearly update of the list to twice a
year starting in 2020, which is intended to allow the EU member states sufficient time to
amend their domestic legislation where it is needed. The latest revision took place in
February 2022.950 The next revision is due in October 2022.
8.2.1.2 Reforming the Code of Conduct
In 2020, the European Commission published the Tax Package for Fair and Simple Taxation.
Part of this Package is the announcement that the Code would be reformed. The goal of this
reform is to focus more on ensuring effective taxation and to react more efficiently to
instances of harmful tax competition.951
947
European Commission (2016e), at p. 7.
948
See European Commission. (2016c). Anti-Tax Avoidance Package. Retrieved from
https://ec.europa.eu/taxation_customs/anti-tax-avoidance-package_en (last accessed 03-05-2022).
949
European Commission (2016e)), at p. 2.
950
Council Conclusions. (2022). On the revised EU list of non-cooperative jurisdictions for tax purposes, 24
February 2022. 6437/22 FISC 50 ECOFIN 150.
951
Also see European Commission. (2016g). Commission Staff Document Accompanying the Communication
on the Anti-Tax Avoidance Package: Next Steps towards delivering effective taxation and greater tax
transparency in the EU, 28 January 2016, COM(2016) 23 final, at p. 11.
207
One aspect of the reform is to incorporate the results of the international discussions on the
reform of corporate taxation, which is steered by the OECD, as these are be very important
in determining the acceptable limits of tax competition in the future. Particularly, a
reformed Code must incorporate a global minimum tax rate. Even if there would be no
consensus on such a minimum rate as a global standard, it is noted that at least “this
concept needs to be introduced in the Code as an EU standard, to modernize and clarify the
concept of harmful tax competition and to ensure that all business pay their fair amount of
tax when they generate profits in the Single Market.”952
Moreover, the Commission argued in the Tax Package for Fair and Simple Taxation that the
scope of the Code should be extended, so that the CoCG also could examine general aspects
of national corporate tax systems, such as tax residency rules as well as other relevant taxes
than corporate income tax. According to the Commission, this meant that the CoCG should
be able to examine all cases of no or very low taxation inside and outside of the EU.
The Communication mentioned further that the CoCG could make more information
publicly available and thus inform the public and stakeholders better on the efforts of the
CoCG through its work. To speed up decision-making processes in the CoCG, the
Commission also suggested that qualified majority voting within the COCG should be
considered. Finally, the Commission suggested that there should be more effective
consequences for Member States that do not comply with the CoCG’s decisions in a timely
manner.
In October 2021, the European Parliament adopted a resolution on reforming the EU policy
on harmful tax practices, including the reform of the Code of Conduct Group. In this
adopted text, the European Parliament supported the Commission’s intention to widen the
mandate of the CoCG to cover further types of regimes and general aspects of the national
corporate tax systems to determine whether a Member State’s legislation includes harmful
tax measures, as it has been outlined in the Action Plan for Fair and Simple Taxation
Supporting the Recovery Strategy.953
On 26 November, the Council proposed a draft resolution for a revised Code of Conduct for
Business Taxation to be discussed in Coreper.954 The revisions included the widened scope
of harmful tax measures, e.g.: "[p]referential tax measures which provide for a significantly
lower effective level of taxation, including zero taxation, than those levels which generally
apply in the member state in question are to be regarded as potentially harmful and
therefore covered by this code;"955and "tax features of general application of a Member
State, which create opportunities for double non-taxation or that can lead to the double or
952
European Commission (2020f), at p. 4.
953
European Parliament, (2021). Resolution of 7 October 2021 on reforming the EU policy on harmful tax
practices (including the reform of the Code of Conduct Group) (2020/2258(INI), at paras. 19-26.
954
The Committee of Permanent Representatives (Coreper) is responsible for preparing Council meetings at
ministerial level. All issues must pass through Coreper before they can be included on the agenda for a Council
meeting. The draft resolution of the Council and of the Representatives of the Governments of the Member
States, meeting within the council, on a revised code of conduct for business taxation is available at
https://data.consilium.europa.eu/doc/document/ST-14354-2021-INIT/en/pdf.
955
Para B.1 of the draft resolution on a revised code of conduct. Retrieved from
208
multiple use of tax benefits, in connection with the same expenses, amount of income or
chain of transactions are to be regarded as potentially harmful and therefore covered by this
code."956 In addition, the revisions made the power of the CoCG to design common tax
policy solutions through soft law more explicit: “The agreed description will permit an
assessment to be made of whether the tax measures in question are harmful, in the light of
the effects that they may have within the Union.”957
The draft resolution, however, did not appear to include the possibility for qualified majority
voting in the decision-making process, as the draft resolution states that “[t]he Commission
does not take part in the decisions of the Group that are taken by the Member States by
consensus.”958
Once drafted, the revised Code should replace the 1997 Code from 1 January 2022.
However, the wider scope of assessing tax features of general application of a Member
State, as it is mentioned in para. B.2, would only apply from the date that EU legislation
would be enacted to implement the agreement that was concluded in the OECD/G20
Inclusive framework,959 or no later than 1 January 2023. Moreover, this wider scope would
only be used for measures enacted or modified on or after that date.960
8.3 OECD/G20 Base Erosion and Profit Shifting Project (BEPS)
According to Brauner, the OECD/G20 BEPS project has established a new way of looking at
international tax law and how to solve its problems.961 This new way entails firstly, that
solutions ought to be based on collaboration, not competition. Secondly, that challenges
and their solutions should flow from a holistic view and not from an ad hoc approach.
Thirdly, that the beaten path does not (always) offer satisfactory solutions to the challenges
at hand, so traditional premises of the tax regime should not stand in the way of solutions
that work.
The approach of the BEPS project is also different in comparison to the Exchange of
Information and Harmful Tax Practices projects. The Exchange of Information project
focused on what governments should be doing, while the Harmful Tax Practices project was
aimed at what governments should not be doing.962 The difference with the BEPS project is
encapsulated in the name of the project. The focus of the language of the BEPS project is
956
Para B.2 of the draft resolution on a revised code of conduct. Retrieved from
957
Para F.2 of the draft resolution on a revised code of conduct. Retrieved from
958
Para N of the draft resolution on a revised code of conduct. Retrieved from
959
OECD (2021b).
960
Para P of the draft resolution on a revised code of conduct. Retrieved from
https://data.consilium.europa.eu/doc/document/ST-14354-2021-INIT/en/pdf..
961
Brauner, Y. (2014). What the BEPS. Florida Tax Review, 16, 55, at p. 55.
962
Of course, many of the measures presented were the result of practical examples of events of abuse,
taxpayer tax evasion and tax avoidance. However, even though this might have triggered the projects, one
could argue that the language of the Exchange of information and Harmful Tax practices projects was primarily
about what governments should do almost regardless of taxpayer behaviour.
209
much more on those who do the actual profit shifting and base eroding, so the project looks
more to the result of the fact that there are harmful tax practices, mismatches, lacking
(exchange of) information and the like.
On the other hand, the structure of the BEPS project is such that there is also much overlap
with the previous projects. The BEPS project963 consisted of several Actions that focused on
coordinating tax policy,964 Action Points that changed the rules governing transfer pricing,965
and Actions that were aimed at increasing transparency.966 In addition, there were Actions
that had a more overarching nature. Action 1 meant to addresses the tax challenges of the
digital economy. This particular area of work of the OECD/G20 will be discussed in more
detail in the next section.967 Action 11 aimed to provide and improve qualitative information
on tax avoidance in profit taxation and the scale of the economic impact of BEPS. Action 14
was about taxpayers’ rights by improving how cross-border tax disputes can be resolved
through the means of (mandatory) arbitration. Finally, Action 15 focused on how the results
of the BEPS project could be implemented as efficiently and swiftly as possible by designing
a multilateral instrument that is able to change the relevant parts of as many bilateral tax
treaties as possible in one decisive action.
Brauner is correct in that the BEPS promotes a more cooperative and holistic approach,
when looking at these Actions in their context and how they are connected,.968 However,
this is only true, insofar as it concerns the design of international tax policy as a corrective
mechanism for taxpayer behaviour. As argued earlier, the BEPS project lacks the same
holistic approach on inter-nation equity considerations and the allocation of taxing rights
concerns.969 The Action Plan states that “[i]n developing countries, the lack of tax revenue
[as a result of BEPS behaviour] leads to critical under-funding of public investment that could
help promote economic growth.”970 Further, it mentions that “a number of countries have
expressed concern about how international standards on which bilateral tax treaties are
based allocate taxing rights between source and residence States.”971 However, that has not
led to a follow-up conclusion that those international standards should be reviewed. In fact,
such a review has been explicitly placed outside of the scope of the BEPS project.972
In this, the OECD demonstrated a very Rawlsian approach to the duty of assistance between
states. As discussed, Rawls argues that states have a duty of assistance to other states that
live under unfavourable conditions. However, these unfavourable conditions refer to the
963
As it is laid out in OECD (2013b).
964
Actions 4 and 5 primarily focus on reducing harmful tax competition through specific tax policy instruments,
while Actions 2, 3, 6 and 7 focus on preventing (or limiting the possibilities of) abuse by those taxpayers that
apply mismatches and/or disparities between tax systems.
965
Actions 8, 9 and 10 are aimed at the transactions, payments and underlying (intangible) assets that are
generally used by taxpayers to shift profits from one jurisdiction to another.
966
Actions 12 and 13 introduce extra reporting requirements that also are to be exchanged automatically and
systematically.
967
See Section 8.4.
968
969
See Section 5.4.1.
970
OECD (2013b), at p. 8.
971
OECD (2013b), at p. 11.
972
OECD (2013b) at p. 11.
210
fact that states should help each other get rid of (certain) impediments, so that the states
can position themselves to improve the wealth and prosperity of their people. There is no
duty to actually ensure that the wealth and prosperity of those people actually is improved
through the assistance granted. 973 The OECD seems to say that, when the BEPS issues are
solved, there is no need to further address the question of how taxing rights are allocated.
Or, perhaps, the implicit promise was that this question would be addressed if it should
become obvious that the BEPS-project was not enough to “restore both source and
residence taxation […] where cross-border income would otherwise go untaxed or would be
taxed at very low rates.”974 In any event, in the original BEPS-project, the aim is for the BEPS
measure to provide source countries with resources to increase their tax revenue to the
point where public investment could be funded enough to promote economic growth within
their state. Whether they would choose to apply those resources to indeed improve their
welfare or not appeared of no immediate, further (moral) concerns at that point.
Even though the BEPS project might not have focused on inter-nation equity, it does
consider inter-taxpayer equity concerns. The Action Plan states that: “[t]hese developments
have opened up opportunities for MNEs to greatly minimise their tax burden. This has led to
a tense situation in which citizens have become more sensitive to tax fairness issues.” 975 It
has been claimed that where international companies did not or would not pay tax on their
profits in a jurisdiction where they generate their income, local (individual and business)
taxpayers of that jurisdiction would have to pay more. Moreover, BEPS behaviour harms fair
competition between domestic businesses and multinational corporations. In the
supporting document, the OECD also states that BEPS constituted a serious risk to tax
revenues, tax sovereignty and tax fairness.976 However, from the language and the use of
the term ‘fairness’ in the supporting document, it follows that these are mostly concerns
about revenue effects and economic distortions. In addition to these concerns, it has also
been expressed that BEPS could undermine the voluntary compliance of all taxpayers.977
Finally, the language in the Action Plan also clearly indicates that the OECD views BEPS as a
technical problem that needs a technical solution. The underlying assumption being that
there is nothing fundamentally wrong with the rules that govern the international tax
system.978 The problems are rather that businesses have become more international and
that business models have changed because of technological advancement, both of which
have increasingly exposed gaps between national tax systems. As a result, “new
international standards must be designed to ensure the coherence of corporate income
taxation at the international level.”979 In other words, the BEPS project was to be the thread
to better stitch together the many-coloured quilt of national tax systems, as the
international tax system was to remain a quilt in essence.
973
Rawls (1999b), at p. 107 et seq.
974
OECD (2013b), at p. 11.
975
OECD (2013b), at p. 8.
976
OECD (2013b), at p. 5.
977
The term fairness appears seven times in the document and is used in different contexts but remains largely
unexplained. See OECD (2013b), at p. 50 where the concerns regarding fairness are made most concrete and is
directly linked to the overall integrity of the corporate income tax.
978
OECD (2013b), at p. 9. (“In many circumstances, the existing domestic law and treaty rules governing the
taxation of cross-border profits produce the correct results”)
979
OECD (2013b), at p. 13.
211
8.3.1 The OECD/G20 BEPS Action Points
The BEPS policy coordination Actions begin by addressing the problem that income goes
untaxed, as the same costs are deducted in more than one country and/or that the
deducted costs in one country are not included in the income of the other country.980 With
this, it underlines that the concept of full taxation is an important principle of the BEPS
project. The “intended effects and benefits of international [tax] standards”981 are to
prevent both double taxation and double non-taxation. To this end, the OECD will “[d]evelop
model treaty provisions and recommendations regarding the design of domestic rules to
neutralise the effect (e.g. double non-taxation, double deduction, long-term deferral) of
hybrid instruments and entities.”982 Action 2 builds on the 2012 report addressing hybrid
mismatch arrangements, but, rather than looking to unilateral domestic anti-abuse
measures,983 the 2015 Final Report on Hybrid Mismatches sets out a common approach that
solves the problem through international cooperation on a holistic level. The Action
introduces a set of interconnected links “that align the tax treatment of an instrument or
entity with the tax treatment in the counterparty jurisdiction but otherwise do not disturb
the commercial outcomes.”984
Subsequently, Actions 3, 4 and 5 focus on the question of whether income that is subject to
tax is indeed taxed at a reasonable level (in that jurisdiction) in combination with the fact
that income should be taxed in the jurisdiction where the value was created.985 However, as
many scholars have argued, the concept of value-creation as a means to allocate income to
countries has proven to be vague and problematic,986 and, by now, it has arguably lost much
of its importance.987
In Action 3 on CFC rules, the coordinated and holistic approach of BEPS is less apparent. The
Final Report sets out recommendations in the form of building blocks instead of minimum
standards or a common approach.988 That this Action did not result in a minimum standard
or common approach demonstrates the difficulty of reaching an international agreement
980
For more on the concept of full or single taxation see Section 5.4.
981
OECD (2013b), at p. 13.
982
OECD (2013b), at p. 15.
983
OECD. (2012a). Hybrid Mismatch Arrangements: Tax Policy and Compliance Issues. OECD Publishing, at p.
25.
984
OECD (2015b), at p. 11.
985
OECD (2013b), at p. 10. (“No or low taxation is not per se a cause for concern, but it becomes so when it is
associated with practices that artificially segregate taxable income from the activities that generate it”); also
see OECD (2000), at p. 5.
986
See Hey, J. (2018). “Taxation Where Value is Created” and the OECD/G20 Base Erosion and Profit Shifting
Initiative. Bulletin for international taxation/IBFD, 72(4/5), 203-207, at p. 208; Devereux, M. P., & Vella, J.
(2018). Value Creation as the Fundamental Principle of the International Corporate Tax System. In European
Tax Policy Forum Policy Paper, at p. 12.
987
Schön, W. (2021). Value Creation, the Benefit Principle and Efficiency-Related Allocation of Taxing Rights.
In EATLP 2020 Congress Report (EATLP International Tax Series 19, (eds.) W. Haslehner and M. Lamensch, IBFD,
Amsterdam, forthcoming, Working Paper of the Max Planck Institute for Tax Law and Public Finance No. 2021-
06, at p. 1.
988
OECD (2015c), at p. 9.
212
when it comes to discussions on the allocation of taxing rights.989 As a result, the building
blocks are primarily meant to give guidance on how to design CFC rules in domestic
legislation, such as by aligning policy considerations that underpin CFC-rules and aligning
definitions of a CFC and of CFC income.990
Action 4 sets out a common approach with regard to the rules of interest deduction that
fosters increased incorporation of national rules in the international tax system. The Final
Report on Action 4 considers that cross-border situations with regard to interest can lead to
a higher post-tax profit in multinational corporations as compared to purely domestic
firms.991 This competitive advantage of the multinational corporation could be increased
even further through other BEPS behaviour, such as by applying hybrid instruments.
Therefore, it was agreed that a coordinated approach based on international best practises
was needed “[to] remove distortions, reduce the risk of unintended double taxation and, by
removing opportunities for base erosion and profit shifting, improve fairness and equality
between groups.”992 To this end, the net-interest deduction a company can claim is made
proportional to the income that is generated by its economic activities.
Action 5 sets out a minimum standard on an agreed methodology to assess if there is

enough substance in a preferential regime to not be considered harmful. Specifically with
regard to IP regimes, such as patent boxes, a consensus was reached on the so-called nexus
approach, which ensures that IP rights—to a great extent—have to be researched and
developed in the particular country in order for a taxpayer to be able to enjoy the benefits
from the IP regime. The same principle can be applied to other preferential regimes, as
substantial activity is required for taxpayers to make use of such regimes.993
The Final Report on Action 5 extensively describes the harmful tax practices project but
does not actually outline a general framework for substantial activity in preferential
regimes. Instead, it presents rules for how substantial activity should be understood
specifically with respect to IP regimes.994 This approach suggests that limiting the scope of IP
regimes, such as patent and IP boxes, has been one of the driving forces for this Action from
the outset.
The second major component from Action 5 sets out a minimum standard for the
mandatory spontaneous exchange of information on cross-border tax rulings that could be
the cause for BEPS concern.995 This element aims to stop countries from competing on the
basis of lack of transparency in combination with the exploitation of differences between
tax systems. This has led to the situation where information on over 360.000 rulings has
989
See section 5.4.1.
990
OECD (2015c), at p. 10.
991
For example, a multinational group can utilise the differential in nominal tax rates in both inbound and
outbound investment situations to ensure that effective tax burdens on profits at the MNE level is lower than
the effective tax rate of a comparable but purely domestic competitor would be. See OECD (2015d), at p. 18.
992
OECD, Limiting Base Erosion Involving Interest Deductions and Other Financial Payments, Action 4 - 2015
Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris, 2015, at p. 16.
993
OECD (2015e), at p. 37 et seq.
994
995
213
been exchanged, and peer-reviews of these tax ruling cover 124 jurisdictions.996 The peer-
review process also shows that, in many cases, the exchanged information confirms that
issued tax rulings meet the terms of reference.997 Moreover, this exchange of information is
also seen to have a prophylactic effect against governments and taxpayers entering into so-
called sweetheart deals, and thus, effectively strengthening the usefulness of the tax ruling
instrument.998
On the whole, Action 5 is a fairly technical report that focuses mostly on the coordination of
national tax policy. It sets out minimum standards, but one could argue that the outsized
focus on IP boxes perhaps makes it more of an ad hoc approach rather than a holistic
approach with respect to preferential tax regimes. In any event, all 15 IP regimes that were
listed in the 2015 Final BEPS Action 5 report as inconsistent with the minimum standard
have been amended or abolished. In addition, legislation in other jurisdiction has been
enacted to amend IP regimes and align them with the agreed-upon standard.
Action 6 is aimed at preventing treaty abuse and, in particular, treaty shopping. The Final
Report on Action 6 considers that taxpayers engaged in treaty shopping undermine tax
sovereignty by claiming treaty benefits for situations where these benefits were not meant
to apply. In doing so, taxpayers are robbing countries of tax revenue.999 Action 6 formulates
a minimum standard to counter treaty shopping as well as other kinds of treaty abuse. This
means that the members of the OECD/G20 Inclusive Framework agreed to include in their
treaties (i) the combined approach of a Limitations of Benefits (LOB) rule and Principal
Purpose Test (PPT) rule; (ii) the PPT rule alone; or (iii) the LOB rule supplemented by a
mechanism that would deal with conduit financing arrangements, which are not already
dealt with in the tax treaties.1000 Most Inclusive Framework members rely on the
Multilateral Convention to implement Treaty Related Measures to Prevent BEPS (MLI)1001 to
implement Action 6 in their treaty network. So far, about 650 treaties have been amended
through the MLI, and another 1,100 will be modified as soon as the MLI has been ratified by
all of the signatories.1002
Furthermore, the preamble of treaties will be amended to include expressly that tax treaties
are not intended to generate double non-taxation, making it clear that it could not be
argued that a treaty could be interpreted in a way where abuse would have been within its
intended use. This addition to the preamble is an example where the structural legal
principle of anti-abuse has been made explicit, even though one could already always have
induced it from the treaty (or the law) itself.1003
Action 7 reinforces (existing) international standards by making changes to the definition of

a permanent establishment to counter techniques used in practice to avoid the status of
996
OECD (2021d), at p. 3.
997
OECD (2021d), at p. 6.
998
OECD (2019f), at p. 9.
999
OECD (2015f), at p. 9.
1000
OECD (2015f), at p. 10.
1001
See OECD (2015m).
1002
OECD (2021d). at p. 3.
1003
See section 4.1.3.
214
permanent establishments.1004 This is intended to result in a fairer allocation of taxing rights
on business profits, especially, in those instances where, under the pre-BEPS rules, these
profits might go untaxed anywhere. These changes in the definition of a permanent
establishment will take effect, as they are included in Article 5 of the OECD Model Tax
Convention and by changing the bilateral tax treaties through the MLI. 1005
Actions 8-10 also further reinforce international standards with the aim of ensuring that
transfer pricing outcomes better align operational profits with the economic activity that
generates them. Actions 8-10 target the transfer pricing rules regarding controlled
transactions involving intangibles, contractual allocations of risks as well as other high-risk
areas to align the outcome of those transactions better with value creation.1006
To highlight the relevance of these Actions, it is important to note that globalisation and
digitalisation have caused the total value of intra-group transactions to increase
dramatically. Recently, the total global international trade in goods and services exceeded
22 trillion USD.1007 About 60% of this international trade is by multinational corporations,
and between 35% to 40% of the total international trade concerns intra-group transactions,
and these transactions increasingly involve the transfer-pricing rules targeted by Actions 8-
10.1008
The Inclusive Framework agreed that risks that are contractually assumed by an entity that
cannot exercise any meaningful control over those risks and/or does not have the financial
means to assume the risk will be allocated to the entity within the group that is in control
and does have the financial capacity to assume those risks. For intangibles, it was agreed
that legal ownership alone does not constitute the right to all (or even any) of the proceeds
that flow from the exploitation of such an intangible asset. This must also be supported by
important functions, by controlling the economical significant risks and by contributing
assets of the intangible asset.1009
The profits of financial transactions will only be allocated to an entity commensurate to the
financial risk associated with the transaction that is borne by that entity. And finally, the
Inclusive Framework members agreed that it will no longer be possible to allocated
synergetic benefits to entities within a multinational group that have not contributed to
these benefits, meaning that excess profits can no longer be siphoned off to so-called ‘cash
boxes’.1010 The report states that the “guidance is linked in a holistic way with other
Actions”, in particular, in relation to the CFC rules in Action 3, matters of interest
1004
OECD (2015g).
1005
See OECD (2016c), at paras. 156-190.
1006
OECD (2015h), at pp. 9-10.
1007
Export of good and services in fact doubled between 2000 and 2020 from 11.5 trillion USD to 22.1 trillion
USD. World Bank. (2020). Export of goods and Services (constant 2015 US$). Retrieved from
https://data.worldbank.org/indicator/NE.EXP.GNFS.KD.
1008
UNCTAD. (1995). World Investment Report 1995, Transnational Corporations and Competitiveness. United
Nations; Shaxson, N. (2019). Over a third of international trade happens inside multinational corporations. Tax
Justice Network.
1009
OECD (2015h), at p. 10.
1010
See OECD (2015h), at p. 11 on that capital-rich, low functioning entities within the group that are often
located in low or zero tax jurisdictions.
215
deductibility in Action 4, matters of treaty abuse in Action 6, and matters of transparency
improvements in Action 13.1011
Transfer pricing will therefore help to materialise the holistic nature of the BEPS Action Plan
in a way that means that the use of tax havens in tax planning structures becomes much
more difficult and/or less effective in lowering a multinational corporation’s overall global
effective tax rate. However, to achieve these results, solutions will have to be found that go
outside of the arm’s length principle.1012 Much of the results from the work of BEPS Actions
8-10 have now been incorporated in the latest update of the Transfer Pricing Guidelines of
2022.1013
Action 11 is arguably one of the most important of the overarching Action points, but it
generally receives very little attention. The aim of Action 11 was to assess available data and
methodologies to determine the scale and economic impact of BEPS. The Action report
concludes that improved data and methodologies are required.
The available data is not comprehensive across countries or companies, and often
does not include actual taxes paid. In addition to this, the analyses of profit shifting
to date have found it difficult to separate the effects of BEPS from real economic
factors and the effects of deliberate government tax policy choices.1014
Noting these data limitations, six BEPS indicators have been formulated, and these suggest
that BEPS behaviour exists and that it has been increasing over time.1015 In order to provide
more accurate data in the future, a series of new data collection processes and analytical
tools have been developed.1016 This has resulted in the creation of the Corporate Tax
Statistics database that was launched in 2019.1017 This database contains data on over 100
jurisdictions on several tax parameters, the aggregate and anonymised statistics that stem
from about 6,000 CbC reports as well as information on the application of interest limitation
rules and CFC rules. The information that is coming into the database so far from the CbC
reports, however, concerns the fiscal year 2017. This means that much of the information
still predates the implementation of many of the BEPS measures, so it might be too early to
tell whether BEPS is effective in achieving its goals.1018
Action 12 sets out a common approach and best practices to mandatory disclosure rules for
aggressive or abusive transactions, arrangements or structures. The final report considers
1011
OECD (2015h), at p. 11.
1012
OECD (2015h), at p. 55.
1013
OECD. (2022d). OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations
2022. OECD Publishing, at p. 656. (“This January 2022 edition includes the revised guidance on the application
of the transactional profit method and the guidance for tax administrations on the application of the approach
to hard-to-value intangibles agreed in 2018, as well as the new transfer pricing guidance on financial
transactions approved in 2020.”).
1014
OECD. (2015i). Measuring and Monitoring BEPS, Action 11 - 2015 Final Report, OECD/G20 Base Erosion and
Profit Shifting Project. OECD Publishing, at p. 16.
1015
OECD (2015i), at pp. 15-16.
1016
OECD (2018d), at p. 31.
1017
OECD (2021d), at p. 18.
1018
OECD (2021d), at p. 19.
216
that “[t]he lack of timely, comprehensive and relevant information on aggressive tax
planning strategies is one of the main challenges faced by tax authorities worldwide. Early
access to such information provides the opportunity to quickly respond to tax risks through
informed risk assessment, audits, or changes to legislation or regulations.”1019
Therefore, one of the main aims of the report is to remove much of the time lag between
the stage in which a scheme has been designed and has had time to be applied widely and
the stage in which the legal action can be taken to prevent the negative impacts. One of the
other goals is to act as a deterrent, while, if the disclosure rules can work as a prophylactic
measure, legal action can be prevented all together while taxpayer compliance improves. To
achieve these goals, the final report “provides a modular framework that enables countries
without mandatory disclosure rules to design a regime that fits their need to obtain early
information on potentially aggressive or abusive tax planning schemes and their users. The
recommendations in this Report do not represent a minimum standard and countries are
free to choose whether or not to introduce mandatory disclosure regimes.”1020
The progress on Action 12 is most concrete in the EU. The adoption of Council Directive
(EU) 2018/822 has resulted in the reporting of cross-border aggressive tax planning, of
offshore structures and CRS avoidance schemes to the relevant EU tax authorities.1021 It is
also mentioned that several countries outside of the EU are considering introducing rules
based on Action 12.1022
Action 13 sets out minimum standards on transfer pricing documentation for both the
master file and the local file as well as for a template for country-by-country reporting
standards on income, taxes paid and certain measures of economic activity per
jurisdiction.1023 The agreed-upon datasets are subsequently to be exchanged automatically
to the relevant tax authorities:1024
Taken together, these three documents (master file, local file and Country-by-Country
Report) will require taxpayers to articulate consistent transfer pricing positions and
will provide tax administrations with useful information to assess transfer pricing
risks, make determinations about where audit resources can most effectively be
deployed, and, in the event audits are called for, provide information to commence
and target audit enquiries.1025
Arguably, Action 13 is one of the most widely adopted Actions of the BEPS project. Over 100
jurisdictions have already introduced legislation to impose a reporting obligation on
multinational corporations, meaning that almost all of the multinational corporations with a
1019
OECD (2015j), at p. 9.
1020
OECD (2015i), at pp. 9-10.
1021
OECD (2019f), at p. 23.
1022
OECD (2018d), at p. 7.
1023
See OECD (2015k).
1024
OECD (2015k), at p. 10. The exchange of information happens through the available government-to-
government mechanisms such as the multilateral Convention on Mutual Administrative Assistance in Tax
Matters, bilateral tax treaties or tax information exchange agreements (TIEAs).
1025
OECD (2015k), at p. 9.
217
consolidated group revenue of more than 750 million EUR will be covered.1026 This will
provide tax authorities around the world with a more comprehensive overview of the global
value chain of multinational corporations. Moreover, it underlines the broad acceptance of
the holistic approach for the application of corrective mechanisms for taxpayer
behaviour.1027
Action 14 sets out a minimum standard in order to improve dispute resolution through the
Mutual Agreement Procedure (MAP) as set out in Article 25 of the OECD MC.1028 The
measures in the final report aim to promote the effective and timely resolution of disputes
to minimise uncertainty and the risk of unintended double taxation. The minimum
standards should ensure that taxpayers have access to MAP and that all the treaty
obligations of the MAP are fully implemented in good faith. Moreover, several countries
have declared their commitment to provide for mandatory, binding MAP arbitration in their
bilateral tax treaties to ensure that treaty-related disputes will be resolved within a
specified timeframe. However, as not all countries have agreed to mandatory binding
arbitration, this is not part of the minimum standard.1029
The progress regarding Action 14 is, to a great extent, visible in the ongoing work of peer-
reviews and data on the number of outstanding MAP. The OECD progress reports also show
that tax authorities are streamlining their processes and (are advocating to) allocate more
resources to better deal with MAP. Furthermore, an increasing number of jurisdictions have
introduced or updated the rules and guidelines for MAP to better support taxpayers in these
procedures, and thus, they have increased tax certainty.1030
Finally, Action 15 “provides for an analysis of the tax and public international law issues
related to the development of a multilateral instrument to enable countries that wish to do
so to implement measures developed in the course of the work on BEPS and amend bilateral
tax treaties.”1031 This analysis concludes that a multilateral instrument to modify tax treaties
is technically feasible and also desirable. In May 2016, a discussion draft was released with
regard to the technical issues relating to the development of a multilateral instrument.1032 In
November 2016, more than 100 jurisdictions concluded negotiations on the Multilateral
Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit
Shifting (hereinafter: Multilateral Instrument; or MLI).1033 As such, the MLI does not directly
amend the text of bilateral tax treaties. It will be applied alongside existing tax treaties,
modifying their application in order to implement the BEPS measures.1034
1026
OECD (2021d), at p. 3.
1027
See Section 5.4.1.
1028
See (2015l), at p. 13 et seq.
1029
See (2015l), at p. 41.
1030
OECD (2019f), at p. 3; OECD (2021d), at pp. 11-12.
1031
OECD (2015m), at p. 9.
1032
OECD. (2016a). BEPS Action 15 - Development of a Multilateral Instrument to Implement the Tax Treaty
related BEPS Measures, 31 May – 30 June 2016, Public Discussion Draft, OECD/G20 Base Erosion and Profit
Shifting Project. OECD Publishing.
1033
OECD. (2016b). Countries adopt multilateral convention to close tax treaty loopholes and improve
functioning of international tax system. OECD Press Release.
1034
OECD (2016c), at para. 13.
218
In June 2017, 76 countries either signed the MLI or expressed their intention of signing it,1035
and, in July 2018, the MLI entered into force. To this, the OECD Secretary-General
commented the following:
The entry into force of this Multilateral Convention marks a turning point in the
implementation of OECD/G20 efforts to adapt international tax rules to the
21st Century[.] We are translating commitments into concrete legal provisions in
more than 1,200 tax treaties worldwide. Thanks to this drive by the international
community, we are ensuring that multinational companies pay their fair share
when it comes to fulfilling tax obligations, like citizens do.1036
8.3.2 The EU Anti-Tax Avoidance Actions
After the June 2009 EU elections, the new EU Commission presented their first work
programme in March 2010. This document promised that “business as usual was not an
option”, as the EU was coming out of the financial crisis.1037 However, at that point, the
corporate income tax did not appear to be on the radar of the EU Commission at all.1038
About six months later, the EU Commission presented the 2011 Work Programme 2011.
This document focused on economic recovery, growth, and jobs. Here, the EU Commission
did see a role for the corporate income tax: “In the area of taxation, a proposal for a
Common Consolidated Corporate Tax base (CCCTB) will aim to open the possibility for
companies to opt for a system to make tax rules simpler, to reduce compliance costs and to
help remove the tax obstacles that companies currently suffer, when they operate cross-
border, without affecting actual tax rates.”1039
With the 2012 Commission Work Programme, the EU Commission kept the main priority of
the EU on sustainable and job-rich economic recovery. To finance the future, the securing of
sustainable public revenue was considered. In addition to the 2011 proposals for the CCCTB
and the Financial Transaction Tax, the Commission identified that tax evasion was a threat
to government revenues. Therefore, a (non-legislative) reinforced strategy to tackle tax
1035
OECD. (2017a). Ground-breaking multilateral BEPS convention signed at OECD will close loopholes in
thousands of tax treaties worldwide. Retrieved from https://www.oecd.org/tax/ground-breaking-multilateral-
beps-convention-will-close-tax-treaty-loopholes.htm.
1036
OECD. (2018b). Milestone in BEPS implementation: Multilateral BEPS Convention will enter into force on 1
July following Slovenia’s ratification, Retrieved from https://www.oecd.org/tax/milestone-in-beps-
implementation-multilateral-beps-convention-will-enter-into-force-on-1-july-following-slovenia-s-
ratification.htm.
1037
European Commission. (2010a). Communication on Commission Work Programme 2010 Time to Act,
COM(2010) 135 final, 31 March 2010, at p. 3.
1038
The 2010 work programme only mentions plans to work on the Energy Tax Directive (see European
Commission (2010a), at pp. 5-6).
1039
European Commission. (2010b). Communication on Commission Work Programme 2011, COM(2010) 623
final, 27 October 2010, at p. 7.
219
havens would be put forward in 2012.1040 This good governance in relation to tax havens
was again referred to in the 2013 Commission Work Programme: “The Commission will also
take action to fight tax fraud and evasion, including an initiative on tax havens, bringing the
EU dimension to bear on national efforts to consolidate public finances.”1041 The 2014 Work
Programme then stated that the global fight against tax evasion and banking secrecy had
become a very important item on the agenda of the G20.1042 Notably, even though the
OECD presented their BEPS Action Plan in 2013, the EU Commission with José Manuel
Barosso as president gave little priority to the subject of corporate tax avoidance up until
2014.1043
In November 2014 a new EU Commission was installed with Jean-Claude Juncker as the new
EU president. Only a few days after the new Commission was installed, the LuxLeaks scandal
broke.1044 This scandal and the ensuing media attention intensified the Commission’s
actions with regard to state aid and tax rulings, both by requesting more information from
Member States on tax rulings and by opening up more investigations into specific cases.1045
Additionally, in line with the ten priorities of Juncker’s political guidelines, more emphasis
was placed on fairness.1046 In the 2015 Commission Work Programme, the Commission
announced that it would be necessary to “do different things and to do things
differently”.1047
On taxation, the Commission now made a clear reference to the OECD/G20 BEPS project
and announced their own EU Action Plan in this regard.1048 Moreover, the CCCTB was being
repositioned as an instrument against tax avoidance and to stabilise tax bases rather than as
a means to remove tax obstacles for cross-border trade. Moreover, the Commission
announced the legislative proposal to automatically exchange information on tax rulings.1049
1040
European Commission. (2011a). Communication on Commission Work Programme 2012 Delivering
European Renewal, COM(2011) 777 final, 15 November 2011, at p. 5; European Commission. (2011b). Annex
to the Communication on Commission Work Programme 2012 Delivering European Renewal, COM(2011) 777
final, 15 November 2011, at p. 22. (“This initiative will develop a reinforced strategy to protect the EU against
the challenges of uncooperative jurisdictions outside the EU (including tax havens and aggressive tax planning).
(4th quarter 2012)”).
1041
European Commission. (2012). Communication on Commission Work Programme 2013, COM(2012) 629
final, 23 October 2012, at p. 3.
1042
European Commission. (2013a). Communication on Commission Work Programme 2014, COM(2013) 739
final, 22 October 2013, at p. 9; European Commission. (2013b) Annexes to the Communication on Commission
Work Programme 2014, COM(2013) 739 final, 22 October 2013, at p. 5.
1043
It must be mentioned here that the EU Commission had stepped up its efforts with regards to tax rulings
and state aid in the beginning in 2014. Also see section 5.4.
1044
International Consortium of Investigative Journalists (ICIJ). (2014). Luxembourg Leaks: Global Companies’
Secrets Exposed. Retrieved from https://www.icij.org/investigations/luxembourg-leaks/; Also see Section
9.4.2.2.
1045
See Sections 5.4. and 9.4.2.1.
1046
Juncker, J.C. (2014). A New Start for Europe: My Agenda for Jobs, Growth, Fairness and Democratic Change
– Political Guidelines for the next European Commission. Retrieved from
https://ec.europa.eu/info/sites/default/files/political-guidelines-short_en.pdf.
1047
European Commission. (2014a). Communication on Commission Work Programme 2015 A New Start,
COM(2014) 910 final, 16 December 2014, at p. 1.
1048
European Commission (2014a), at p. 8; European Commission. (2014b). Annex to the Communication on
Commission Work Programme 2015 A New Start, COM(2014) 910 final, Annex 1, 16 December 2014, at p. 3.
1049
Also see section 8.1.5.3.
220
In June 2016, the Commission presented the announced EU Action Plan.1050 Much more
than the OECD Action Plan, this EU Commission Action Plan focuses on inter-taxpayer equity
concerns, and it emphasises that the “current [international] rules for corporate taxation no
longer fit the modern context[, because] [c]orporate income is taxed at the national level,
but the economic environment has become more globalised, mobile and digital.”1051 This
makes it easy for corporations to shift profits, and it makes it harder to determine which
country that should have the right to tax these profits. This leads to a situation where
“certain profitable multinationals appear to pay very little tax in relation to their income,
while many citizens are heavily impacted by fiscal adjustment efforts”, which has “caused
public discontent [and] [t]his perceived lack of fairness threatens the social contract between
governments and their citizens, and may even impact overall tax compliance.”1052
The Commission further considers that “[c]omplex and intransparent rules are inefficient.
They put smaller businesses, which are the backbone of Europe’s economy, at a
disadvantage. […] The current lack of coordination in corporate taxation between Member
States creates obstacles for companies acting in the Single Market […] [and it] also allows
companies to exploit mismatches. Intense competition for mobile tax bases has created new
opportunities for aggressive tax planners, while other companies are still facing double
taxation.”1053
As tax rules are increasingly becoming outdated, the Code of Conduct for business taxation
becomes less effective in dealing with harmful tax practices within the EU.1054 Moreover, the
legitimacy of tax competition is weakening when it is abused for corporate tax
avoidance.1055 The EU thus builds on the OECD BEPS work in order to make the corporate
income tax fairer and more efficient. Accordingly, it must re-establish a link between
taxation and where economic activity takes place; it must allow Member States to correctly
value corporate activity in their jurisdiction; it must create a competitive and growth-
friendly corporate tax environment; and it must safeguard the Single Market as well as
protect the EU against non-cooperative tax jurisdiction.1056
To achieve these goals, the CCCTB must, first and foremost, form an overall holistic solution
to profit shifting.1057 Secondly, while the CCCTB proposal is being prepared, a “coherent EU
approach to implementing the new international standards arising from the OECD BEPS
project, providing consistency for businesses and preventing a fragmented approach in the
Single Market.”1058 Thirdly, as unfettered tax competition hampers growth, greater
coordination should create a more favourable business environment. Moreover, the
Commission looks specifically to cross-border loss offset possibilities and to improve tax
1050
European Commission. (2015d). Communication on a Fair and Efficient Corporate Tax System in the
European Union: 5 Key Areas for Action, COM(2015) 302 final, 17 June 2015.
1051
European Commission (2015d), at p. 2.
1052
1053
1054
1055
1056
1057
European Commission (2015d), at pp. 8-9.
1058
221
resolution mechanisms to further improve the corporate tax environment. Fourthly, the
Commission proposes to further increase tax transparency, also in relation to third-
countries. Finally, the tools for EU coordination will also be improved by reforming the EU
Code of Conduct for Business Taxation and the installation of the Platform on Tax Good
Governance.1059
The 2016 Commission Work Programme builds further on the EU Action Plan, as it says: “We
also want to make further progress towards fair, efficient and growth-friendly corporate
taxation, based on the principle that companies should pay taxes in the country where
profits are generated. We will present a set of measures to enhance transparency of the
corporate tax system and fight tax avoidance, including by implementing international
standards on base erosion and profit-shifting. We intend to withdraw the blocked proposal
for a Common Consolidated Corporate Tax Base and replace it with proposals for a staged
approach starting with agreeing a mandatory tax base. This will improve the Single Market
for businesses whilst closing loopholes and ensuring that all companies pay their fair share
of tax.”1060
In January 2016, the Commission presented the Anti-Tax Avoidance Package, which
consisted of an overarching communication from the Commission, a proposal for the Anti-
Tax Avoidance Directive, a proposal to revise the Directive on Administrative Cooperation, a
recommendation on tax treaties, a communication on an external strategy for effective
taxation, and a study on aggressive tax planning.1061
The Commission’s Communication repeats some of the statements from the EU Action Plan
in the Anti-Tax Avoidance Package communication but uses distinctly stronger wording. For
instance, the communication states: “Member States suffer significant revenue losses due to
this aggressive tax planning by certain companies. Other less aggressive, less mobile
taxpayers then have to carry a heavier burden. […] This uneven burden-sharing erodes
fairness in taxation, reduces general tax-payer morale and threatens the social contract
between citizens and their governments. The European Parliament, voicing the concerns of
European citizens, has demanded that these practices should stop.”1062 However, the
Commission Staff Working Document that is accompanying the Anti-Tax Avoidance Package
suggests some nuances to this stronger language. For example, with regard to the economic
evidence of profit shifting, the Staff Working Document points to the lack of data that was
also encountered by the OECD in BEPS Action 11, and, while the existence of BEPS is
demonstrated in many academic studies, its precise impact is hard to measure. Even so, the
impact is thought to be considerable.1063 Moreover, the Staff Working Document offers no
1059
European Commission (2015d), at pp 10-14.
1060
European Commission. (2015a). Communication on Commission Work Programme 2016 No Time for
Business as Usual, COM(2015) 610 final, 10 October 2015, at p. 8; European Commission. (2015b). Annex to
the Communication on Commission Work Programme 2016 No Time for Business as Usual, Annex 1,
COM(2015) 610 final, 10 October 2015, at p. 3.
1061
European Commission (2016c).
1062
European Commission. (2016d). Communication on the Anti-Tax Avoidance Package: next steps towards
delivering effective taxation and greater tax transparency in the EU, COM(2016) 23 final, 28 January 2016, at p.
2.
1063
European Commission (2016g), at p. 6.
222
further evidence on differences in the tax burden of international and domestic (individual)
taxpayers nor on any noticeable effects on the levels of tax morale or tax compliance.
The Communication further points out that, while the revised CCCTB proposal is pending,
the Commission is to take action that is closely linked to the OECD/G20 BEPS Project. Those
BEPS measures that can be implemented in national legislation will be included in the Anti-
Tax Avoidance Directive. Moreover, the Commission makes it clear that it wants to show
political ambition by going beyond what was agreed upon in the OECD BEPS Project:
“Europe now has the opportunity to go further in some areas and take action in respect of
other aggressive tax planning structures that have been discussed at the OECD and in the
inter-institutional debate.”1064 This means that, on the one hand, the EU means to
implement BEPS Actions that were not minimum standards as if they were minimum
standards, such as CFC rules, and, on the other hand, this means that additional measures
are included that were not part of the OECD Actions, such as rules on exit taxation and a
general anti-abuse rule.1065 In addition, the Commission announced that, in addition to
implementing the OECD Action 13 Country-by-Country reporting between tax authorities on
at EU level, the Commission will also analyse how (similar) CbC information can be made
public as well.1066
Under the Dutch presidency of the Council, the Anti-Tax Avoidance Directive was adopted in
less than six months from the time that it was proposed.1067 This unprecedented timeframe
from the proposal to the adoption of a directive concerning (direct) taxation on its own is
indicative of how much the political morality on what is acceptable taxpayer behaviour has
shifted in only a relatively short period of time.
Moreover, it was already noted above that the wording used became more explicit in DAC4
(adopted in 2016) compared to DAC3 (adopted in 2014).1068 The same is true for the
language in ATAD. While the language in the OECD/G20 remained more nuanced, the EU
directives took on a much stronger tone. One explanation for this change in tone in the
space of two years’ time lies in the fact that, after the LuxLeaks scandal of 2014, the ICIJ had
uncovered another international tax scandal, the Panama Papers, that was made public in
April 2016.1069 This shift in tone, for example, in particular that most of the nuancing that
one can find in the considerations of previous directives has disappeared from the
considerations in the ATAD, is another strong indication of the changes in the political
narrative on corporate tax avoidance. For instance, even though the Staff Working
Document notes that conclusive data is not available, the ATAD’s considerations state that
“groups of companies increasingly engaged in BEPS, through excessive interest
deductions.”1070
1064
1065
European Commission (2016d), at pp. 5-6.
1066
1067
Council Directive (EU) 2016/1164 on laying down rules against tax avoidance practices that directly affect
the functioning of the internal market. Retrieved from http://data.europa.eu/eli/dir/2016/1164/oj.
1068
See section 8.1.
1069
International Consortium of Investigative Journalists (ICIJ). (2016) The Panama Papers: Exposing the Rogue
Offshore Finance Industry. Retrieved from https://www.icij.org/investigations/panama-papers/; Also see
section 9.4.3.2.
1070
223
The ATAD introduces five minimum standards for measures that are to be implemented by
the Member States. The interest limitation rule, General Anti-Abuse Rule, CFC-rule and rules
concerning hybrid mismatches are, by and large, consistent with the recommendation of
the OECD/G20 BEPS Project.1071 The EU Directive goes beyond the scope of BEPS with regard
to these measures in the sense that these are all minimum standards for EU Member States,
while, in BEPS, only Action 6 was adopted as a minimum standard.1072 Moreover, in addition
to the BEPS recommendations, the ATAD also includes a minimum standard for exit taxation
for asset transfers between the head office and a PE in different Member States, and when
the tax residence of an entire business is transferred from one Member State to another or
a third country.1073
However, even though the ATAD prescribes minimum standards, the result of the
negotiations between the Member States in the run-up to its adoption is that the ATAD
offers Member States several options to better adapt the measures to their national tax
systems. These options, however, mean that the measures can vary in their level of
strictness across Member States. For example, the interest-deduction limitation rule offers
the options of a de minimis threshold, several carve-outs,1074 grandfathering, and a so-called
group-escape. Additionally, there are options for carry-forward and carry-back for non-
deductible interests and/or unused interest capacities.
The political negotiations on the CFC rules resulted in the ATAD giving the choice to either
apply Model A or Model B. Model A entails that a number of predefined categories of
passive income should be deemed CFC income to be included in the tax base of the parent
company, unless the CFC carries on substantive economic activity, which is supported by
staff, equipment and assets. Model B means that the income of a CFC should be included
only if the income came from non-genuine arrangements that have been put in place for the
essential purpose of obtaining a tax advantage. Whether this is the case depends on
whether there are adequate significant people functions relevant to the assets and risks
instrumental to generating income.1075 Generally, Model B is considered the less strict
option; 10 Member States have opted for Model B, while 14 Member States have opted for
Model A.1076
1071
See respectively OECD ((2015d); OECD (2015f); OECD (2015c); and OECD (2015b).
1072
See Council Directive (EU) 2016/1164, articles 4, 6, 7, 8 and 9.
1073
See Council Directive (EU) 2016/1164, article 5.
1074
Member States can allow taxpayers to fully deduct borrowing costs up to 3 million Euro, Member States
can choose to exclude stand-alone entities, exclude certain loan for long-term public infrastructure projects,
exclude loans concluded before 17 June 2016, and Member States are allowed to increase the deduction limit
based on a higher group ratio. For example, 12 Member States apply the standalone exception, 18 Member
States exclude loans for long-term infrastructure projects, 8 Member States apply the grandfathering option,
and 14 Member States apply the group escape option. See Dafnomilis, V. (2021). ATAD I and II Implementation
Overview. PwC NL Knowledge Center, at pp. 9-17.
1075
See Council Directive (EU) 2016/1164, article 7(2).
1076
Predominantly the Member States that were considered to be more likely to engage in harmful tax
competition to attract foreign investment opted for Model B (Belgium, Cyprus, Estonia, Hungary, Ireland,
Latvia, Luxembourg, Malta, Slovakia, and United Kingdom). See Dafnomilis (2021), at pp. 6 and 28.
224
These options within the ATAD are symptomatic examples stemming from the dichotomy
between international tax policy as a holistic, corrective mechanism and the national tax
revenue considerations that were discussed earlier.1077 While the considerations of the
ATAD say that “[in] a market of highly integrated economies, there is a need for common
strategic approaches and coordinated action, to improve the functioning of the internal
market and maximise the positive effects of the initiative against BEPS,”1078 the end result of
the political negotiations in the Council show that, even within the political union that is the
EU, the (selfish) interests of each separate Member State play a very dominant role when it
comes to maximising tax revenue.
In tandem with the 2017 Work Programme,1079 the European Commission relaunched the
CCCTB proposal as a two-stage proposal.1080 The first stage was to be a compulsory common
corporate tax base, and the second stage was to include the possibility of that common tax
base to be consolidated across the EU. The Commission also announced in the 2017 Work
Programme further amendments to come to the ATAD and the DAC in order to further
implement the OECD agreement on BEPS: “The Commission is also presenting further
measures to tackle tax fraud and evasion, including via third countries”, and “additional
measures in the area of tax transparency over the next year [include] a proposal to increase
oversight of promoters and enablers of aggressive tax planning schemes.”1081 Finally, the EU
proposed in the 2017 Work Programme to finalise the list of third-country jurisdictions that
fail to comply with the international tax good governance standards and their
implementation.
The splitting up of the CCCTB proposal is a direct result of the fact that Member States, since
2011, have resisted a full tax consolidation in the EU.1082 Interestingly, as the original CCCTB
proposal was meant to make life easier for businesses when they engaged in cross-border
activities, the business community considered the consolidation elements as some of the
crucial elements in order for them to be able to support the proposal. However, since 2017,
the CC(C)TB has been almost completely rebranded as an anti-tax avoidance instrument.1083
Moreover, this rebranding is also utilised to be able to justify of the staged approach.1084
1077
See section 5.4.1.
1078
See Council Directive (EU) 2016/1164, consideration (2).
1079
European Commission. (2016a). Communication on Commission Work Programme 2017 Delivering a
Europe that protects, empowers and defends, COM(2016) 710 final, 25 October 2016.
1080
European Commission. (2016i). Proposal for a Council Directive on a Common Consolidated Corporate Tax
Base (CCCTB), COM/2016/0683 final, 25 October 2016; and European Commission. (2016j). Proposal for a
Council Directive on a Common Corporate Tax Base, COM/2016/0685 final, 25 October 2016.
1081
Referring to Action 2 in dealing with hybrid mismatch arrangements in third countries (ATAD 2), and Action
12 mandatory disclosure rules for intermediaries (DAC6). See European Commission (2016a), at p. 9; and
European Commission. (2016b). Annex to the Communication on Commission Work Programme 2017
Delivering a Europe that protects, empowers and defends, Annex 1, COM(2016) 710 final, 25 October 2016, at
p. 3.
1082
European Commission (2016j), at p. 3.
1083
See European Commission (2016j), consideration (1), consideration (2), consideration (4), consideration
(5), consideration (7), consideration (9), consideration (14), consideration (15), consideration (16),
consideration (17), and consideration (21).
1084
The Commission argues that a non-consolidated common tax base would still be a big improvement over
28 separate divergent tax systems in the EU. However, the Commission, in this regard, does not consider that
225
Accordingly, this gels with the notion that a holistic approach to tax policy for correct
taxpayer behaviour is much easier for countries to support politically than a holistic
approach to the sharing of tax revenue between countries.
The ATAD 2 proposal was also published on the day of the publication of the 2017 Work
Programme. The proposal explains why OECD Action 2 was to be implemented in two
stages: “As part of the final compromise proposal for the Anti-Tax Avoidance Directive that
was agreed on 20 June 2016, the ECOFIN Council issued a statement on hybrid mismatches.
In this statement the ECOFIN Council requests the Commission "to put forward by October
2016 a proposal on hybrid mismatches involving third countries in order to provide for rules
consistent with and no less effective than the rules recommended by the OECD BEPS report
on Action 2, with a view to reaching an agreement by the end of 2016."1085 The Council
subsequently adopted ATAD 2 on 29 May 2017.1086
On 5 December 2017, the Council approved and published conclusions containing an EU list
of non-cooperative jurisdictions in taxation matters.1087 The Council also agreed on applying
defensive measures regarding the listed jurisdictions. The aim of the EU list is to promote
good governance worldwide as well as to maximise efforts to prevent tax fraud and tax
evasion.1088 The Council's work on the list has been conducted in parallel with the OECD.
Finally, the work on the list is a dynamic process. As of 2020, the Council updates the list
twice a year. The next revision of the list is scheduled for October 2022.
The 2018 Commission Work Programme does not say much about tax issues. With the
implementation of most, if not all, of the BEPS Actions underway or completed at EU level,
the focus of the Commission has shifted to a new issue, the digital economy. The 2018 Work
Programme mentions this in a cursory manner, but it is clear that this will develop into a
separate and big work stream over time: “We will continue our efforts to protect national
budgets against harmful tax practices. This includes […] rules for taxing the profits that
(i) as a result of BEPS and other developments in international tax law, these separate tax systems are already
converging on many points; and (ii) that even if there is a directive equalising the tax base, the national
implementation and interpretation of these rules would still effectively mean that there would be differences
between the 27 Member States. Even if these differences are small, cross-border trade activities would still
need to account for those, and, as a result, the effect of the CCCTB to facilitate cross-border trade within the
EU would be much smaller than indicated. Moreover, politically, there seems to be very little incentive for
Member States to agree on the second stage once an eventual agreement on the first stage would have been
reached in the Council, as this would lead to a redistribution of tax revenue across the Member States (e.g.,
because of cross-border loss relief). In fact, from the CCTB proposal itself, it can be inferred that this point
likely was a major reason as to why the political negotiations for the original proposal were stalled in the first
place.
1085
European Commission. (2016h). Proposal for a Council Directive on hybrid mismatches with third
countries, COM(2016) 687 final, 25 October 2016, at p. 2.
1086
Council Directive (EU) 2017/952. On hybrid mismatches with third countries. Retrieved from
1087
Council Conclusions. (2017). On the EU list of non-cooperative jurisdictions for tax purposes, 5 December
2017. 15429/17 FISC 345 ECOFIN 1088.
1088
Also see Council Conclusions. (2016). On the criteria for and process leading to the establishment of the EU
list of noncooperative jurisdictions for tax purposes, 8 November 2016. 14166/16 FISC 187 ECOFIN 1014, at pp.
4-7. (“Compliance of jurisdictions on tax transparency, fair taxation and the implementation of BEPS measures
will be assessed cumulatively in the screening process.”).
226
multinationals generate in the digital economy.”1089 The issue of addressing tax challenges in
the digitalising economy and how the OECD and the EU consider these challenges in their
official publications will be discussed in more detail in the following section.
8.4 Addressing the Challenges of the Digitalised Economy
The BEPS Action 1 Final Report on the digital economy did not yield much in the way of
tangible results. Moreover, one could argue that some of the source countries were also
somewhat disappointed at how much extra revenue they managed to collect, for instance,
as a result of the changes to the Transfer Pricing rules as described in Actions 8-10.1090
Therefore, it was perhaps unavoidable that the G20/OECD BEPS Project was to be re-started
with the digitalisation of the economy at its heart.
In 2018, the OECD identified (again) that digitalisation raises much broader questions with
regard to the international tax system than only how digitalisation might exacerbate
BEPS.1091 These broader issues revolve around the question of which jurisdiction that should
get to tax the income that is generated in cross-border activities in a highly integrated,
globalised, and digitalised economy. Moreover, the 2018 interim report stated that leaving
the question of how these taxing rights should be allocated unanswered (or leaving them
with an unsatisfactory answer) would translate in a proliferation of unilateral measures to
tax the revenues of this cross-border activity.1092 As such, the simple conclusion was that, if
the international tax system did not provide for a way that, particularly, source countries
could tax the income from these cross-border activities, countries would devise a way to do
it using their national tax system.
The interim report gives a comprehensive overview of how digitalisation can impact
business models across the whole economy, how several different digital business models
work, and how digitalisation could affect value creation.1093 The report considers how these
might impact the international corporate tax system in the longer run, as the broader tax
challenges of digitalisation change the rules for both determining which jurisdiction that
gets the right to tax based on the nexus of economic activity and the allocation of profit to
this nexus.1094 A stronger reliance on intangible assets for generating income across
jurisdictions where a multinational corporation has little or no physical presence means
that, even if a jurisdiction can legitimately claim the right to tax, it is still very hard to then
objectively determine how the income should be distributed over the different
jurisdictions.1095
1089
European Commission. (2017). Communication on Commission Work Programme 2018 An agenda for a
more united, stronger and more democratic Europe, COM(2017) 650 final, 24 October 2017, at p. 5.
1090
See for instance, Herzfeld, M. (2017). The case against BEPS: Lessons for tax coordination. Florida Tax
Review, 21, 1, at pp. 4 and 19-22.
1091
OECD (2018c), at paras. 15-21.
1092
See for an overview of different categories of unilateral measures, such as specific Permanent
Establishment rules, withholding tax regimes, turnover taxes, and specific regimes targeting large MNE
regimes, OECD (2018c), at pp. 135-158.
1093
OECD (2018c), at pp. 23-87.
1094
OECD (2018c), at paras. 381-382.
1095
See also Section 5.4.2. on various tax scholars that suggest several methods by which to divide the tax base
over jurisdictions based on inter-nation equity considerations.
227
A compelling element in the Interim report is that it describes how different members of the
Inclusive Framework view the changes that should be made to the international tax system
as a result of the digitalisation of the economy. There appear to be strong voices in the
Inclusive Framework that consider both that scale-without-mass-business-models, and
reliance on intangibles should not lead to fundamental changes in the international tax
system.1096 The Interim report does not reveal which countries (have) held this position, but
it is likely that at least some of these voices belong to the incumbent residence countries
that might fear that changes to the international tax system will result in a loss of revenue
on their part. Additionally, the Interim Report seems to underline that, while none of the
groupings of countries seem to reject outright that the tax system needs further
consideration as a result of the digitalisation, there is a sense of a lock-in effect. For
example, the OECD suggests that all three groups agree that “the long-standing principles of
the current tax system”1097 still manage to deliver the correct result in most cases. It is also
clear, though, that there is disagreement on whether the extent of those principles still
works well enough in the digitalised margins as well as on the precise width of those
margins.
Another important thing to note is that the countries that believe that “interim
measures”1098 are justified are willing to take for granted the negative economic spill-over
effects that these additional levies might have. They see a “strong imperative to act to
ensure that the tax paid by certain businesses is commensurate with the value they consider
is being generated in their jurisdiction […] and consider that at least some of the adverse
consequences can be mitigated by the design of the measure.”1099 As it has been argued, the
considerations of these countries do not involve the question of whether or not the levels of
taxation of a certain business are adequate for the business as a whole. They just consider
the levels of taxation within their own jurisdiction, and they do not reflect overly much on
the economic efficiency problems that might arise from this.1100
Moreover, it is not clear that possible negative spill-over effects of such additional measures
will be limited to their jurisdiction. It might well be that the impact on investment,
innovation, growth, welfare as well as that costs are passed on to customers or local
suppliers could affect an entire region.1101 Therefore, should it not be prevented that such
detrimental tax policies are enacted? Or, as Van Apeldoorn seems to suggest, should
incumbent residence countries not consider themselves duty-bound to relinquish some of
their tax revenue to preserve and/or restore the fiscal self-determination of these countries
that believe that a satisfactory international agreement is so unlikely that they feel forced to
1096
OECD (2018c), at paras. 387-393.
1097
OECD (2018c), at p. 172.
1098
OECD (2018c), at p. 178.
1099
1100
In fact, one might argue the additional levies are almost viewed as Pigouvian taxes designed to correct for
external costs of the current international tax system. See also section 4.1.3.1.
1101
Also see OECD. (2020c). Tax Challenges Arising from Digitalisation – Economic Impact Assessment: Inclusive
Framework on BEPS, OECD/G20 Base Erosion and Profit Shifting Project. OECD Publishing, at p. 11. (“The
magnitude of the negative consequences would depend on the extent, design and scope of these unilateral
measures, and the scale of any ensuing trade retaliation. In the “worst-case” scenario, these disputes could
reduce global GDP by more than 1%.”).
228
resort to such interim measures? 1102 In doing so, they would prevent that such potentially
harmful measures are even considered rather than attempting to limit their negative
consequences through design suggestions.1103
In the 2019 Policy Note, the OECD/G20 Inclusive Framework has agreed on a direction of
travel with regard to the tax challenges of the digitalisation of the economy.1104 The 3-page
Policy Note states that the work stream is to be divided into two pillars. The first pillar
addresses the questions on allocation of taxing rights and nexus issues. These issues
concern “fundamental aspects of the current international tax architecture”1105 because
there has to be found a way for there to be enough nexus to warrant taxing rights without
there being any significant physical presence. Therefore, the Inclusive Framework has
agreed to explore concepts such as changes to the PE threshold, “significant economic
presence”, and/or “significant digital presence”.1106 The second pillar is to “strengthen the
ability of jurisdictions to tax profits where the other jurisdiction with taxing rights applies a
low effective tax rate to those profits.”1107 This pillar is to take away the incentive to shift
profits to low tax or no-tax jurisdictions without actually prescribing a set minimum rate to
individual countries. Both pillars, therefore, innovatively create a taxing right in jurisdictions
that did not have the ability to tax that particular income before. In both cases, however,
this new taxing right comes on top of the existing international tax architecture.
The 2018 Interim Report and the 2019 Policy Note were followed up by a public
consultation document.1108 This document puts forward three possible models to allocate
profits to a new nexus under the first pillar. The first model based value creation, and thus
profit allocation, on levels of user participation. This means that only a limited number of
highly digitalised business models would be affected.1109 A second model looks at the use of
marketing intangibles, a basis for value creation and to allocate profit accordingly. This
means that more business models would be affected.1110 The third model sets criteria that
would constitute a significant economic presence. Subsequently, the profit allocation to this
significant economic presence could take place based on a formulaic apportionment.1111
The consultation document considers that the first two models are similar in their
conceptual approach and stay relatively close to the current international tax rules and
principles. The document then goes on to compare these two models in more detail and
discusses design considerations for both.1112 Interestingly, the consultation document does
not further elaborate on the significant economic presence model. This could be indicative
of the fact that the fundamental changes to the international tax system that are needed for
1102
Apeldoorn, L. van (2018). BEPS, tax sovereignty and global justice. Critical Review of International Social
and Political Philosophy, 21(4), 478-499, at pp. 493-494.
1103
OECD (2018c), at paras. 412-463.
1104
OECD (2019a).
1105
OECD (2019a), at p. 2.
1106
OECD (2019a), at p. 2.
1107
OECD (2019a), at p. 2.
1108
OECD (2019b).
1109
OECD (2019b), at paras. 17-28.
1110
1111
1112
229
the third model would not be able to count on enough support in the OECD/G20 inclusive
Framework, even though the Policy Note expressly mentions a “significant economic
presence” as a concept to be explored “without prejudice” only three weeks prior to the
publication of the Consultation Document.1113
Under the second pillar, the consultation document considers that these new rules should
be applied to ensure that all internationally operating businesses pay a minimum level of
tax.1114 To this end, two interconnected rules are considered, an income inclusion rule and a
tax on base eroding payments (undertaxed payments rule).1115 The income inclusion rule
would operate similar to a switch-over rule, meaning that the taxable income of a subsidiary
or permanent establishment would be included in the taxable income of the parent
company.1116 The undertaxed payment rule would deny a deduction for certain defined
payments to a related company, unless that payment was subject to taxes at a minimum
effective rate.1117 Finally, the coordination of both of these rules under the second pillar are
considered to prevent an overlap between them.1118
The 2019 Programme of Work subsequently puts further details as to what both pillars
could entail and on what the next steps will be to further flesh out the details to come to a
coherent and integral proposal.1119 This document first outlines options and issues for Pillar
One in connection with the new profit allocation rules that could determine how much
profit that could be taxed under a new taxing right. The options of a modified residual profit
split method, fractional apportionment method, and distribution-based approaches are
discussed, and several technical issues are highlighted for each of these methods, which are
to be further examined in the Inclusive Framework.1120 Secondly, the Programme describes
that the new taxing right to be developed would not be constrained by the traditional
physical presence requirements, so that market jurisdictions can tax those profits allocated
to them under the new profit allocation rules.1121
With regard to Pillar Two, the Programme of Work is first and foremost focused on technical
issues of the design of the income inclusion rule that operates as a top-up to a minimum
rate. It announces further work on how the effective tax rate should be determined, the use
of carve-outs, at which level the effective tax rate should be calculated (at global group
level, jurisdictional level, or entity-by-entity) to apply the top-up tax, as well as a host of
other technical details on co-ordinating the income inclusion rule with other international
tax rules.1122 With regard to the undertaxed payments rule, the next steps are described,
such as the determination of the type of payments that are to be included, how the
adjustments should take place, and possible carve-outs.1123 Finally, further work for both
1113
OECD (2019a), at p. 2.
1114
OECD (2019b), at para. 91.
1115
1116
1117
OECD (2019b), at paras. 101-103.
1118
1119
OECD (2019c).
1120
1121
1122
1123
230
rules is necessary with regard to rules of co-ordination, the interaction with other BEPS
actions and compatibility with EU law.1124
On 9 October 2019, the OECD secretariat published a public consultation document with the
Secretariat Proposal for a “Unified Approach” under Pillar One.1125 The first thing of note is
that this document does not “represent the consensus views of the Inclusive Framework, the
Committee on Fiscal Affairs (CFA) or their subsidiary bodies.”1126 Therefore, what is unified in
this document is the three models of profit allocation under a new nexus rule rather than
the opinions of the members of the Inclusive Framework. Besides this, the document sets
out proposals under Pillar One for the scope, new nexus rules, and new profit allocation
rules, all of which go beyond the arm’s length principle using a three-tier approach (Amount
A, Amount B and Amount C).1127
The document mentions that the “current rules dating back to the 1920s are no longer
sufficient to ensure fair allocation of taxing rights in an increasingly globalised world.”1128
While it is not made explicit in the text itself, the term fair should be primarily understood in
the context of inter-nation equity. It is considered unfair that the current system grants
taxing rights to the residence country (where there is a physical presence) instead of to
jurisdictions where users of highly digitalised business models are located (where the
company has no physical presence).1129 This sense of unfairness in the allocation of taxing
rights is stronger, according to the OECD secretariat. When based on the current arm’s-
length-principle-rules, the taxing rights on excess profits fail to be allocated to the market
jurisdiction. The Unified Approach is thus designed to correct the outcome of the current
rules based on the arm’s length principle using a formula-based solution.1130 Consequently,
the residence country should give tax relief for the re-allocated portion of the profit to
prevent double taxation.1131
This formula-based solution means concretely that, under Amount A, the routine profit
would still be subject to the current arm’s length-based rules. However, a portion of the
deemed residual profit is calculated based on a set formula, and this portion is then
allocated to the market jurisdictions meeting the new nexus rule criteria. In addition, an
Amount B is proposed to simplify the current transfer pricing rules for marketing and
distribution services. Namely, the current rules would be replaced by a fixed remuneration.
Finally, Amount C can be calculated in those cases where the fixed remuneration of Amount
1124
1125
OECD (2019d).
1126
OECD (2019d), at p. 2; also see section 5.3.2.
1127
1128
1129
This is the only reference to fairness or similar concepts in this document. It can be observed that up until
this point, the concept of “fairness” has both in OECD and EU publications been used mostly in the context of a
level playing field / fair competition between different companies, as well as in the context of inter-taxpayer
equity between corporate and individual taxpayers. Inter-nation equity very rarely was mentioned in official
OECD and EU documents as a consideration. As argued before, this underlines that particularly the Pillar One
proposals should be considered as a first small, but important step towards a more global holistic view with
regards to allocating taxing rights. Also see Section 5.5.
1130
1131
231
B does not reflect the actual level of functions in the market jurisdictions, and, therefore, a
profit in the excess of Amount B would be warranted.1132
On 8 November 2019, the OECD published the public consultation document for Pillar
Two.1133 Even though this document does not state it as clearly in the title as the Unified
Approach document did, this Pillar Two document also does not “represent the consensus
views of the Inclusive Framework, the Committee on Fiscal Affairs (CFA) or their subsidiary
bodies.”1134 It is further worth noting that, even though Pillar Two also “represents a
substantial change to the international tax architecture”1135 and in contrast to the Unified
Approach document, the Pillar Two document does not explicitly refer to fairness or similar
concepts to justify this fundamental change. Instead, it refers to the 2019 Programme of
Work by stating that “global action is needed to stop a harmful race to the bottom on
corporate taxes, which risks shifting the burden of taxes onto less mobile bases and may
pose a particular risk for developing countries with small economies.”1136 These remarks
appear to be mostly in the context of inter-taxpayer equity considerations—that, in the
national tax mix, the tax burden should not fall primarily on domestic taxpayers, while
international corporations manage to escape this tax burden as a result of preferential tax
regimes offered to them by governments.1137 Additionally, they could be viewed in the
context of inter-nation equity, as the GloBe proposal could act as a protective mechanism by
preventing countries from adopting ineffective tax incentives to attract investments and,
thus, ensure that no future tax revenue would be needlessly sacrificed. However, both
perspectives would primarily serve to safeguard tax sovereignty and fiscal self-
determination towards the future. It would therefore appear from the wording that the
Pillar Two proposal is not aimed at correcting unfair allocations of taxing rights, because it
means to correct the existing bias of the international tax system but only to prevent that
the tax sovereignty is further encroached upon.1138
The Pillar Two document considers that, for a fair comparison of effective tax rates, there is
a need to determine a common tax base for multinational corporations on a global level.
The document suggests that the consolidated financial accounts of multinational
corporations could be used as a starting point to provide an appropriate income base for
GloBe, and it further considers several issues and adjustments that would need further
consideration in this regard.1139 A second chief issue is at which level the effective tax rate
should be calculated (at global group level, jurisdictional level, or entity-by-entity) to
1132
1133
OECD (2019e).
1134
OECD (2019e), at p. 3.
1135
OECD (2019e), at para. 7.
1136
OECD (2019e), at para. 7; OECD (2019c), at para. 54.
1137
Paragraph 54 of the 2019 Programme of Work mentions uncoordinated unilateral action to attract new tax
base and protect the existing tax base, but specifically focuses on tax incentives to attract investments in
developing countries and that studies find that these incentives are often ineffective.
1138
See, in this context, Van Apeldoorn (2018), at pp. 483-494. Van Apeldoorn argues that it is an important
step to further the cooperation between states to tackle the corrosive effects of tax competition. However,
the OECD does not sufficiently address the current inequality in effective tax sovereignty. A global minimum
tax rate would not increase or even guarantee the current levels of effective tax sovereignty. To increase
effective tax sovereignty, global redistribution is necessary.
1139
OECD (2019e), at paras. 15-52.
232
determine whether top-up tax should be applied. Here, the Pillar Two document submits
that the costs of compliance would be lower with a less granular approach on the one hand,
but that, on the other hand, the effectiveness in creating a floor for tax competition of Pillar
Two would be lower with such a less granular approach.1140
In October 2020, the OECD published three reports. The Blueprints on Pillar one, and Pillar
Two, as well as an economic impact assessment of the proposals for both Pillars.1141 The
Cover Statement by the OECD/G20 Inclusive Framework on BEPS on the Reports on the
Blueprints of Pillar One and Two makes it clear that no agreement has been reached yet on
either Pillar, but that the OECD/G20 Inclusive Framework approved the release of the
reports as a solid foundation for future agreement. The cover statement on the project says:
A consensus-based solution comprised of two pillars (Pillar One focused on nexus

and profit allocation whereas Pillar Two is focused on a global minimum tax
intended to address remaining BEPS issues) can not only play an important role to
ensure fairness and equity in our tax systems and fortify the international tax
framework in the face of new and changing business models; it can also help put
government finances back on a sustainable footing. The public pressure on
governments to ensure that large, internationally operating, and profitable
businesses pay their fair share and do so in the right place under new international
tax rules has increased as a result of the current COVID-19 pandemic. At the same
time, a consensus-based solution could provide businesses with much needed tax
certainty in order to aid economic recovery.1142
The Pillar One Blueprint further states: “Pillar One seeks to adapt the international tax
system to new business models through changes to the profit allocation and nexus rules
applicable to business profits. Within this context, it expands the taxing rights of market
jurisdictions […] where there is an active and sustained participation of a business in the
economy of that jurisdiction.”1143
Furthermore, the Pillar Two Blueprint states: “[Pillar Two is] a systematic solution designed
to ensure that all internationally operating businesses pay a minimum level of tax. in doing
so, it helps to address the remaining BEPS challenges linked to the digitalising economy,
where the relative importance of intangible assets as profit drivers makes highly digitalised
businesses often ideally placed to avail themselves of profit shifting planning structures.”1144
The most comprehensive reasoning and justification for Pillar Two can be found in the 2019
Programme of Work.1145 Interestingly, the text in the Programme of Work and the Pillar Two
Blueprint appear to differ slightly. Where the Blueprint speaks of “remaining BEPS
challenges linked to the digitalising of the economy”,1146 the Programme of Work refers to
1140
OECD (2019e), at paras. 53-72.
1141
OECD (2020a); OECD (2020b); and OECD (2020c).
1142
OECD (2020a), at p. 7; OECD (2020b), at p. 10.
1143
OECD (2020a), at para. 6.
1144
1145
1146
OECD (2020b), at pp. 14, 15, and 148.
233
“remaining BEPS risk of profit shifting to entities subject to no or very low taxation”.1147 In
fact, the Programme of Work makes it clear that the need for GloBe proposal comes from
the assumption that the measures from the original BEPS Actions would not preclude the
“risk of [future] uncoordinated, unilateral action, both to attract more tax base and to
protect existing tax base, with adverse consequences for all countries, large and small,
developed and developing as well as taxpayers.”1148 Therefore, one might argue that Pillar
Two is primarily aimed at removing existing tax incentives to attract investments and/or to
prevent new incentives from springing up.
Moreover, Pillar Two is indiscriminate. The 1998 Report on Harmful Tax Practices made a
difference between tax incentives that stimulate new investments and tax incentives that
divert real investment decisions in a distortive manner. Additionally, the 1998 report
considered that tax incentives could justifiably serve to level the playing field between
countries, while it was argued that they made it possible to compensate for specific
structural disadvantages such as a poor geographical location, a lack of natural resources,
and/or the size of the market.1149
To justify the catch-all nature of Pillar Two, the OECD points to a study by the International
Monetary Fund, the OECD, the United Nations and the World Bank, showing that tax
incentives in developing countries are redundant in attracting investments.1150 The
investments would also have occurred if there were no tax incentives. The 2019 Work
Programme therefore seems to assume that tax incentives cause needless loss of revenue
and that they likely lead to the (artificial) re-routing of investments with the use of
intangibles, which causes concern for new BEPS challenges.
Taken together, the Blueprint reports give the impression that the OECD views the entire
project primarily as a technical challenge to ensure that the existing architecture of the
international tax system can be adapted enough to accommodate a new economic reality.
One could argue that the project’s goal is not to achieve greater fairness and a more
equitable system, but that fairness and equity are a by-product or happy coincidence. Or,
perhaps, that fairness and equity are seen as the logical and inherent result of economic
efficiency. By adapting the system to fit the economic reality once again, fairness and equity
are also automatically restored.
By also putting in a universal tax rate floor, the entire system is ensured to ceteris paribus
generate more tax revenue on a global level, while effectively side-lining jurisdictions’
(future plans to introduce) tax incentives to attract investments. This could also promote
fairness and equity, as the assumption is that the extra tax revenue increases tax
sovereignty and fiscal self-determination, as well as that it restores the level playing field
1147
OECD (2019c), at p. 25.
1148
OECD (2019c), at p. 25.
1149
1150
International Monetary Fund, OECD, United Nations, & World Bank. (2015). Options for Low Income
Countries Effective and Efficient Use of Tax Incentives for Investment: A Report to the G-20 Development
Working Group by the IMF, OECD, UN and World Bank. IMF, at p. 11. The same study, however, also states that
empirical evidence suggests that effective tax rates do significantly affect investments in advanced economies.
234
between international and domestic companies and/or that it shifts the tax burden back
from domestic (individual) taxpayers to multinational corporations.
This means that tax neutrality, the normative universe of many policymakers and scholars in
international tax, is at the core of this technical approach of the problem.1151 An
international tax system that fits the economic reality and is not riddled with national, ad-
hoc tax incentives does not distort the choices of economic actors. It achieves production
efficiency and, therefore, leads to the greatest measure of welfare for everyone
involved.1152 However, as argued before, the question is whether neutrality is the best
promoter of fairness and equity. Or, if economic efficiency, as a main tenet of international
tax policymaking, perhaps, in practice, tends to maintain the status quo between capital-
rich and capital-poor jurisdictions as well as effectively inhibiting a more global and holistic
outlook in international tax policy.1153
On 8 October 2021, the OECD announced that the Inclusive Framework had reached an
agreement on a Two-Pillar Solution to address the tax challenges arising from the
digitalisation of the economy.1154 The statement is as factual as it is brief. It mentions all the
separate elements of both Pillars very briefly, explains very shortly how the implementation
of the proposals should take effect as well as the expected timeline on which the
implementation is to happen. What is interesting is that, even though this is really the first
BEPS 2.0 document that is based on an actual agreement by the OECD/G20 Inclusive
Framework rather than an ongoing work document, the statement does not mention the
background nor the reason for the project at all.1155
In December 2021, the OECD released the Model Rules for Pillar Two.1156 In this document,
the OECD repeats the somewhat perfunctory texts without further explanation that “two-
pillar solution to reform the international taxation rules and ensure that multinational
enterprises pay a fair share of tax wherever they operate and generate profits in today’s
digitalised and globalised world economy.”1157 The Model Rules then almost directly launch
into the technical details of Pillar Two. What is new in the document is the mentioning of a
1151
Compare Peters (2013), at p. 13; Hongler (2019), at p. 418; De Wilde (2010), at p. 288.
1152
Also see OECD (2020c), at para. 31 (“[A] negative effect may be partly or even fully offset by the positive
effect from other less quantifiable but nonetheless significant channels. In particular, the proposals aim to
increase tax certainty, would affect compliance and administration costs in various ways, may enhance the
efficiency of global capital allocation, and would reduce the need to raise revenues by implementing other
(potentially more distortive) tax measures”]; and at para. 294 (“The Pillar One and Pillar Two proposals reduce
ETR differentials across jurisdictions, thus reducing the scope for tax-induced distortions of investment
decisions and potentially leading to a more efficient capital allocation and higher global output”); and at para
376 (“Although the potential limitation in the generosity of tax incentives could reduce the scope of policy
instruments available to governments to attract foreign investment, it is unlikely to produce efficiency losses at
the jurisdiction or global level”).
1153
1154
OECD (2021b).
1155
For example, also see OECD (2020a) and OECD (2020b) at pp. 7-8 on this point of consensus in the
OECD/G20 Inclusive Framework. Both Blueprint reports state that they “reflect convergent views on a number
of key policy features, principles and parameters of both Pillars, and identif[y] remaining political and technical
issues where differences of views remain to be bridged”
1156
OECD (2021c).
1157
OECD (2021c), at p. 3.
235
Qualified Domestic Minimum Top-up Tax (QDMTT). Moreover, the QDMTT pops up
somewhat unannounced in chapter 4 on the computation of adjusted covered taxes.1158 The
QDMTT is mentioned seven times, while it is first explained at page 64:
Qualified Domestic Minimum Top-up Tax means a minimum tax that is included in
the domestic law of a jurisdiction and that:
(a) determines the Excess Profits of the Constituent Entities located in the
jurisdiction (domestic Excess Profits) in a manner that is equivalent to the GloBE
Rules;
(b) operates to increase domestic tax liability with respect to domestic Excess Profits
to the Minimum Rate for the jurisdiction and Constituent Entities for a Fiscal Year;
and
(c) is implemented and administered in a way that is consistent with the outcomes
provided for under the GloBE Rules and the Commentary, provided that such
jurisdiction does not provide any benefits that are related to such rules.
A Qualified Domestic Minimum Top-up Tax may compute domestic Excess Profits
based on an Acceptable Financial Accounting Standard permitted by the Authorised
Accounting Body or an Authorised Financial Accounting Standard adjusted to
prevent any Material Competitive Distortions, rather than the financial accounting
standard used in the Consolidated Financial Statements.1159
The add-on of the QMDTT means that the design of Pillar Two has undergone a fundamental
change. Where, originally, the parent jurisdiction would collect the top-up tax under the
Income Inclusion Rule, the QMDTT enables the local jurisdiction to collect the top-up tax
before the parent jurisdiction does. Moreover, this changes the overall effect of Pillar Two
and could lead to more tax competition rather than the opposite, as the QMDTT effectively
gives countries access to two types of corporate income tax, which thus gives more options
to compete.1160
The effect of these extra options could be that the introduction of the QDMTT could make it
more likely that the 15% effective tax rate floor effectively also becomes an effective rate
ceiling across countries for those multinational corporations in the scope of Pillar Two as
opposed to countries only being able to rely on their nominal corporate income tax rate. In
an ECIPE report, Bauer argues that a global minimum tax could hurt small open economies
beyond the free-rider problem.1161 In a scenario of full narrowing where the global
minimum tax becomes the globally prescribed effective tax rate, investments would
gravitate more towards larger economies, would still be subject to tax competition, and
would encounter more trade and investment barriers. According to the report, a global
1158
OECD (2021c), at p. 23.
1159
OECD (2021c), at p. 63.
1160
See for example, Devereux, M., Vella, J., & Burrus, H. W. (2021). More on Pillar 2 and Tax Competition.
Retrieved from Oxford University Centre for Business Taxation: https://oxfordtax.sbs.ox.ac.uk/article/more-on-
pillar-2-and-tax-competition.
1161
See Bauer, M. (2020). Unintended and undesired consequences: The impact of OECD Pillar I and II
proposals on small open economies (No. 04/2020). ECIPE Occasional Paper, at pp. 15 and 24-26.
236
minimum tax would not lead to a more efficient allocation of capital, as “countries’ legal and
institutional characteristics […] indicate that a narrowing of tax rate differentials would
effectively shift taxing powers to the world’s largest countries, of which most perform poorly
with respect to economic freedoms, openness to trade and investment and the state of the
rule of law. […] [The] reform proposals would reduce the financial resources of companies,
implying lower levels of domestic and international investment. As financial resources would
be allocated away from businesses to governmental institutions, which spend tax funds
according to political will, the reallocation of financial resources would likely generally result
in a less efficient allocation of financial resources.”1162 Arguably, the full narrowing scenario
would not likely occur, as it would require larger economies to reduce their nominal tax rate
significantly. However, the QDMTT could mean that a (near) full narrowing scenario could
become more likely.
The Model Rules for Pillar One have not been finalised yet at the time of writing. The OECD
has published several public consultation documents that cover draft Model Rules of
different elements of Pillar One. In general, these are relatively short documents, which only
discuss the various technical details to be worked out.1163
8.4.1 Addressing Tax Challenges of the Digitalisation of the Economy in the EU
In May 2019, there were European elections, which meant that the Juncker Commission was
coming into its last official year. This also meant the Commission wanted to show that they
had delivered on their promises. One could say that, after the adoption of the ATAD 1 and
the ATAD 2 as well as the different amendments to DAC, taxation was slightly less
prominent on the EU legislative agenda in 2018. However, as the language in the EU
Commission’s 2019 Work Programme shows, the Commission is picking up the pace again
on taxation in general and the tax challenges of the digitalisation of the economy in
particular: “We must intensify efforts to agree on a common consolidated corporate tax
base and on the proposals for a fair and efficient taxation of the digital economy so that all
companies, big and small, pay their fair share of tax where their profits are earned.”1164
Additionally, the Commission announced an initiative to “enhance the use of qualified
majority voting and allow more efficient decision-making in key fields of taxation and social
policies, so that the EU Single Market legislation can keep pace with economic and societal
developments.”1165
The comment in the 2019 Work Programme on taxation of the digital economy refers to
two proposals for a Directive put forward by the Commission in March 2018. The first
proposal was aimed at formulating new rules for permanent establishments to create taxing
rights for when companies have a “significant digital presence.”1166 This proposal
considered that “the application of the current corporate income tax rules to the digital
1162
Bauer (2020), at pp. 23-24.
1163
See OECD (2022a); OECD (2022b); and OECD (2022c).
1164
European Commission. (2018a). Communication on Commission Work Programme 2019 Delivering what
we promised and preparing for the future, COM(2018) 800 final, 23 October 2018, at p.4.
1165
European Commission (2018a), at p. 10.
1166
European Commission. (2018c). Proposal for a Council Directive on the corporate taxation of a significant
digital presence, COM(2018) 147 final, 21 March 2018.
237
economy has led to misalignment between the place where the profits are taxed and the
place where value is created.”1167 The proposal thus establishes a taxable nexus for digital
businesses that operate cross-border but do not have a physical commercial presence. The
Commission also considered that an international solution to this problem would be much
preferred over an EU solution. However, as the progress to reach an agreement at the
international level is challenging, the Commission decided to take action anyway in a way
that should be conducive to (but not dependent on) reaching an agreement at OECD
level.1168
The second proposal aimed to introduce an EU digital services tax on revenues of certain
digital services.1169 The proposal considers that “policy makers are currently struggling to
find solutions which can ensure a fair and effective taxation as the digital transformation of
the economy accelerates, given that the existing corporate taxation rules are outdated and
do not capture this evolution.”1170 Moreover, it mentions that the current tax rules, in
particular, are no longer fit for the future where online cross-border trading is facilitated by
digital corporations that have no physical presence and rely on intangible assets in
combination with large sets of user data to deliver added value.1171
Additionally, in this proposal, the Commission comments that a global solution would be
preferable. However, “[i]n the wait of the comprehensive solution, which may take time to
adopt and implement, Member States face pressure to act, given the risk that their
corporate tax bases are significantly eroded over time, and also due to the perceived
unfairness of the situation.”1172 Moreover, the Commission states that 10 Member States
have already taken unilateral action, and further proliferation of national digital services
taxes might fragment the Single Market and distort competition. Therefore, “the
Commission [has to act by proposing] a harmonized approach on an interim solution that
tackles this problem in a targeted way.”1173
Arguably, the Single Market argument is the more persuasive reason for the Commission
taking action. For, the fact that the economic reality has changed to the point where
corporations can do business without a physical presence does not constitute a base erosion
in the sense of the BEPS Project. In and of itself, this is not an erosion caused by tax
avoidance or aggressive tax planning. A new dominant digital market player can, of course,
end up causing that national more traditional businesses are being pushed out of the
market. Additionally, as a result of the vertical integration of global value chains, a tax base
might move away from the country where its sales revenues originate from.1174 This means
that countries with large markets might be genuinely disappointed that their national tax
1167
1168
1169
European Commission. (2018d). Proposal for a Council Directive on the common system of a digital
services tax on revenues from the provision of certain digital services, COM(2018) 148 final, 21 March 2018.
1170
1171
1172
1173
1174
Lammers (2019), at p. 617.
238
base has become smaller as a result of economic development, but, in and of itself, this is
not base erosion, and it is not unfair.1175
The proposals were discussed at the ECOFIN meeting of 4 December 2018, and it became
clear that several Member States were not ready to move ahead with the proposals but
rather wanted to wait on the OECD/G20 BEPS Project to produce an international result.
There was, however, a joint declaration by Germany and France urging the other Member
States to adopt the proposal for a DST by the next ECOFIN meeting.1176 At the following
ECOFIN meeting of 12 March 2019, it was agreed that the EU would not (unilaterally) move
forward with a digital services tax, as an agreement was expected at OECD/G20 in 2020.1177
The 2020 Commission Work Programme under the new Commission of President Von der
Leyden said on the matter of taxation: “Technological change and globalisation have
enabled new business models. This creates opportunities but also means that the
international corporate tax framework has to keep pace. The Commission will present a
Communication on Business Taxation for the 21st century, focusing on the taxation aspects
relevant in the Single Market. This will be complemented by an Action Plan to Fight Tax
Evasion and make taxation simple and easy.”1178
Due to COVID-19, the communication on Business Taxation in the 21st century was delayed
in the adjusted Commission Work Programme until the end of 2020 but would not be
published until May 2021.1179 The Commission, however, did deliver on the promise to
present an Action Plan for Fair and Simple Taxation Supporting the Recovery Strategy.1180
The Action Plan set out that fair and efficient taxation will be even more important during
the recovery from the COVID-19 crisis: “[The] Commission will step up the fight against tax
fraud and unfair practices. This will help Member States generate the tax revenue needed to
respond to the major challenges of the current crisis.”1181 In the Action Plan, the Commission
reaffirms its commitment to the OECD/G20 BEPS work by “realigning taxing rights with
value creation and setting a minimum level of effective taxation of business profits.”1182
1175
Of course, it is acknowledged that combined with tax avoidance behaviour a dominant digital player could
realise a lower effective tax rate, putting the traditional domestic businesses at a considerable unfair
disadvantage which, in turn, would exacerbate the effects with regards to the tax base.
1176
The Franco-German joint declaration on the taxation of digital companies and minimum taxation is
available at https://www.consilium.europa.eu/media/37276/fr-de-joint-declaration-on-the-taxation-of-digital-
companies-final.pdf.
1177
Council Conclusions. (2019). On the digital services tax, 12 March 2019. 7368/19 PRESSE 12 PR CO 12, at p.
6.
1178
European Commission. (2020a). Communication on Commission Work Programme 2020 A Union that
strives for more, COM(2020) 37 final, 29 January 2020, at p. 6.
1179
The communication on Business Taxation in the 21st century is not mentioned in the adjusted work
programme itself but is mentioned in the annex. See European Commission. (2020c). Communication on
Commission Adjusted Work Programme 2020, COM(2020) 440 final, 27 May 2020; and European Commission.
(2020d). Annex to the Communication on Commission Adjusted Work Programme 2020, Annex 1 of 2,
COM(2020) 440 final, 27 May 2020, at p. 3.
1180
European Commission. (2020e). Communication on An Action Plan for Fair and Simple Taxation Supporting
the Recovery Strategy, COM(2020) 312 final, 15 July 2020.
1181
1182
239
Moreover, the Commission announces that they will explore how to make full use of all the
resources that they have at their disposal to ensure fair taxation. This includes to see if
Article 116 of the Treaty on the Functioning of the EU (TFEU) could serve to circumvent
unanimous decision-making in the area of taxation.1183
The 2020 Fair and Simple Taxation Package includes a wide range of different initiatives. For
example, it aims, to a great extent, to combat fraud and non-compliance in the area of
indirect taxation. Moreover, it mentions that the European Parliament initiated the launch
of the EU Tax Observatory as part of the EU Pilot Project on Fair Taxation and the
Commission’s relating call for proposals.1184 Furthermore, it announces a Communication
from the Commission taking stock of taxpayers’ rights under EU law, and it includes a
proposal to amend the Directive on Administrative Cooperation (DAC7).1185
Furthermore, the Fair and Simple Taxation Package includes a Communication on Tax Good
Governance in the EU and beyond. The document mentions the term fairness in taxation 33
times, but similar to the use of fairness in several of the OECD publications, the context in
which the term fairness is used is not necessarily consistent throughout the document. The
greatest emphasis appears to lie on countering harmful tax practices and in fostering a level
playing field in the Single Market with the underlying aim of protecting national tax revenue
(necessary for the recovery).1186 Against this background, the document proposes to reform
the Code of Conduct for business taxation,1187 to review the EU list of Non-Cooperative
Jurisdictions,1188 to make access to EU funds contingent on good tax governance and to
assist third countries in establishing good tax governance practices.
Finally, 2020 also saw the approval of the EU budget as proposed by the new Commission—
namely, the Multiannual Financial Framework 2021-2027. Notwithstanding the conclusions
of the ECOFIN of 12 March 2019, the Council approved the MFF 2021-2027 in July 2020, and
this included the following decision: “[As] a basis for additional own resources, the
Commission will put forward in the first semester of 2021 proposals […] on a digital levy,
with a view to their introduction at the latest by 1 January 2023.”1189 On 16 December 2020,
the European Parliament approved the MFF 2021-2027.1190
1183
For an analysis on whether Article 116 TFEU could in fact circumvent unanimous decision-making in the
EU, see Englisch, J. (2020). Article 116 TFEU – The Nuclear Option for Qualified Majority Tax
Harmonization?. EC Tax Review, 2, 58-61.
1184
See European Commission. (2020h). TAXUD/2020/CFP-01: Preparatory action – EU Tax Observatory.
Retrieved from https://taxation-customs.ec.europa.eu/taxud2020cfp-01-preparatory-action-eu-tax-
observatory_en.
1185
See Section 8.1.5.
1186
1187
See Section 8.2.1.
1188
Also see section 8.3.2.
1189
Council Conclusions. (2020). On the Multiannual Financial Framework (MFF) 2021-2027, 21 July 2020.
EUCO 10/20 CO EUR 8 CONCL 4, at p. 8.
1190
European Parliament. (2020). Parliament approves seven-year EU budget 2021-2027. Press release.
Retrieved from https://www.europarl.europa.eu/news/en/press-room/20201211IPR93621/parliament-
approves-seven-year-eu-budget-2021-2027.
240
The 2021 Commission Work Programme states the following with regard to corporate
income taxation: “To uphold fairness in the digital world, the EU will continue to work for an
international agreement for a fair tax system that provides long-term sustainable revenues.
Failing this, the Commission will propose a digital levy in the first half of next year.”1191
Accordingly, even though the MFF 2021-2027 includes the decision to enact a digital levy,
the Work Programme (re)makes this contingent on the progress of the OECD/G20 Inclusive
Framework.1192
On 18 May 2021, the Commission published the Communication on Business Taxation for
the 21st Century.1193 This document sets out the EU tax agenda for the short and longer term
following the roadmap of the Fair and Simple Taxation Package. It is remarkable that, in
doing so, this 14-page document manages to use the term ‘fairness’ 25 times. Also, in this
document, the context of what is fair is not entirely consistent. Mostly, the document refers
to fairness in the sense of preventing distortions in the Single Market, but, particularly with
regard to the BEFIT proposal, fairness is (also) meant with regard to inter-nation equity
through just allocation of taxing rights throughout the EU.1194
In the Communication, the Commission announces several different legislative proposals

with regard to taxation. For example, the Commission will propose directives for the
implementation of Pillar One and Pillar Two to ensure their uniform implementation in the
EU. This is also due to the fact that some EU legislation, such as the CFC rules in the ATAD,
will have to be amended as a result of Pillar Two.1195 The Commission further announced
that it plans to go beyond the OECD agreement by proposing a directive that will require
large multinational corporations to disclose their effective tax rates, following the Pillar Two
methodology. The Commission will also put forth an amendment to the ATAD to fight the
abusive use of shell companies as well as a proposal to address the debt-equity bias in
corporate taxation. Finally, the CCTB and CCCTB proposals will be withdrawn and replaced
with the BEFIT proposal in 2023.1196
In the proposal for the Unshell Directive (or ATAD 3), the Commission considers that there is
a clear need for the proposal, as there are “continuous scandals on the misuse of shell
entities worldwide and specifically in the single market [as well as that] future application of
the rules on global minimum taxation [would] only apply to multinational companies that
meet the 750 million EUR threshold, thus leaving all companies below this threshold out of
scope. In the same vein, the Commission appreciates that the protection of Member States’
taxable bases is all the more important to ensure that a sustainable economy under the
exceptional circumstances imposed by the health crisis”.1197 This passage is indicative of the
1191
European Commission. (2020i). Communication on Commission Work Programme 2021 A Union of vitality
in a world of fragility, COM(2020) 690 final, 19 October 2020, at p. 6.
1192
It should also be noted that the 2021 Programme of Work predates the approval of the European
Parliament of the MFF 2021-2027.
1193
European Commission. (2021a). Communication on Business taxation for the 21st century, COM(2021) 251
final, 18 May 2021.
1194
The BEFIT proposal will be discussed in more detail below.
1195
European Commission (2020i), at p. 8.
1196
European Commission (2020i), at pp. 9-12.
1197
European Commission. (2021b). Proposal for a Council Directive on preventing the misuse of shell entities
for tax purposes, COM(2021) 565 final, 12 December 2021, at p. 5.
241
fact that the COVID-19 crisis meant that another context of the term fairness has been
introduced in the debate on corporate tax avoidance, namely, one of retribution. Those who
were guilty of misusing the international tax rules must be made to be seen to pay for the
economic recovery. Moreover, instead of determining precise minimal substance rules, the
proposal relies on several gateways in combination with a presumption of a lack of minimal
substance and tax abuse to ensure that all who are guilty of misusing the rules are caught in
the net of the ATAD.1198
The proposal for the Pillar Two Directive, by and large, follows the OECD/G20 Inclusive
Framework model rules as closely as possible. In addition, it includes the option for Member
States to implement the QDMTT. Moreover, “to ensure compatibility with primary Union
law, and more precisely with the freedom of establishment, the rules of this Directive should
apply to entities resident in a Member State as well as non-resident entities of a parent
entity located in that Member State. This Directive should also apply to very large-scale,
purely domestic groups.”1199
Interestingly, the Commission then considers: “[While] it is necessary to ensure that tax
avoidance practices are discouraged, adverse impacts on smaller MNEs in the internal
market should be avoided. For this purpose, this Directive should only apply to entities
located in the Union that are members of MNE groups or large-scale domestic groups that
meet the annual threshold of at least EUR 750 000 000 of consolidated revenue.”1200
Apparently, the Commission does not consider preferential tax regimes targeted at and/or
tax avoidance practices by smaller multinational corporations as problematic. This is
interesting, as the Commission also considered that “this major reform aims to put a floor
on competition over corporate income tax rates through the establishment of a global
minimum level of taxation. By removing a substantial part of the advantages of shifting
profits to jurisdictions with no or very low taxation, the global minimum tax reform will level
the playing field for businesses worldwide and allow jurisdictions to better protect their tax
bases.”1201
In this regard, it is also remarkable that the Commission considers that no EU impact
assessment of the proposal was necessary. The reason that the Commission gave for this
was that the OECD already did an impact assessment on 12 October 2020 to support the
OECD/G20 Pillar One and Two proposals. Moreover, “all the important policy decisions have
already been taken by the Inclusive Framework and at the highest political level (G20
Finance Ministers and G20 Heads of States). All EU Member States which are members of
the Inclusive Framework have already agreed on the main aspects of Pillar 2 and committed
to apply the OECD Model Rules. The EU would have no policy options to choose from as key
elements of the framework, such as the scope or tax rates and base, have already been
1198
European Commission (2021b), articles 6, 7 and 8.
1199
European Commission. (2021c). Proposal for a Council Directive on ensuring a global minimum level of
taxation for multinational groups in the Union, COM(2021) 823 final, 22 December 2021, Consideration (5).
1200
European Commission (2021c), Consideration (7).
1201
European Commission (2021c), Consideration (2) - emphasis added.
242
prescribed and agreed on.”1202 This is an interesting consideration, as it points to the fact
that the EU here states that the 8 October 2021 OECD/G20 Inclusive Framework Agreement
is to be considered binding on the Members of the Inclusive Framework, even though the
OECD/G20 Pillar Two Model Rules – that were approved by the OECD/G20 Inclusive
Framework two days before the publication of the EU Pillar Two Proposal – were designated
as a “common approach”.1203 This remark by the Commission appears to underline earlier
considerations in this study that the EU’s institutional support to the OECD work adds to its
importance as the setter of international tax standards.
The so-called DEBRA proposal is not – or perhaps only partly – an anti-tax avoidance
measure. The measure aims to promote tax neutrality. On the one hand, by removing the
debt-equity bias in general. On the other hand, by taking away possible (remaining)
differences in the treatment of debt and equity between the Member States. The
Commission neatly conflates both goals, as it considers that “only 6 Member States address
the debt-equity bias from a tax perspective and the relevant national measures differ
significantly. Unless the tax-induced debt-equity is effectively tackled across the single
market, EU Business will continue to have insufficient incentives towards equity of debt
financing and relevant tax planning considerations will continue distorting distribution of
investment and growth.”1204
To neutralise the bias against equity financing, the proposal suggests that there should be
an allowance for new equity that is deductible from that taxpayers’ tax base. To avoid any
abuse of this new allowance, the proposal also includes several anti-avoidance rules that
target artificial increases of equity in group entities. In addition to the EBITDA rule in the
ATAD, it is proposed that the deductibility of interests also is limited further to neutralise
the bias. This means concretely that 15% of the exceeding borrowing costs would no longer
be deductible.1205
The remaining announced proposals, namely the extended reporting requirements and the
BEFIT proposal, were not yet published at the time of writing.
The first observation that one might make about the publications of the OECD and the EU is
that neither of these organisations mention concepts like the spirit of the law or the letter of
the law. The same goes for terms such as morality and justice. Particularly, the OECD
publications tend to be carefully drafted texts that purposely avoid such vague, ambiguous
language. The texts aim to clarify technical solutions to politically charged problems. They
1202
European Commission (2021c), at pp 4-5. One would expect that not all OECD/G20 Inclusive Framework
Members agree with the interpretation that a common approach would not leave any policy options. Also see
in this respect OECD. (2016f). BEPS Project Explanatory Statement: 2015 Final Reports, OECD/G20 Base Erosion
and Profit Shifting Project, OECD Publishing, at para. 11. (“common approaches which will facilitate the
convergence of national practices”).
1203
European Commission (2021c), at p. 3; OECD (2021c), at p. 70; Also see Section 5.3.2.
1204
European Commission. (2022). Proposal for a Council Directive on a debt-equity bias reduction allowance
and on limiting the deductibility of interest for corporate income tax purposes, COM(2022) 216 final, 11 May
2022, at p. 1.
1205
European Commission (2022), at pp. 7-10.
243
do not speak of the international spirit, but of international standards and how they should
be developed to ensure an internationally consistent implantation and application. Their
understatedness in this respect might have been conducive in enhancing their global
political impact.
The EU publications differ from the OECD texts in this regard. The communications from the
European Commission as well as the political compromise texts of Council Directives seem
to serve a much stronger and explicit political purpose, while their function as a source of
technical information seems to be more in the background. Throughout the discourse
analysis, it has been observed that the language and wording in the EU documents have
been stronger and more judging of corporate taxpayer behaviour than in the OECD texts.
Moreover, particularly over the last few years, this pattern has been more apparent.
This difference in tone is even more interesting when it is viewed from the perspective of
how the OECD and the EU approaches are synergetic. Because, while the OECD functions as
the standard setter of international tax rules, the EU has established itself as those
standards’ most fervent legislator. Where the OECD designed a standard, the EU has been
instrumental as the importer of not only the standard but also in copying many of the terms
used to explain and justify that standard. The discourse analysis repeatedly confirms the
points that Valderrama has made in this regard.1206 The EU has consistently been
introducing international standards in the EU legislation with regard to exchange of
information, BEPS and transparency rules. In each of these OECD projects, the European
Commission has been very active in the discussions at the level of the OECD/G20. Moreover,
the EU usually has had a parallel European process in place, and, by doing so, they have
consistently ensured that the development of these international tax rules and the
relationship between the EU and non-EU countries have been also addressed.1207
The EU also validates much of the OECD’s position in international tax policy. The discourse
analysis shows that the EU has been instrumental in the OECD being so effective in
achieving the position as the global standard setter of international taxation norms. To a
sizeable degree, the EU organises the institutional support for the international tax
standards by adopting the EU legislation that is subsequently implemented in the national
legislation of the 27 EU Member States. As a result, even if an international standard is
designated as a building block, as the CFC-rules were, they still have teeth in practice.
At the same time, all the work at the level of the OECD has supported the European
Commission in being successful in reaching political compromises between the EU Member
States in the EU Council. It can be observed that certain political compromises at the level of
the EU Council are reached, which otherwise would have been unlikely in the absence if the
wider context of the OECD efforts. Moreover, in turn, the political dynamic in the EU Council
pushed national governments to agree to measures that they would not have agreed to
otherwise. The ending of bank secrecy in the EU through the Savings Directive and the
implementation of the 2015 BEPS Actions across all Member States through the ATAD are
both examples of this.
1206
See Section 4.2.
1207
Valderrama (2019), at p. 466; Geringer (2022), at p. 14; Section 4.2.1.3.
244
The discourse analysis also suggests that there is a hierarchy in the policy concerns that
drive much of the work with regard to tax avoidance and tax evasion.1208
(i) Tax revenue concerns

Throughout the OECD and the EU documents, concerns for revenue loss as a result
of tax avoidance and tax evasion practices have been paramount, regardless of
whether they concerned tax evasion as a result of lack of transparency, preferential
tax regimes and harmful tax competition, BEPS behaviour, or the digitalisation of
the economy. Moreover, even though the empirical data on the loss of tax revenue
on the level of individual countries is not clear on how much tax revenue that is lost
precisely, both the OECD and the EU texts make it clear that, collectively, the
revenue losses are significant and that there is a genuine fear that—if left
unchecked—these losses could continue to increase, which could put the integrity
of the entire tax system at risk. Recently, the EU texts have particularly emphasised
the importance of increasing the tax revenue in relation to Covid-19 and the need
for economic recovery.
(ii) Economic efficiency concerns

Both the OECD and the EU strongly believe that tax policy should strive for tax
neutrality. The absence of tax neutrality would cause economic distortions and tax
avoidance, for example, through the exploitation of preferential tax regimes, tax
rate differentials, or other differences between national tax systems. This might
make real cross-border investments more attractive than investing domestically, or
it might cause one country to poach real investments from another country. Such
tax-driven structures could cause loss of welfare as a result of production
inefficiency and/or financial instability, as risk-taking behaviour could increase
because investments that are uneconomic before-tax become marginally viable
after-tax.
(iii) Inter-taxpayer equity concerns on competition

Some businesses, such as those which operate cross-border and have access to
sophisticated tax expertise, may profit from (aggressive) tax planning opportunities
and have unintended competitive advantages compared to other businesses, such
as small and medium-sized enterprises, that cannot (easily) use the same or similar
tax structures.
(iv) Inter-taxpayer equity concerns on the overall tax-mix

Fairness relates to the fact that mismatch opportunities are more readily available
for taxpayers with an income from capital rather than from labour. The ability of a
selected group of taxpayers to reduce their taxes could be perceived as unfair, thus
affecting public confidence in the fairness of the tax system.
(v) Inter-nation equity concerns

These concerns focus on how tax revenue is allocated across countries and, in
1208
Compare OECD (2012a), at pp. 11-12.
245
particular, on how developing countries are not benefitting enough from the
current international tax standards, as these favour residence over source
countries. BEPS exacerbates this to the point where developing countries are faced
with underfunding of public investments, which is hampering growth.
Globalisation and digitalisation have, in turn, caused a further centralisation of tax revenue
in residence countries, as the vertical integration of value chains can be seen, and business
models have steadily become more digitalised across sectors. The discourse analysis also
shows that, under the influence of these economic forces, the hierarchy of these policy
concerns have been in flux, but arguably they have not changed fundamentally.
Inter-nation equity has become more of a prominent concern over time. This is particularly
visible in the BEPS project addressing the tax challenges of the digitalisation of the economy.
However, the increase in prominence does not mean that this concern has overtaken any of
the other policy concerns. The question of inter-nation equity has consistently been put out
of the scope of the OECD documents, until the work on Pillar One commenced. Moreover,
the topical political discussions on how to move forward on Pillar One brings further
evidence that other policy concerns take precedence. In the EU solutions, inter-nation
equity concerns have since the 1992 Ruding Report stayed mostly at the background. Since
2011, the Commission has pointed to the CCCTB proposal as the solution for such concerns
– even though the CCCTB also always has lacked the required political support to move
forward – and the Commission has not considered alternative routes to meet these
concerns. In other words, the question of fair allocation of taxing rights consistently have
been kept in the background, as the discussion has been compartmentalised towards a
proposal that is unlikely to be adopted in the foreseeable future.
Furthermore, one might observe that the tax mix concern has become more prominent
compared to the concerns of a level playing field between domestic and international
businesses.1209 This shift would perhaps put these two inter-taxpayer equity concerns more
at the same level with each other. In any event, based on the discourse analysis, it is difficult
to say which that takes precedence over the other, as the arguments are often used
interchangeably or in conjunction with one another.
In my view, the discourse analysis demonstrates clearly that (national) tax revenue concerns
and tax neutrality concerns are, by far, the most important policy considerations in both the
OECD and the EU documents throughout the whole examined period. What is interesting in
this regard, is that the OECD is much less inclined to use terms like fairness than the
European Commission is.
For example, even the OECD publications on BEPS 2.0 only sporadically mention concepts
like fairness or (inter-taxpayer or inter-nation) equity, and/or tax morale, tax compliance or
the overall sustainability of the international tax system as major drivers for the project.1210
1209
Also see Section 9.4 for further evidence of this shift in reasoning.
1210
See for instance OECD (2018c). Even though this document provides much of the grounding justification
for the two-pillar solution, the term fairness appears only three times in the document. It states that the
members of the Inclusive Framework agree that international cooperation is needed to achieve a fairer tax
246
From the publications, it follows that the OECD approaches BEPS 2.0 primarily as a technical
challenge to make sure that the existing architecture of the international tax system can be
adapted enough to accommodate a new economic reality. In this, the main concerns
expressed by the individual countries are on (national) tax revenue effects. Where countries
express concerns about the public acceptance of the tax system, they seem to refer to a
public acceptance of the national tax mix rather than an acceptance of the international
system of profit taxation. And (extra) tax revenue should either help to fix political problems
at home, or at the very least not be the cause of such domestic political problems.
The EU documents, on the other hand, do increasingly use the term fairness over time. In
fact, as mentioned above, fairness is mentioned so many times in some of the latest
documents, it almost seems that the term has been made part of a certain standard
phrasing by the Commission.1211 Moreover, the term fairness appears to be attached to
each of the five policy concerns listed above. Additionally, the interchangeability between
these five concerns becomes more prolific over time. As discussed above, though, the term
fairness is mostly used in the context of economic efficiency in the internal market, and its
second-most applied usage concerns inter-taxpayer equity concerns.1212 One might wonder
if the use of standard phrasing and the increased interchangeability of the context of the
term add to or subtract from the impact of the use of such a term.1213
Finally, the discourse analysis shows that the European Commission uses the same or similar
turns of phrasing in subsequent documents. The repetition of these statements works as a
self-reinforcing mechanism. Moreover, it can also be observed that the Commission has
used very definitive language in the considerations of a number of directives, even if the
underlying data had not always presented such a conclusive picture.1214 The repetitive use
of terms of fairness in combination with the definitive language in the considerations of
several directives also serves to reinforce the institutional support for the measures in those
directives based on the international tax norms set through agreement in the OECD/G20
Inclusive Framework.
system (at para. 396), and that some countries believe that there is a mismatch between taxable profit and
value creation, which challenges the fairness, sustainability, and public acceptance of the system (at para.
408). Finally, it is mentions that the gig and sharing economy raises questions of fair competition, as workers
can earn income outside of the employee-employer relationship (at para. 468).
1211
A strong example of this is European Commission (2021a); see Section 8.2.1.
1212
These concerns are more or less equally divided between level playing field and tax-mix considerations.
1213
Also see in this regard, Geringer (2022).
1214
For example, compare European Commission (2016f) with European Commission (2016g); or see Lammers,
J. (2014). How Much Weight does €1 Trillion Carry? Assessing Data on Tax Planning, Avoidance and Evasion,
Tax Notes International, Vol 73 (13), 1193-1199, at p. 1999.
247
9 Media Analysis
The media represents an important voice in the debate on the international system of profit
taxation and corporate tax avoidance. To examine the impact of this voice, over 9,400
individual newspaper articles related to tax avoidance were selected. These newspaper
articles were published in six different European newspapers in the span of more than 15
years.1215
In order to understand the way newspapers report, this section first briefly looks into the
theoretic framework on why news stories are considered newsworthy. Also, the theoretical
framework from communication theory on different media strategies will be considered to
better assess the content of the news stories. Consequently, the content of these
newspaper articles has been qualitatively assessed regarding the subjects the articles deal
with, the various actors involved, from which actor’s perspective they were written, the
general tone of voice, and how this tone of voice has developed.
The media analysis is augmented by an analysis of Google Trends data. Research suggests
that there is a correlation between the lifespan of a news story and the search interest in
the subject dealt with.1216 Therefore, the Google Trends data on search interest is linked up
with insights from the media analysis. In particular, it is examined whether the topical tax
events and their news coverage line up with the search results and whether the emphasis or
frame of the news stories correspond with those internet searches.
9.1 Theories on Newsworthiness

There are competing academic views as to why some news stories are deemed newsworthy
while others are not.1217 In 1965, Galtung & Ruge presented a system of 12 factors that
together define newsworthiness. It is very prominent among these factors that negative
1215
The Guardian https://www.theguardian.com/, Financial Times https://www.ft.com/, Telegraaf
https://www.telegraaf.nl/, de Volkskrant https://www.volkskrant.nl/, Financieele Dagblad https://fd.nl/;
and Frankfurter Allgemeine Zeitung https://www.faz.net/aktuell/.
1216
Schema, Google, & AXIOS. (2021). The Lifespan of News Stories. Retrieved from https://newslifespan.com/.
1217
Also see Lammers (2021), at p. 1001.
248
events draw more attention than positive events.1218 However, in 2001, Harcup & O’Neill
found that some articles are considered newsworthy without fulfilling any of the 12 factors
listed by Galtung & Ruge. Therefore, they concluded that the Galtung & Ruge definition was
incorrect, or at least incomplete. According to these authors, other factors, such as
references to sex, animals, humour, and celebrities, could also determine
newsworthiness.1219
In 2012, Shoemaker & Cohen rejected the approach that newsworthiness was determined
by many different factors. They contended that there were only two distinct factors of
matter: deviance and social significance.1220 Deviance in this sense means how far
something is removed from what may be deemed normal, and social significance in this
sense means how an event might impact the future development of a society.
In 2018, Pashler & Heriot commented that none of these studies considered possible
intrinsic political biases of news outlets.1221 This means that, in some instances,
newsworthiness is determined only by the fact that the subject matter lines up with the
political beliefs and preferences of the journalist and/or the news outlet.
The results clearly show that judgements of newsworthiness - specified as

importance to a hypothetical newspaper readership - are contaminated by an
ideological bias: news stories that offer good ‘ammunition’ for the views of the rater
are assigned a higher news value than those providing ammunition for the opposing
view. The bias appeared slightly greater for those reporting an interest in politics
and - for unknown reasons - slightly greater for those characterizing their political
views as liberal.1222
Based on the available research, there is little consensus on a single definitive set of values
or factors that make something newsworthy. However, even if there is no clear, agreed
upon framework, in practice, journalists at least appear to look to a combination of several
elements,1223 such as whether (i) the information concerns current events, (ii) the
information affects people in the direct community or region, (iii) the information highlights
conflicts and/or controversy, (iv) the information features unusual things about (famous)
people, and (v) the information is relevant to the target news audience.
1218
Galtung, J., & Ruge, M. H. (1965). The Structure of Foreign News: The Presentation of the Congo, Cuba and
Cyprus Crises in Four Norwegian Newspapers. Journal of peace research, 2(1), 64-90, at pp. 81-84.
1219
Harcup, T., & O'Neill, D. (2001). What is news? Galtung and Ruge revisited. Journalism studies, 2(2), 261-
280, at p. 275.
1220
Shoemaker, P. J., & Cohen, A. A. (2012). News around the world: Content, practitioners, and the public.
Routledge, at pp. 7-23 and 335.
1221
Pashler, H., & Heriot, G. (2018). Perceptions of newsworthiness are contaminated by a political usefulness
bias. Royal Society Open Science, 5(8), 172239, at p. 2.
1222
Pashler & Heriot (2018), at p. 8.
1223
These elements are not meant to be exhaustive, and they do not all need to apply at once. However, these
elements do incorporate most of the factors referred to above.
249
9.2 Theories on Media Strategies
Communication theory, by and large, recognises three main strategies that are used in the
media to highlight the importance of a certain subject: agenda-setting, priming and
framing.1224
a) Agenda-setting relies on the idea that the general public will find a certain subject of
greater importance if the mass media place a greater emphasis on that subject.1225
Accordingly, the more the media covers a certain subject, the more people will start
to consider that subject important. In that way, the media is able to signal to the
public what is important and thus shape people’s perception of a certain subject. In
this sense, it is not so much the actual information about the subject that has the
effect, “it is the fact that the issue has received a certain amount of processing time
and attention that carries the effect.”1226
b) Priming means that an individual's exposure to one subject influences his or her
response to a second subject, without the individual necessarily being aware of the
connection. Priming therefore links a certain subject to a specific response. This is a
two-step process.1227 The first step is to access the pre-existing knowledge of the
news audience with regard to a certain subject. The second step is to introduce a
second stimulus to become associated with the pre-existing knowledge. For
example, the coverage of a certain subject could suggest to news audiences that
they should use certain benchmarks to evaluate the performance of their leaders
and governments. Priming in this sense is a process by which the prominence of a
subject in the media can become the basis for people’s judgement and evaluation.
Through repetition, news audiences thus become more likely to respond more
readily in a certain way each time the relevant subject appears.
c) Framing assumes that the way an issue is described or the label that is attached to it
in news coverage is what really triggers an effect in news audiences. In other words,
how an issue will be understood by news audiences is dependent on how that issue
is presented. Therefore, framing looks more to how a subject is discussed rather
than the prominence of that subject. For that reason, framing is more about the way
the public thinks about an issue rather than if they think about an issue.1228
The distinction between agenda-setting and priming on the one hand and framing on the
other hand comes down to the difference between accessibility and applicability effects.1229
1224
Douma, S. (2018). Miscommunication and Distrust in the International Tax Debate, at p. 7. Retrieved from
European Commission Platform for Tax Good Governance
https://ec.europa.eu/taxation_customs/system/files/2018-09/presentation_of_prof_douma_docx_en.pdf.
1225
Scheufele, D. A., & Tewksbury, D. (2007). Framing, agenda setting, and priming: The evolution of three
media effects models. Journal of communication, 57(1), 9-20, at p. 11.
1226
Scheufele & Tewksbury (2007), at p. 14.
1227
Moy, P., Tewksbury, D., & Rinke, E. M. (2016). Agenda-setting, priming, and framing. In The international
encyclopedia of communication theory and philosophy, (eds K.B. Jensen, E.W. Rothenbuhler, J.D. Pooley and
R.T. Craig), 52-64, at pp. 56-59.
1228
1229
Price, V. & Tewksbury, D. (1997). News Values and Public Opinion: A theoretical account of media priming
and framing. In Progress in communication sciences: Advances in persuasion, Vol 13, (G. A. Barnett & F. J.
Boster (eds.)). 173-212, at pp. 185-188.
250
Tewksbury & Price argue that agenda-setting and priming are accessibility effects, as they
are based on memory-based models of information processing. Media can make certain
issues or aspects of issues more accessible (more easily recalled) and, thereby, influence the
standards that people use when forming opinions. This is distinctly different from the
effects of framing. Namely, the two concepts are presented in such a way that the news
audience will accept that they are connected in the manner that the frame suggests. For
instance, news reporting might suggest that the best way to think about whether corporate
tax avoidance is problematic or not is through a consideration of whether one wants to pay
more or less personal income tax. Thus, the message suggests that the level of personal
income tax for each individual is directly linked to whether or not corporations engage in tax
avoidance.
On the one hand, framing works as a tool to reduce the complexity of an issue—basically,
boiling it down to a single provocative message—and, on the other hand, it provides an
overall interpretation of isolated items of fact. It provides a means for individuals to
evaluate complex issues.1230 Therefore, framing can persuade news audiences to accept that
two concepts are connected in the manner that the frame suggests.1231 Furthermore, it is
important to note that Tewksbury & Price point out that they are not suggesting that news
media are actively trying to manipulate news audiences. They suggest that events that are
emphasised by the media tend to work as yardsticks to evaluate behaviour.1232
Where the issue of corporate tax avoidance is concerned, news media exert an effect
by translating complex and obscure tax issues into simple and provocative messages
which then easily penetrate into the public’s mind through repetitive broadcasting. As
a survey by the Oxford Centre for Business Taxation indicates, corporate tax issues
remain out of the public eye until the media discovers them, and they then become
part of social concern only if the media and the public begin to focus their attention on
those matters.1233
Interestingly though, Lee goes on to conclude that, even though the public eye might fall on
businesses because of (negative) media reporting, there is very little effect on the level of
transparency with regard to their tax policy or payments. In fact, negative media reporting
seems to make multinational corporations more reluctant to be transparent on tax
issues.1234
Other research also suggests that corporations may not be inclined to change their
behaviour because of negative media coverage. In 2015 and 2018, Chen, Schuchard &
Stomberg found that the likelihood of media zeroing in on the tax affairs of a corporation is
greater for well-known corporate brands than for corporations that are less in the public’s
1230
1231
Price & Tewksbury (1997, at pp. 182-183.
1232
Price & Tewksbury (1997, at pp. 182-183, at p. 181.
1233
Lee, S. (2015). News media coverage of corporate tax avoidance and corporate tax reporting. WU
International Taxation Research Paper Series, (2015-16), at p. 2.
1234
Lee (2015), at p. 22.
251
direct view.1235 In addition, they also found that media tax coverage is both more frequent
and more negative during economic downturns. However, they did not find evidence that
corporations reduce their tax avoidance behaviour following media coverage. They conclude
in their article that news media might not have the same influence over corporate tax policy
as other external stakeholders have, although they also acknowledge that their analysis is
subject to limitations, which should be considered when interpreting their results.1236
It should also be considered that media attention, perhaps, is not primarily aimed at
changing the behaviour of the corporations that are reported on. It might be that the media
coverage of the subject of tax avoidance is mostly meant to move public opinion. However,
public opinion is difficult to gage. Research suggests that, if one deems that a successful
influence on public opinion should result in an effective change in voting behaviour, the use
of news media might not be very effective. For instance, Zaller points to the fact that, with
regard to the public opinion on Barack Obama’s health-care reforms in the US, “the single
strongest predictor of perceptions of health care reform is partisanship.”1237 This would
suggest that an individual’s opinion on most subjects might be influenced mostly by their
political affiliation. Moreover, Achen & Bartels argue that there is little evidence that
suggests that voters hold politicians responsible for political decisions that produce bad
instead of good outcomes. With regard to political accountability, they suggest that most
voters “cannot manage the task of competent retrospection. [They] forget all about
[previous] experiences with the incumbents and vote solely on how they feel about the most
recent months. Knowing that, governments pander to the voters near election time,
showering them with one-time benefits atypical of their performance in office.”1238
Therefore, governments might not necessarily have to fear being voted out of office
because they are not responsive enough to public opinion. It seems the biggest electoral
danger to governments comes from external factors such as economic cycles, as “the
rotation of parties with markedly different agendas into and out of office depends heavily on
essentially chance variation in the peaks and valleys of the economy.”1239
9.3 Overview of Media Coverage of Tax Avoidance
This section aims to give a sense of how much newspapers covered the subject of tax
avoidance over the span of more than 15 years and how these reporting volumes has
developed year-on-year across different types of newspapers. In the figure below, the 9,400
selected newspaper articles from the first initial selection on the general topic of tax
avoidance across the six selected European newspapers that were published in the years
2004-2021. Therefore, these articles do not only cover corporate tax avoidance, but they
also cover other issues regarding both tax avoidance and tax evasion. The articles have been
1235
See Chen, S., et al. (2015). Examining the role of the media in influencing corporate tax avoidance and
disclosure. University of Texas at Austin, Working Paper; and Chen, S. et al. (2018). Media Coverage of
Corporate Taxes. Available at SSRN 2686333.
1236
Chen et al. (2018), at p. 28.
1237
Zaller, J. (2012). What nature and origins leaves out. Critical Review, 24(4), 569-642, at pp. 626-627.
1238
Achen, C. H., & Bartels, L. M. (2004). Musical Chairs: Pocketbook Voting and the Limits of Democratic
Accountability. In Annual Meeting of the American Political Science Association, Chicago, at p. 7.
1239
Zaller (2012), at p. 627.
252
categorised based on their content and year of publication. This first general breakdown of
all 9,400 articles shows that the bulk of newspaper reporting focuses on international
corporate tax avoidance and that, overall, the biggest changes in year-on-year volume over
the examined period also occurred in the articles covering international corporate tax
avoidance.
Figure 1 - Reporting on Tax Avoidance

in Six Prominent European Newspapers
National tax avoidance and evasion issues

Other international tax avoidance and evasion issues
International corporate tax avoidance issues
Moreover, all the newspapers display a distinctly similar pattern in terms of popularity of
the subject. All newspapers show a strong increase after 2009 and a sharp drop-off again
between 2016 and 2021.1240
1240
The available digital archive for Telegraaf did not allow to examine articles that were published before
2012. See https://www.telegraaf.nl/zoeken/belastingontwijking.
253
Figure 2- Financial Times Figure 3 - The Guardian
Figure 4 – de Volkskrant Figure 5 - Telegraaf
Figure 6 - Financieele Dagblad Figure 7 - Frankfurter

Allgemeine Zeitung
Of the 9,400 initially selected articles, about 5,300 articles dealt specifically with
international corporate tax avoidance. The next section gives a qualitative analysis of these
5,300 articles. The qualitative analysis focuses on these articles for two reasons. First, the
scope of this book is limited to (international) corporate taxation. Second, from Figure 1
above, it follows that the biggest changes in year-on-year volume over the examined period
also occurred in the articles covering corporate tax avoidance.
254
Figure 8 below shows the number of articles on international corporate tax avoidance per
year for each newspaper. From this breakdown, it follows that the number of articles rose
sharply after 2011 and dropped again after 2016. Further, it is evident that the number of
articles decreased much slower in the more business-oriented newspapers compared to the
newspapers that, traditionally, are more oriented to the political left. From around 2008
until 2013, these two categories of newspapers, by and large, published an equal number of
articles. From 2014 to 2016, the business-oriented newspapers published about double the
number of articles compared to the left-oriented newspapers. From 2017 to 2021, this ratio
was about four to one.
Figure 8 - Articles Relating to International Corporate Tax

Avoidance Issues per Newspaper
De Volkskrant
The Guardian
Frankfurter Allgemeine Zeitung
Telegraaf
Financieele Dagblad
Financial Times
9.4 Analysis of Media Coverage of Corporate Tax Avoidance
This section focuses on the content of the newspaper reporting between 2004 and 2021 and
aims to identify the major developments in the tone of voice and argumentation by
different stakeholders in the debate. To be able to do this effectively and efficiently, the
255
examined period is divided into three period blocks with the original OECD/G20 BEPS
Project to mark the major dividing lines of these periods:
(i) Pre-BEPS (2004-2012)

(ii) Designing BEPS (2013-2015)
(iii) Post-BEPS and BEPS 2.0 (2016-2021)
9.4.1 Pre-BEPS (2004-2012)
Media reporting on tax avoidance in the period between 2004 and 2012 is initially mostly
divided between (i) questions on whether and to what extent (super)wealthy individuals pay
their taxes and (ii) questions on whether there is an issue with corporate tax avoidance.
With regard to rich individuals, certain tax schemes received a lot of attention, such as the
non-domicile rules in the UK, certain cross-border pension schemes and schemes to avoid
inheritance tax. Quite a lot of the reporting also refers to government action regarding
these specific schemes. These reports are mostly rather descriptive, but there are also very
critical articles that state that, even though a government is taking action, it is doing far too
little and much too late. Moreover, there are commentators that claim that government
action is not really meant to have too much of an impact.
The reporting on rich individuals changed between 2006 and 2009. The focus landed on the
role of tax advisors, accountants and–particularly–banks promoting these schemes, thus,
facilitating rich individuals in avoiding taxation in their country of residence. In this period,
investigative journalists uncovered a number of banking scandals where the schemes that
were promoted bordered on–and, sometimes, crossed the lines of–what was legal.
Specifically, the actions of Barclays Bank and UBS attracted much attention in the media.
On top of that, the actions of Barclays Bank to prevent the Guardian from publishing certain
information that was uncovered with regard to the bank’s actions and its connections to tax
havens led to a slew of articles outlining the bank’s contempt for the general public and that
they would go to any lengths to prevent information on their practices from becoming
public. On the back of this reporting, the wealthy individuals that were involved in these
schemes were dubbed ‘tax exiles’ that have a very cheap attitude towards nationality. For
instance, the Guardian reported that “[p]ersons that choose their nation on the basis of tax
rates are not just money-obsessed – they are withdrawing from society.”1241
This point that taxpayers who (attempt to) avoid paying the taxes they are due are
extracting themselves from the rules of society for the sole selfish purpose to gain an
advantage (over others) is a recurring argument in the tax debate. It has also been a
powerful driver for political responses to fight tax avoidance over the years.1242 This is all the
more the case, because taxpayers that engage in tax avoidance insist that the authorities
1241
Liam Firth, Tax Exiles’ Cheap Attitude to Nationality, The Guardian, 12 December 2009. Retrieved from
https://www.theguardian.com/commentisfree/2009/dec/12/tax-exiles-nationality-attitude.
1242
See Section 8.5.
256
compel others to follow the rules, while they ask those same authorities to let them seek
the utmost edges of these rules in order to gain an advantage over those others.
The direct political response to these banking scandals could be seen in the growing support
to enact banking taxes (or Tobin tax) in a few European countries as well as taxes on
bankers’ bonuses and an extra (top-up) tax for wealthy individuals in the UK. In addition,
several measures were taken to crack down the use of tax havens by banks and to abolish
the possibility of bank secrecy (in the EU).1243 These events form the run-up to the
enactment of the US Foreign Account Tax Compliance Act (FATCA) in 2010.1244 The Foreign
Account Tax Compliance Act (FATCA) was passed as part of the HIRE Act. It requires that
foreign financial Institutions and certain other non-financial foreign entities report on the
foreign assets held by their US account holders or be subject to withholding on relevant
payments. The HIRE Act also requires US persons to report on their foreign financial
accounts and foreign assets depending on the value.1245
With regard to reporting on international corporate income tax avoidance, it can be

observed that, between 2004 and 2009, media articles both showed commentators that
were addressing the severity of the problems as a result of corporate tax avoidance and
commentators that pointed towards the benefits of tax competition and the importance of
capital being allowed to flow freely. In line with the findings of Chen et al.,1246 most of the
reporting highlights the negative effects of corporate tax behaviour. In fact, throughout the
pre-BEPS period, the reporting is becoming increasingly negative, and there is less room for
proponents of tax competition, those who question the actual level of tax avoidance that
corporations engage in and the extent of the negative impact of tax avoidance.
9.4.1.1 Reporting on Government
Specifically, in the media coverage on government action, one can observe two types of
government perspectives. Firstly, there is the perspective of government officials who
initiate most (if not all) of the legislation to prevent or fight corporate tax avoidance and/or
conduct the negotiations in the international forums with regard to setting the international
tax standards. These government officials tend not to express particular views on other
stakeholders in the debate. They mostly attempt to explain the actions that are proposed
and the reasoning behind those particular actions.1247 However, this appears to have
1243
See, for instance, OECD. (2011). The Era of Bank Secrecy is Over: The OECD/G20 process is delivering
results. OECD Publishing; and European Economic and Social Committee (2012). Opinion on ‘Tax and financial
havens: a threat to the EU’s internal market’ (own-initiative opinion), 2012/C 229/02, 31 July 2012.
1244
Foreign Account Tax Compliance Act (FATCA), as part of the Hiring Incentives to Restore Employment
(HIRE) Act. Retrieved from https://www.govinfo.gov/content/pkg/PLAW-111publ147/pdf/PLAW-
111publ147.pdf#page=27.
1245
See Internal Revenue Service (IRS), Foreign Account Tax Compliance Act (FATCA). Retrieved from
https://www.irs.gov/businesses/corporations/foreign-account-tax-compliance-act-
fatca#:~:text=The%20Foreign%20Account%20Tax%20Compliance,to%20withholding%20on%20withholdable%
20payments. (Last accessed 18-05-2022).
1246
See Section 9.2.
1247
See, for instance:
257
changed from the beginning of 2012. For instance, in January 2012, the UK government
started using terms such as crony capitalism to describe the behaviour of large corporations
regarding executive pay and tax avoidance.1248
Secondly, there is the government perspective of, for instance, (individual members of)
national parliaments and the EU parliament. These branches of government are wont to
comment on both the actions and the intentions of all of the stakeholders in the debate,
including those of the incumbent government or international organisations. As such, it is
oftentimes difficult to differentiate between the (hierarchical) position that stakeholders,
such as interest groups, take in the debate and those of some members of parliaments, as
both appear to function mostly as commentators on the current state of play. Of course,
there is a clear and important difference between members of parliaments and other
commentators. Parliaments take up a very central position inside of the actual legislative
process, whereas other stakeholders only can try to influence this process from the outside.
However, in terms of this discourse analysis, it is important to note that parliaments tend to
take up the position of commentator.1249
Mark Atkinson, Multinationals face clamp down, The Guardian, 8 March 2001. Retrieved from
https://www.theguardian.com/business/2001/mar/08/globalisation.budget2001;
Nick Mathiason, UN Targets tax-avoiding multinationals, The Guardian, 21 December 2003. Retrieved from
https://www.theguardian.com/business/2003/dec/21/theobserver.observerbusiness3;
David Leigh, Government outlaws tax avoidance schemes, The Guardian, 14 June 2008. Retrieved from
https://www.theguardian.com/business/2008/jun/14/taxavoidance.tesco
Nicholas Watt, Larry Elliot and Julian Borger, G20 declares door shut on tax havens, The Guardian, 2 April 2009.
Retrieved from https://www.theguardian.com/world/2009/apr/02/g20-summit-tax-havens
Nick Mathiason, Multinational firms face exposure over their corporation tax policies, The Guardian , 15 June
2009. Retrieved from https://www.theguardian.com/business/2009/jun/15/multinational-firms-tax-avoidance
Vanessa Houlder & Nikki Tait, Brussels attacks rules on tax avoidance, Financial Times, 17 February 2011.
Retrieved from https://www.ft.com/content/787951c4-3aef-11e0-8d81-00144feabdc0
Vanessa Houlder & Jim Pickard, Treasury attacks ‘dodgy’ tax advisers, Financial Times, 24 July 2012 retrieved
from https://www.ft.com/content/28ca560e-d4f0-11e1-9444-00144feabdc0
Vanessa Houlder, OECD enters multinationals’ tax debate, Financial Times, 4 November 2012. Retrieved from
https://www.ft.com/content/06e259a2-268e-11e2-9295-00144feabdc0
1248
Hellen Warrell, Clegg vows to curb ‘Crony Capitalism’, Financial Times, 5 January 2012. Retrieved from
https://www.ft.com/content/32e21592-3783-11e1-897b-00144feabdc0
1249
See for instance:
Angela Balakrishnan, Treasury performs U turn on taxing foreign profits, The Guardian, 21 July 2008. Retrieved
from https://www.theguardian.com/business/2008/jul/21/taxavoidance.tax?gusrc=rss
Mark Milner & Lizzy Davis, MPs urge clampdown on firms failing to pay, The Guardian, 22 October 2008.
Retrieved from
https://www.theguardian.com/business/2008/oct/22/taxavoidance-tax-hmrevenue-corporationtax
Nick Mathiason, Brown does a U-turn on tax haven blacklist, The Guardian, 8 March 2009. Retrieved from
https://www.theguardian.com/business/2009/mar/08/taxavoidance-global-economy
George Monbiot, Yes Britain’s open for business – the sort of business that does not pay tax, The Guardian, 8
November 2010. Retrieved from https://www.theguardian.com/commentisfree/2010/nov/08/businesses-
that-dont-like-tax
Aditya Chakrabortty, MPs take note: a new political youth is brewing, The Guardian, 3 December 2010.
Retrieved from https://www.theguardian.com/world/2010/dec/03/new-political-youth-brewing
Alex Hawkes & Graeme Wearden, MPs to investigate corporate tax avoidance, The Guardian, 28 Mar 2011.
Retrieved from https://www.theguardian.com/business/2011/mar/28/mps-investigate-corporate-tax-
avoidance;
258
Media coverage with regard to government action is thus mostly twofold. On the one hand,
there is a rather factual coverage of what the administration is proposing. On the other
hand, there is reporting on the commentary from a wide range of stakeholders on whether
the administration is taking the right type of action.
All throughout the pre-BEPS period, a relation between these two types of reporting can be
observed. Typically, it is government action that first sparks media coverage. Further, both
the government action and the initial media attention can then also trigger commentators
to comment through media and/or through their own communication channels. There are,
however, a few instances in the pre-BEPS period where the commentators take the lead in
causing media coverage. This happened in 2009 with the Guardian’s Tax Gap Project and
again in 2010/2011 as a result of the UK Uncut tax protests.1250
With regard to reporting that factually reports on government action for the most part, it is
interesting to note that it is commonly the fact that the government is taking action that is
reported on. Typically, news media simply state that government action has been taken or
will be taken. Often, there is little information with regard to what the actual measures are.
The reporting mostly consists of two parts. The first part states that there is a problem,
which is described in one or two statements. The second part gives a description of the
intensity of the government action—the government is cracking down on or clamping down
on the problem. The latter appears mainly to act as an indicator of how bad the described
problem is. Interestingly, it is also rare in the pre-BEPS period that media attempt to give
any indication of the extent of the problem or what the adverse effects might be.
9.4.1.2 Reporting on NGOs
During the pre-BEPS period, the positions of separate stakeholders in the media reporting
start to become more distinct from each other. Particularly, NGOs take on a more
adversarial position towards the business and advisory community1251 and to a lesser extent
Felicity Lawrence, Britain’s tax rules – now written for and by multinationals, The Guardian, 19 March 2012.
Retrieved from https://www.theguardian.com/commentisfree/2012/mar/19/britains-tax-rules-written-by-
multinationals;
Vanessa Houlder, MPs to grill companies over tax strategies, Financial Times, 11 November 2012. Retrieved
from https://www.ft.com/content/49f1a51e-2c14-11e2-a91d-00144feabdc0;
Vanessa Houlder, HRMC to face MPs over multinationals tax, Financial Times, 4 November 2012. Retrieved
from https://www.ft.com/content/27465480-2686-11e2-9295-00144feabdc0;
Rajeev Syal & Patrick Wintour, MPs attack Amazon, Google and Starbucks over tax avoidance, The Guardian, 3
December 2012. Retrieved from https://www.theguardian.com/business/2012/dec/03/amazon-google-
starbucks-tax-avoidance.
1250
See section 9.4.1.2 for more on the UK Uncut movement.
1251
See for instance:
Nick Mathiason, Corporate tax avoidance is costing us all billions, The Guardian, 29 June 2003. Retrieved from
https://www.theguardian.com/business/2003/jun/29/corporateaccountability.theobserver;
Prem Sikka, Accountants: a threat to democracy, The Guardian, 5 September 2005. Retrieved from
https://www.theguardian.com/politics/2005/sep/05/publicservices.economy;
Ashley Seager & Philip Inman, Tax evasion costs the lives of 1000 children a day, The Guardian, 12 May 2008.
Retrieved from https://www.theguardian.com/business/2008/may/12/taxavoidance.taxandspending1;
259
towards national governments.1252 The NGOs typically come at the issue of tax avoidance
from the angle that developing countries are losing a lot of revenue as a result of corporate
tax avoidance and that it has the detrimental effects on these countries. Research reports
by NGOs usually focus on an individual company and aim to expose tax structures that the
company uses.1253 The reports then call on both the company and governments to take
action in abolishing the tax structures that allow profits to be siphoned out of developing
countries.
By the end of 2011, some NGOs take on a more activist role that focuses less on developing
countries and rather zooms more in on how much multinationals actually pay in corporate
income tax in the countries where much of their turnover is generated. Specifically, the UK
Uncut protests targeted high-street shops in the UK for their low tax payments. Their goal
with these protests was to prevent the UK government from cuts in public services.
UK Uncut and Tax Activism

The end of 2010 marks the beginning of a period of widespread campaigns and protests
against high-street shops that were suspected of engaging in tax avoidance behaviour.
Media outlets around the world have covered these campaigns extensively.
The protests originated in the organisation UK Uncut.1254 This grassroots protest

organisation was established in October 2010 with the aim to fight proposed austerity
measures in the UK with regard to certain public services. They supported the idea that
cracking down on tax avoidance would be a credible alternative to austerity measures
leading to public sector spending cuts.
One of the main reasons directly leading up to the establishment of UK Uncut was a tax
settlement between the UK tax authorities and Vodafone. The tax settlement followed from
a court case decision with regard to Controlled Foreign Company (CFC) income from a
Luxembourg subsidiary.1255 As a result of the settlement that was concluded in July 2010,
Vodafone ended up paying 1.25 billion GBP to the UK tax authorities. This settlement was
covered by some media outlets. However, at the time, the settlement and its subsequent
Prem Sikka, No risk, big rewards, The Guardian, 10 June 2008. Retrieved from
https://www.theguardian.com/commentisfree/2008/jun/10/qinetiqgroup.labour;
Felicity Lawrence, Brewer SABMiller accused of depriving poor countries of millions in revenue, The Guardian,
29 Nov 2010. Retrieved from https://www.theguardian.com/business/2010/nov/29/sabmiller-india-africa-
actionaid-report;
Saviour Mwambwa, We need greater transparency over tax payments, The Guardian, 5 April 2011. Retrieved
from https://www.theguardian.com/global-development/poverty-matters/2011/apr/15/greater-
transparency-over-tax-payments.
1252
See for instance:
Ed Vulliamy & Sandra Laville, Ministers, Moguls and Murky deals, The Guardian, 4 March 2006. Retrieved from
https://www.theguardian.com/politics/2006/mar/04/uk.italy1;
Richard Murphy, Bold? Not bold enough, The Guardian, 8 October 2008. Retrieved from
https://www.theguardian.com/commentisfree/2008/oct/08/creditcrunch.marketturmoil1;
George Monbiot, Politics is broken, so what do we do? We leave it to the politicians, The Guardian, 2 February
2009. Retrieved from https://www.theguardian.com/commentisfree/2009/feb/03/george-monbiot-on-tax.
1253
See, for instance, Hearson & Brooks (2010).
1254
UK Uncut, Homepage. Retrieved from https://www.ukuncut.org/.
1255
See Vodafone 2 v. Revenue and Customs Commissioners, EWCA Civ 446, Case A3/2008/2235 (2009).
260
reporting did not spark any notable reaction in the broader public.1256 In October 2010, the
news and current affairs magazine Private Eye alleged that the settlement had been highly
favourable for Vodafone. In fact, it was so favourable that one senior HMRC official called it
“an unbelievable cave-in” in the original Private Eye article.1257 This article led other news
outlets to report on the tax settlement once again, and, this time around, there was
definitely a reaction.
The settlement and the subsequent reporting in the Private Eye and other news outlets
inspired a group of about 10 UK Uncut protesters to put out a message on social media.
Who it was exactly that sent out the message remains unclear, but it reads as follows:
Anti-Cuts Direct Action – Wednesday 9.30am

Posted on October 24, 2010 by b2458284
The cuts have come and we need to get to work opposing them fast. This
Wednesday we will take direct action against a target to expose the lies that these
cuts are necessary or fair.
The target has to stay secret until Wednesday morning but we need as many people
as possible to join us. We’ll be meeting outside the Ritz (right next to Green Park
tube) at 9.30am. Look for the person with the orange umbrella. Be prompt: you’ll be
briefed quickly and then we’ll move to the target.
There will be lots of different ways to participate. Come along and make your mind
up there how you want to help.
See you on the streets!1258
This message on social media prompted about 70 people to gather and walk to the
Vodafone flagship store on Oxford Street in London and stage a sit-in that caused the store
to have to close for the day. The participants did not know each other or UK Uncut. Through
social media, UK Uncut had — more or less over the course of a matter of days — gone from
a simple hashtag on Twitter to a website, and, quickly, it became a movement “complete
with an ‘action map’ listing the shutdowns being rapidly planned all over the country.”1259
Within three days of the first action on October 24, UK Uncut successfully caused five more
Vodafone stores in central London to close down as well as stores in Birmingham, Brighton,
Bristol, Brixton, Edinburgh, Glasgow, Hastings, Leeds, Leicester, Liverpool, Manchester,
Oxford, Portsmouth, Worthing and York.
1256
Erik Larson & Jonathan Browning, Vodafone to pay 1.25 billion pounds in UK tax case, Bloomberg, 23 July
2010. Retrieved from https://www.bloomberg.com/news/articles/2010-07-23/vodafone-to-pay-1-93-billion-
to-settle-u-k-tax-suit-over-foreign-units.
1257
Initially, the issue was addressed in the UK’s news and current affairs magazine Private Eye in issue no.
1273 (https://www.private-eye.co.uk/) and was quickly picked up by a host of other news outlets.
See for instance:
Richard Murphy, Vodafone’s tax case leaves a sour taste, The Guardian, 22 October 2010. Retrieved from
https://www.theguardian.com/commentisfree/2010/oct/22/vodafone-tax-case-leaves-sour-taste.
1258
UK Uncut, Their crisis… we won’t pay for it, 24 October 2010. Retrieved from
https://theircrisis.wordpress.com/2010/10/24/call-out-wednesday-9-30am/.
1259
Sam Baker, Vodafone protest shows tweets can get people on the streets, The Guardian, 1 November 2010.
Retrieved from https://www.theguardian.com/commentisfree/2010/nov/01/vodafone-protest-social-media.
261
Since 2010, there have been over 800 events in the UK alone that have been organised by
UK Uncut.1260 Also, there have been spin-offs in other European countries,1261 and a similar
protest group has formed in the US under the name US Uncut. UK Uncut is still active on
social media today, but the media attention has much died out. The last time the UK Uncut
protests were prominently in the media was in October and December 2012 with regard to
the announcement from Starbucks that they would pay a total sum of 20 million GBP in tax
in the years 2013 and 2014 in the UK regardless of whether they turned a profit.1262 This
statement, however, was met with disapproval — and new tax protests — from UK Uncut,
as Starbucks had “missed the point.”1263
UK Uncut and similar protest organisations had an unmistakable impact on the debate and
all of its stakeholders. For starters, their use of non-conventional media and almost
guerrilla-like media tactics put many large corporations – especially those in the business-to-
consumer markets – on alert, if not on the defensive. Moreover, they helped change the
narrative with regard to tax and tax avoidance. This was due to the protest organisations’
reasoning, which had very little to do with what was the correct tax treatment of profits
from a legal standpoint but had everything to do with what they considered to be the
morally correct tax treatment of profits. As such, instead of a perspective of how the rules
work, they approached it from a perspective of what the result (of the rules) should have
been.
In fact, they have argued that the (UK) rule-based tax system should be replaced with a
principle-based system that is deliberately vague as to where the boundary between
acceptable tax mitigation and unacceptable tax avoidance lies. For, the principle of legal
certainty has become an open challenge where it comes to tax, to the point where "clear
and unambiguous tax law is an invitation to raid the public purse."1264
9.4.1.3 Reporting on Business
The business community rarely appears in the media to respond to reports by NGOs and the
claims made in them. In fact, the business community does not really take part in the
debate in the media until governments start to propose concrete measures against tax
avoidance and tax evasion. While the business community never outright opposes or
condemns government measures to combat tax avoidance or evasion during the pre-BEPS
period, their core message is typically to warn the government against the adverse effects
that these measures will have on investments and that too complex measures could stifle
1260
A famous example is the protest of the 2011 U2 performance at the Glastonbury festival. See Simone
Bowers, U2's Glastonbury gig targeted by tax protesters, The Guardian, 3 June 2011. Retrieved from
https://www.theguardian.com/music/2011/jun/03/u2-glastonbury-tax-protesters.
1261
See for instance; Portugal Uncut http://portugaluncut.blogspot.com/.
1262
BBC News, Starbucks agrees to pay more corporation tax, 6 December 2012. Retrieved from
https://www.bbc.com/news/business-20624857.
1263
Roxanne Escobales & Tracy McVeigh, Starbucks hit by UK Uncut protests as tax row boils over, The
Guardian, 8 December 2012. Retrieved from https://www.theguardian.com/business/2012/dec/08/starbucks-
uk-stores-protests-tax.
1264
Margareta Pagano, Lawyers back UK Uncut on taxes, Independent, 23 October 2011. Retrieved from
https://www.independent.co.uk/news/business/news/lawyers-back-uk-uncut-on-taxes-2280762.html.
262
business activity.1265 However, it is notable that the business community largely remained
silent in the pre-BEPS period. Further, insofar as the business community does respond in
the media, it tends to use more business-oriented media rather than responding in media
outlets such as the Guardian or de Volkskrant. It is also of note that there is very little
acknowledgement from the business community that there is a problem that needs to be
addressed. In fact, the business community appears more inclined to question if there
indeed is a problem. There are a few instances where representatives of the business
community take a more understanding tone in the debate.1266 These statements, however,
appear to reflect more personal opinions of certain business leaders than a broader
consensus within the business community.
The tax advisory community has been even quieter than the business community during the
pre-BEPS period. It does not appear to respond to claims that are made against them with
regard to its role in tax avoidance and/or tax evasion whatsoever. It occasionally does
appear in the media concerning government action. For instance, this happened regarding
plans that advisory firms should publish certain tax schemes. To this, the response from the
Association of Chartered Certified Accountants was that “the draft legislation to tackle tax
avoidance […] could prevent its members from offering even the most basic tax advice.”1267
The arguments from the business community and the advisory firms tend to go to two
points. The first point is that, generally, (corporate) tax planning and tax advice constitute
both benign and justified behaviour. In fact, it is behaviour that, by its nature, has positive
externalities, as it is primarily engaged in preventing double taxation rather than creating
situations where profits or income are not taxed at all. The second point is that it is not clear
where the line should be drawn between normal tax planning and aggressive tax planning
and tax avoidance. This second point is also meant to argue the fact that, since these
boundaries are not clear, the size of the problem tends to be overstated. Conversely, it
could also argue for the fact that government measures to combat tax avoidance and
aggressive tax planning tend to go too far in the sense that they cause collateral damage,
while they are also affecting tax planning and tax advice that brings about positive rather
than negative externalities. Even though these qualitative notions appear pervasive in many
of the business and advisory communities’ reasoning across countries, the business
community offers very little by way of quantitative evidence to support their claims.
1265
See for instance:
Jill Treanor, CBI warns again of tougher tax and regulations creating exodus from City, The Guardian, 19
January 2010. Retrieved from https://www.theguardian.com/business/2010/jan/19/cbi-survey-city-tax-
warning;
Terry Macalister, Diageo warns it may leave Britain for a low-tax jurisdiction, The Guardian, 11 February 2010.
Retrieved from https://www.theguardian.com/business/2010/feb/11/diageo-leave-
uk#:~:text=The%20comments%20tally%20with%20those,tea%20and%20Hellman's%20mayonnaise%20brands;
Vanessa Houlder, CBI fears backlash over tax avoidance row, Financial Times, 13 November 2011. Retrieved
from https://www.ft.com/content/1bd64d14-0c95-11e1-88c6-00144feabdc0;
Vanessa Houlder, Business fears powers of tax avoidance rules, Financial Times, 16 September 2012. Retrieved
from https://www.ft.com/content/4d64260e-0009-11e2-a30e-00144feabdc0.
1266
Andrew Clark, GlaxoSmithKline boss: firms should not quit Britain for tax reasons, The Guardian, 20 March
2011. Retrieved from https://www.theguardian.com/environment/2011/mar/20/firms-quit-britain-tax-
reasons.
1267
Jonathan Moules, Threat to basic tax advice, Financial Times, 7 May 2010. Retrieved from
https://www.ft.com/content/06cc9958-59f6-11df-acdc-00144feab49a.
263
9.4.1.4 Concluding Observations on the Pre-BEPS Period
In general, the media strategy applied in the news reporting in the pre-BEPS period with
regard to tax avoidance as well as in the news reporting specifically dealing with corporate
income tax avoidance in the beginning of this period can best be categorised as agenda-
setting. The growing media attention for the subject is most striking. Even though the
number of articles had gone up quite dramatically in the final years of the pre-BEPS period,
actual (technical) information on the subject of tax avoidance has been very limited. In fact,
it is mostly the tone of voice — by way of the use of stronger terms and superlatives — that
separated the earlier reporting from the later. Content-wise, the differences are much
harder to detect.
It can be observed that, particularly during 2010, the tone of voice had become increasingly
negative. On the one hand, this can be attributed to protest groups becoming more vocal on
corporate tax avoidance issues. On the other hand, this followed from the fact that, in 2010,
there was more concrete government action in several EU countries to prevent and combat
tax avoidance and evasion by very wealthy individuals.
Towards the end of the pre-BEPS period, it can be observed that priming and framing had
become more prominent. For instance, in 2011, the media — particularly in the UK —
started highlighting the inherent dichotomy in government tax policy. On the one hand, it
provides an attractive fiscal climate for wealthy individuals and corporate investments
while, on the other hand, taking a firm stance against taxpayers that make use of (intended
and unintended) favourable tax treatment possibilities. NGOs and protest groups, however,
almost exclusively laid the blame for tax avoidance at the feet of the tax avoiders.
The actual media attention on how much governments have been engaged in tax
competition and which effect this had on tax avoidance was not very extensive. Some
concerns were raised that corporations might be far too influential in the design of tax
laws.1268 However, in these articles, governments were seen as (innocent) bystanders that
had let it happen rather than the culprits. That specific role was reserved for taxpayers.
Towards the end of 2012, media outlets started to question much more explicitly if these
two seemingly opposing goals in countries’ tax policies could be reconciled and what role
governments actively played in propagating (corporate) tax avoidance behaviour.1269
1268
See for instance:
David McNair, The long arm of corporate influence, The Guardian, 31 July 2011. Retrieved from
https://www.theguardian.com/business/2011/jul/31/long-arm-corporate-governance;
Felicity Lawrence, Britain’s tax rules – now written for and by multinationals, The Guardian, 19 March 2012.
Retrieved from https://www.theguardian.com/commentisfree/2012/mar/19/britains-tax-rules-written-by-
multinationals.
1269
See for instance:
The Guardian, Two nations when it comes to tax, 11 October 2012. Retrieved from
https://www.theguardian.com/business/2012/oct/11/two-nations-tax.
264
2012 was also the year where the media started giving tax avoiders a face. Up until this
point, it was hard for the general public to really get angry at anyone specific for avoiding
tax payments. Reporting told of wealthy individuals and large corporations that used
loopholes to pay less in tax, but these avoiders had largely remained unidentified. In June
2012, however, it was revealed that British stand-up comedian Jimmy Carr was among
about 1,000 wealthy individuals that had made use of the so-called K2-scheme.1270
Apparently, the scheme was a completely legal loophole and was disclosed to the British tax
authorities.1271 The ensuing tax controversy, however, even prompted the UK Prime
Minister, David Cameron, to comment that, although the scheme might be legal,
participating in the scheme was wrong from a moral viewpoint. He reportedly said that “it
was unfair on the people who pay to watch him perform that he is not paying his taxes in the
same way that they do.”1272
This statement by Cameron is interesting for at least two reasons. Firstly, this is interesting
because, with this statement, the UK Prime Minister — more than the media outlets did at
that point — actively used a powerful image to frame the discussion to explain why he
thought that this behaviour was not permissible, even though it was within the bounds of
the letter of the law. The second reason is that, in 2016, David Cameron himself was at the
centre of a tax controversy scandal, which was not entirely unlike the one Jimmy Carr found
himself in, as the Panama Papers exposed that Cameron’s family were engaging in tax
avoidance using an offshore trust.1273
With regard to avoiding corporate income tax, it is unmistakable that the media reporting in
2012 became more and more focused on big tech companies, specifically Amazon, Google
and Apple.1274 This occurrence coincides with two particular instances of priming. First, the,
1270
This scheme involves an offshore company – usually in Jersey – that would hire the original employee(s)
from the operating company, usually in the UK. The operating company would pay the regular salary to the
offshore company, but this company would pay a much lower wage to the employee(s). In addition to the
salary, the employee(s) would receive loans from the offshore company.
1271
BBC News, Comedian Jimmy Carr: I’ve made terrible error over tax, 21 June 2012. Retrieved from
https://www.bbc.com/news/uk-politics-18531008.
1272
Patrick Wintour & Rajeev Syal, Jimmy Carr tax arrangements ‘morally wrong’, says David Cameron, The
Guardian, 20 Jun 2012. Retrieved from https://www.theguardian.com/politics/2012/jun/20/jimmy-carr-tax-
david-cameron.
1273
1274
See for instance:
Ian Griffiths, Amazon: 7 bln in sales, no UK corporation tax, The Guardian, 4 April 2012. Retrieved from
https://www.theguardian.com/technology/2012/apr/04/amazon-british-operation-corporation-tax;
Rupert Neate, Tim Waterstone warns Amazon tax avoidance could kill off bookshops, The Guardian, 6 April
2012. Retrieved from https://www.theguardian.com/technology/2012/apr/06/tim-waterstone-attacks-
amazon-tax-
avoidance#:~:text=Tim%20Waterstone%2C%20the%20founder%20of,death%20of%20high%20street%20book
shops.&text=Waterstone%20said%20Amazon's%20%22highly%20creative,tax%20planning%22%20was%20gro
tesquely%20unfair;
Volkskrant, Apple ontwijkt massaal belastingen, 30 April 2012. Retrieved from
https://www.volkskrant.nl/economie/apple-ontwijkt-massaal-belastingen~b12f088d/;
Stephen Moss, Should we boycott the tax-avoiding companies?, The Guardian, 17 October 2012. Retrieved
from https://www.theguardian.com/business/shortcuts/2012/oct/17/boycotting-tax-avoiding-companies;
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by now, pre-existing knowledge that — especially big tech — corporations are avoiding tax
coupled with the notion that local shops and businesses are going out of business. Second, it
had become increasingly frequent that media coverage would state — undoubtedly fuelled
by the UK Uncut protests — that, as a result of the tax avoidance of corporations, the
general public would be required to pay more in personal income tax.1275 Or conversely, if
only corporations would pay their due, everybody else could pay less in tax. These two
examples show that the narrative around tax avoidance is changing while moving into the
next period, namely, the development of the BEPS proposals.
9.4.2 Designing BEPS (2013-2015)
The designing BEPS period is signified by the fast build-up of national and international
political pressure on governments and international bodies to act against tax avoidance.
Interestingly, much of the political pressure came from within politics itself.
For instance, David Cameron’s keynote address at the 2013 World Economic Forum’s annual
meeting in Davos includes a call on other countries for coordinated international action to
tackle tax avoidance.1276 In this, he stated that, in an open, global and interconnected
economy, “it is [all] about the rules that shape it, the fairness and the openness that
characterises it. We need more free trade; we need fairer tax systems. We need more
transparency on governments, and yes, on how companies operate. […] This modern open
world is still in many ways so closed and so secretive. […] It’s a world where trade is still
Jennifer Thompson & Vanessa Houlder, Starbucks faces boycott calls over tax affairs, Financial Times,17
October 2012. Retrieved from https://www.ft.com/content/5cd14dcc-187f-11e2-8705-00144feabdc0;
Simon Neville & Shiv Malik, Starbucks wakes up and smells the stench of tax avoidance, The Guardian, 12
November 2012. Retrieved from https://www.theguardian.com/business/2012/nov/12/starbucks-tax-
avoidance-controversy;
Charles Arthur, How to stop using Google, The Guardian, 2 May 2013. Retrieved from
https://www.theguardian.com/technology/2013/may/02/how-stop-using-google-search-services;
Caroline Moraes, Consumers won’t boycott Apple and Google over tax…yet, The Conversation, 29 May 2013.
Retrieved from https://theconversation.com/consumers-wont-boycott-apple-or-google-over-tax-yet-14649;
Jim Pickard, MPs consider tax avoidance probe, Financial Times, 24 October 2012. Retrieved from
https://www.ft.com/content/1536cb8a-1dfd-11e2-8e1d-00144feabdc0;
Patrick Wintour & Dan Milmo, UK and Germany agree crackdown on tax loopholes for multinationals, The
Guardian, 5 Nov 2012. Retrieved from https://www.theguardian.com/business/2012/nov/05/uk-germany-tax-
loopholes-multinationals;
James Shotter & Vanessa Houlder, EU plans action on corporate tax avoidance, Financial Times, 18 November
2012. Retrieved from https://www.ft.com/content/fb4727bc-30d3-11e2-a11a-00144feabdc0;
Rajeev Syal & Patrick Wintour, MPs attack Amazon, Google and Starbucks over tax avoidance, 3 December
2012, The Guardian. Retrieved from https://www.theguardian.com/business/2012/dec/03/amazon-google-
starbucks-tax-avoidance.
1275
See for instance:
Heather Stewart, Wealth does not trickle down, it just floods offshore, research reveals, The Guardian, 21 July
2012. Retrieved from https://www.theguardian.com/business/2012/jul/21/offshore-wealth-global-economy-
tax-havens;
Center for American Progress, The Failure of Supply-side Economics, 1 August 2012. Retrieved from
https://www.americanprogress.org/issues/economy/news/2012/08/01/11998/the-failure-of-supply-side-
economics/.
1276
World Economic Forum Annual Meeting 2013, 24-27 January 2013, Special Address by David Cameron, at
9m 00s. Retrieved from https://www.youtube.com/watch?v=A_pLvK4I2v4.
266
choked off by barriers and bureaucracy. It’s a world where […] some companies navigate
their way around national tax systems and low tax rates with armies of clever accountants
[to] run circles around the letter and the spirit of the law and rip off hard working people and
to plunder natural resources […] behind a veil of secrecy.”
Moreover, several countries began taking aim at countries that were considered overly
aggressive in how they engaged in tax competition.1277 This naming and shaming of these
countries and their ways of leadership became even more poignant after the LuxLeaks
scandal,1278 as it shed light on the tax ruling practices in Luxembourg.
Finally, during the designing BEPS period, the famous hearings by the Public Accounting
Committee took place in the UK Parliament. Especially, Committee Chair Margaret Hodge
became a well-known public figure after the 2013 and 2014 hearings in which several big
tech companies and accountancy firms were questioned. In turn, for example, this led to
political pressure on UK Prime Minister David Cameron to remove Eric Schmidt — the
executive chairman of Google at the time — as a member of the Prime Minister’s Business
Advisory Council.1279
This entire political dynamic on the corporate income tax front was made for the G8, G20,
OECD and the European Commission to show themselves to be very invested in the subject
and to issue political statements to this effect.1280 Further, it also led to a change in the
political focus, which shifted away from wealthy individuals and rather became more firmly
fixed on corporate tax avoidance. Media coverage, by and large, followed suit. The media
did also push the subject of their own accord, but the media certainly were very much
focused on the activity in the political arena during this period.
With governments being more focused on the question of how they should take concrete
action, media reporting also began to pay attention to the more technical side of tax
avoidance. For instance, they explained how letterbox companies or hybrid instruments
1277
For instance, this resulted in the European Commission setting up a dedicated Task Force on Tax Planning
Practices in the summer of 2013 to follow up on public allegations of favourable tax treatments of certain
companies (in particular in the form of tax rulings). The Commission extended this information inquiry to all
Member States in December 2014, including a list of tax rulings issued in recent years, based on which
individual tax rulings that had been requested. The work of this Tax Force led to a number of formal state aid
investigations by the European Commission, of which a number is still ongoing. More information on the Task
Force on Tax Planning and the (ongoing) investigations is Retrieved fromhttps://ec.europa.eu/competition-
policy/state-aid/tax-rulings_en.
1278
Luxleaks refers to the financial scandal revealed in November 2014 by the International Consortium of
Investigative Journalists (ICIJ). The investigative reporting was based on confidential information on tax rulings
of more than three hundred multinational companies based in Luxembourg that were issued by Luxembourg
tax authorities between 2002 and 2010. See International Consortium of Investigative Journalists (ICIJ). (2014).
Luxembourg Leaks: Global Companies’ Secrets Exposed. Retrieved from
https://www.icij.org/investigations/luxembourg-leaks/.
1279
Daniel Gross, Erich Schmidt and Tim Cook Face the Music, Newsweek Magazine, 23 May 2013. Retrieved
from https://www.newsweek.com/2013/05/22/eric-schmidt-and-and-tim-cook-face-music-237410.html.
1280
See for instance, Remarks by President Obama in a Press Conference at the G20, 6 September 2013.
Retrieved from https://obamawhitehouse.archives.gov/the-press-office/2013/09/06/remarks-president-
obama-press-conference-g20; and the Joint Statement by European Commission President Barosso and
European Council President Van Rompuy, 6 September 2013. Retrieved from
https://ec.europa.eu/commission/presscorner/detail/en/MEMO_13_767.
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were applied in practice. In addition, naming and shaming became more prevalent. These
trends in reporting partly meant to simply explain how tax avoidance took place and to
point out who the bad guys were, but these were certainly also meant to raise the question
of how deep the rabbit hole really went.1281
Moreover, the amount of news articles went up dramatically in the designing BEPS period.
To illustrate, in the pre-BEPS period, a person reading all six of the examined newspapers
daily would see an average of 0.3 articles per day on corporate tax avoidance. In
comparison, that same person would see an average of 1.8 articles per day on corporate tax
avoidance in the designing BEPS period. Accordingly, between the two periods, there was
more than a 600% increase in media attention on the subject. On top of that, the media’s
eye got more and more fixed on big tech companies.
All this prompted that the issue of tax avoidance — particularly by big tech companies —
reportedly, also became a much more prominent issue in the public opinion, surpassing
“executive pay levels as a cause for concern regarding ethical corporate behaviour.”1282
All of the examined newspapers show a dramatic increase in the number of articles
regarding tax avoidance. This increase is, for a very large part — if not exclusively — the
result of an increase in reporting on international corporate income tax avoidance. More
specifically, the increase in reporting is primarily regarding government action vis-à-vis
corporate tax avoidance. This is not completely unexpected, as governments on virtually all
national and international levels were either preparing or taking some kind of action aimed
at tackling corporate tax avoidance. It is, however, notable that now all newspapers are
amply reporting on tax avoidance, whereas, before, the more business-oriented newspapers
were not paying that much attention to the subject of tax avoidance.
In terms of government action, the lion’s share of the media attention went to what the
international organisations, such as the OECD and the European Commission, were
planning.1283 In the designing BEPS period, three specific areas received special interest of
1281
See for instance:
Matt Steinglass, Great Tax Race: Dutch focus Reforms on Letterbox Companies, Financial Times, 28 April 2013.
Retrieved from https://www.ft.com/content/5a9f0780-a6bc-11e2-885b-00144feabdc0;
Vanessa Houlder, Hybrid tax schemes face day of reckoning, Financial Times, 25 November 2013. Retrieved
from https://www.ft.com/content/29f9bfd2-4638-11e3-b495-00144feabdc0;
Vanessa Houlder, Vincent Boland & James Politi, Tax avoidance: The Irish Inversion, Financial Times, 29 April
2014. Retrieved from https://www.ft.com/content/d9b4fd34-ca3f-11e3-8a31-00144feabdc0.
1282
Brian Groom Tax avoidance replaces bosses’ pay at top of concerns over ethics, Financial Times, 28
November 2013. Retrieved from https://www.ft.com/content/ac44e12e-578b-11e3-86d1-00144feabdc0.
1283
See for instance:
Hannah Kuchler, Cameron seeks bold steps from G8 leaders, Financial Times, 2 January 2013. Retrieved from
https://www.ft.com/content/41f2c1ee-54b5-11e2-a628-00144feab49a;
Robert Giebels, Weekers gaat brievenbus BVs niet aanpakken, de Volkskrant, 24 January 2013. Retrieved from
https://www.volkskrant.nl/nieuws-achtergrond/weekers-gaat-brievenbus-bv-s-niet-aanpakken~b60f4df7/;
268
Philip Inman, OECD calls for crackdown on tax avoidance by MNEs, The Guardian, 12 February 2013. Retrieved
from https://www.theguardian.com/business/2013/feb/12/oecd-crackdown-tax-avoidance-multinationals;
Frankfurter Allgemeine Zeitung, OECD kritisiert Steuerschlupflöcher für Konzerne, 13 February 2013. Retrieved
from https://www.faz.net/aktuell/wirtschaft/wirtschaftspolitik/studie-oecd-kritisiert-steuerschlupfloecher-
fuer-grosskonzerne-12061423.html;
Chris Giles, Tax avoidance dominates G8 meeting, Financial Times, 11 May 2013. Retrieved from
https://www.ft.com/content/2aa755e6-ba53-11e2-a564-00144feab7de;
Brian Groom, An Inquisitor of our Times, Financial Times, 20 May 2013. Retrieved from
https://www.ft.com/content/2b2bd532-c138-11e2-b93b-00144feab7de;
Vanessa Houlder, G8 leaders braced for battle on evasion, Financial Times, June 10 2013. Retrieved from
https://www.ft.com/content/8d32cec2-d1d0-11e2-9336-00144feab7de;
George Parker & Vanessa Houlder, G8 seeks to rewrite global tax rules, Financial Times, 18 June 2013.
Retrieved from https://www.ft.com/content/0c6a699a-d7e7-11e2-b4a4-00144feab7de;
Robert Giebels, Weekers ziet in onderzoek bewijs dat Nederland geen belastingparadijs is, de Volkskrant, 12
Jun 2013. Retrieved from https://www.volkskrant.nl/nieuws-achtergrond/weekers-ziet-in-onderzoek-bewijs-
dat-nederland-geen-belastingparadijs-is~ba802b13/;
Vanessa Houlder, G20 sharpens attack on corporate tax avoidance, Financial Times, 14 July 2013. Retrieved
from https://www.ft.com/content/a2752ec6-eb23-11e2-bfdb-00144feabdc0;
Vanessa Houlder, OECD unveils global crackdown on tax arbitrage by corporates, Financial Times, 19 July 2013.
Retrieved from https://www.ft.com/content/183c2e26-f03c-11e2-b28d-00144feabdc0;
Vanessa Houlder, G20 backs new tax transparency plan, Financial Times, 20 July 2013. Retrieved from
https://www.ft.com/content/5e9d2158-f155-11e2-b753-00144feabdc0;
Matt Steinglass, Netherlands decides to review tax treaties with developing countries, Financial Times, 6
September 2013. Retrieved from http://ig-legacy.ft.com/content/1560d626-16bf-11e3-bced-
00144feabdc0#axzz6w4GuMXuw;
Vanessa Houlder & Matt Steinglass, G20 leaders ratchet up pressure on tax avoidance, Financial Times, 6
September 2013. Retrieved from https://www.ft.com/content/099eb084-1704-11e3-9ec2-00144feabdc0;
Vanessa Houlder & Alex Barker, Brussels aims to level the playing field for EU’s ‘honest businesses’, Financial
Times, 25 November 2013. Retrieved from https://www.ft.com/content/e64da6ba-55f3-11e3-96f5-
00144feabdc0;
Vanessa Houlder, Hybrid tax schemes face day of reckoning, Financial Times, 25 November 2013. Retrieved
from https://www.ft.com/content/29f9bfd2-4638-11e3-b495-00144feabdc0;
Vanessa Houlder, OECD: Special tax rules for internet companies ‘not viable’, Financial Times, 20 January 2014.
Retrieved from https://www.ft.com/content/ec659cec-81ef-11e3-a600-00144feab7de;
Alex Barker, EU steps up probe into tax sweeteners for multinationals, Financial Times, 21 March 2014.
Retrieved from https://www.ft.com/content/b93d4126-b345-11e3-b09d-00144feabdc0;
Vanessa Houlder, OECD denies rules are biased against low-tax countries, Financial Times, 2 April 2014.
Retrieved from https://www.ft.com/content/5f06a9f8-ba80-11e3-a905-00144feabdc0;
James Politi, US bill would thwart corporate tax moves, Financial Times, 20 May 2014. Retrieved from
https://www.ft.com/content/0993583c-e03b-11e3-9534-00144feabdc0;
Vanessa Houlder, Brussels calls for reform of EU digital tax rules, Financial Times, 28 May 2014. Retrieved from
https://www.ft.com/content/4fea2fc2-e662-11e3-9a20-00144feabdc0;
Christian Oliver, Vincent Boland & Vanessa Houlder, EC opens tax probe against Starbucks, Fiat and Apple,
Financial Times, 11 June 2014. Retrieved from https://www.ft.com/content/333f62d2-f159-11e3-9fb0-
00144feabdc0;
Jamie Smyth, Five things to look out for at G20, Financial Times, 13 November 2014. Retrieved from
https://www.ft.com/content/8c3dc9ce-6b06-11e4-be68-00144feabdc0;
Alex Barker & Vanessa Houlder, Brussels slams Netherlands over Starbucks Tax Deal, Financial Times, 14
November 2014. Retrieved from https://www.ft.com/content/be073364-6be2-11e4-b1e6-00144feabdc0;
Jamie Smyth, George Parker & Vanessa Houlder, G20 back drive to unmask shell companies, Financial Times,
16 November 2014. Retrieved from https://www.ft.com/content/25ae632e-6d60-11e4-8f96-00144feabdc0;
Margrethe Vestager & Pierre Moscovici, This is the year for Europe to put its tax house in order, The Guardian,
17 January 2015. Retrieved from https://www.theguardian.com/commentisfree/2015/jan/17/europe-tax-
commissioners-evasion-fraud-companies;
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the international organisations as root causes of tax avoidance practices. These are (i) tax
secrecy and shell companies, (ii) harmful tax competition, and (iii) tax rulings and state aid.
The focus on these three areas also prompted an interesting dynamic, which developed
between governments active in these international organisations. On the one hand, there
are governments that consider themselves victims of corporate tax avoidance, as they claim
that their tax base has been eroded away. These are typically larger countries such as
Germany, France and Italy. On the other hand, there are those governments that are
criticised by other governments as well as by NGOs for perpetuating secrecy, engaging in
harmful or aggressive tax competition, or providing overly advantageous tax rulings. In
doing so, these countries are criticised for enabling corporate tax avoidance and/or profit-
shifting practises. These are typically smaller open economies such as the Netherlands,
Ireland and Luxembourg.
Government Strategies
There is an interesting difference in how the different countries — in particular those that
were criticised for their role in corporate tax avoidance — approached the subject.1284 For
instance, Ireland seemed to have adopted a wait-and-see strategy. In general, they would
go along with the international political consensus while also trying to adapt proposals as
they came.1285 Ireland did take some national measures to curb tax avoidance, but the
country rather put a long timeline on actually taking these measures. At the same time, the
country introduced national measures to bolster the overall investment climate. The Irish
strategy, therefore, seemed to focus on strengthening the economy in the longer term by
enhancing the investment climate and slowly getting rid of the tax schemes that were most
offensive in the eyes of the international community.
Duncan Robinson, EC probes Belgium for tax deals for multinationals, Financial Times, 3 February 2015.
Retrieved from https://www.ft.com/content/e69cb5f8-ab9b-11e4-b05a-00144feab7de;
Christian Oliver, Brussel demands details of tax rulings from 15 more countries, Financial Times, 8 June 2015.
Retrieved from https://www.ft.com/content/6fcf1734-0de5-11e5-9a65-00144feabdc0;
Carlijne Vos, Geen VN orgaan tegen belastingontwijking, de Volkskrant, 16 July 2015. Retrieved from
https://www.volkskrant.nl/nieuws-achtergrond/geen-vn-orgaan-tegen-belastingontwijking~b26fec12/;
Robert Giebels, Europese Commissie: Nederland moet zich ‘schamen’ voor Starbucks deal, de Volkskrant, 21
October 2015. Retrieved from https://www.volkskrant.nl/economie/europese-commissie-nederland-moet-
zich-schamen-voor-starbucks-deal~b0d89ada6/;
Vanessa Houlder, Plans unveiled to crack down on corporate tax avoidance, Financial Times, 5 October 2015.
Retrieved from https://www.ft.com/content/307c921a-6b45-11e5-aca9-d87542bf8673;
Vanessa Houlder, Call to reform ‘outdated’ global corporate tax regime, Financial Times, 5 October 2015.
Retrieved from https://www.ft.com/content/8bc3e00e-6a89-11e5-aca9-d87542bf8673;
Christian Oliver, Jim Brunsden & Lindsay Whipp, Brussels poised to launch investigation into McDonalds,
Financial Times, 2 December 2015. Retrieved from https://www.ft.com/content/57fbfd7a-98ff-11e5-9228-
87e603d47bdc.
1284
See for instance:
Vanessa Houlder, Nations on the defensive as anger grows over tax avoidance, Financial Times, 28 April 2013.
Retrieved from https://www.ft.com/content/e99c202e-a0fb-11e2-990c-00144feabdc0.
1285
See for instance:
Jamie Smyth & James Fontanella-Khan, Dublin cut tax burden on MNEs after US lobbying, Financial Times, 21
May 2013. Retrieved from https://www.ft.com/content/ee6c1b64-c1f2-11e2-ab66-00144feab7de;
James Fontanella-Khan & Jamie Smyth, Ireland pledges cooperation on global tax avoidance plan, Financial
Times, 22 May 2013. Retrieved from https://www.ft.com/content/1accd5b2-c2d5-11e2-9bcb-00144feab7de.
270
For the shorter term, Ireland seemed just to wait out the storm and laid as low as possible.
This strategy seems to have worked out well for the country, as, on the back of the OECD
BEPS-measures, they managed to secure a large number of foreign direct investments from
the banking sector and big tech companies. These foreign investors were either newly
establishing themselves in Ireland or extending on the already existing Irish operation to
give it more substance. All in all, these foreign direct investments led to an enormous leap
of the Irish GDP by almost 30% in 2015 compared to 2014.1286
The Netherlands took to a different strategy. The country opted for a more active show-and-
tell strategy that relied on a two-prong approach. First, they attempted to contradict the
frame of Netherlands as a tax haven and/or enabler of tax avoidance. The country tried to
show that the claims against it were either baseless or overstated. It did this, for instance,
by requesting independent studies into the added value of the trust sector of the Dutch
economy, as well as into the tax ruling practice.1287 Second, it showed its willingness to
reduce the attractiveness of the Dutch investment climate unilaterally in order to shed the
tax haven image. For this reason, it implemented a number of national measures designed
to fight international tax avoidance, which included introducing stricter substance
requirements for taxpayers to benefit from the Dutch tax treaty network and offering to
1286
See OECD. (2016e). Irish GDP up by 26.3% in 2015? Retrieved from https://www.oecd.org/sdd/na/Irish-
GDP-up-in-2015-OECD.pdf. It is important to note that the OECD also puts the jump in GDP in the perspective
of what this actually means for the average Irish family in this document. They mention that “[g]lobalisation
combined with a growing importance of intangible assets creates issues in relation to the appropriate
allocation of production and value added to countries. The relocation of such activities within MNEs may have
a significant impact on the levels and the growth rates of GDP. Although it represents a certain economic
reality, it goes without saying that it makes it much harder to interpret economic developments appropriately.
It also makes it much more important not to derive incorrect conclusions from the developments of GDP. One
cannot put developments on (material) well-being on a par with economic growth. For this purpose, one
should rely on other indicators from the system of national accounts and look at broader measures of well-
being.”
1287
See for instance:
Merijn Rengers, Xander van Uffelen & Sybren Kooistra, Fiscale wirwar in vrijplaats Nederland, de Volkskrant,
23 January 2013. Retrieved from https://www.volkskrant.nl/nieuws-achtergrond/fiscale-wirwar-in-vrijplaats-
nederland~b64afb4e/;
Robert Giebels, Allesonthullende onderzoek brievenbusfirma’s ‘gekleurd’, de Volkskrant, 25 January 2013.
Retrieved from https://www.volkskrant.nl/nieuws-achtergrond/allesonthullende-onderzoek-naar-
brievenbusfirma-s-gekleurd~b8cb1129/;
Xander van Uffelen, Fiscaal sluipverkeer, de Volkskrant, 25 January 2013. Retrieved from
https://www.volkskrant.nl/nieuws-achtergrond/fiscaal-sluipverkeer~b5d3392a1/;
Matt Steinglass, Great Tax Race: Dutch reforms focus on letterbox companies, Financial Times, 28 April 2013.
Retrieved from https://www.ft.com/content/5a9f0780-a6bc-11e2-885b-00144feabdc0;
Robert Giebels, Weekers ziet in onderzoek bewijs dat Nederland geen belastingparadijs is, de Volkskrant, 12
June 2013 Retrieved fromhttps://www.volkskrant.nl/nieuws-achtergrond/weekers-ziet-in-onderzoek-bewijs-
dat-nederland-geen-belastingparadijs-is~ba802b13/;
Wilco Dekker & Sybren Kooistra, Nóg een studie naar belastingontwijking, de Volkskrant, 4 July 2013.
Retrieved from https://www.volkskrant.nl/nieuws-achtergrond/nog-een-studie-naar-
belastingontwijking~b8df58f9/;
Merijn Rengers & Xander van Uffelen, CPB: Nederland is een doorsluisland, de Volkskrant, 31 August 2013.
Retrieved from https://www.volkskrant.nl/nieuws-achtergrond/cpb-nederland-is-een-
doorsluisland~bf464d55/.
271
include more stringent anti-abuse measures in the 23 Dutch tax treaties with developing
countries.1288
In hindsight, one could possibly conclude that the Dutch strategy did not exactly work out as
imagined by the Dutch government. The studies on the role of the Netherlands in
international tax avoidance were criticised for lack of objectivity and/or did not always paint
a very favourable picture.1289 Moreover, there were competing reports by other
organisations, which often contradicted the results of the official reports.1290 At the same
time, the Netherlands received very little credit from the international community for the
unilateral measures that were taken with the exception perhaps of the offer to include anti-
abuse measures in tax treaties with developing countries.1291 Either, the measures were
considered to be “too little, too late”, or they might have even gone mostly unnoticed. At
the end of the day, the Netherlands was (and still is) widely regarded as one of the
jurisdictions in the world that acts as an enabler of tax avoidance schemes. On top of that,
the Netherland lost some of its attractiveness as a location where companies have their
(regional) headquarters. For instance, in 2014, Starbucks moved their European head office
from Amsterdam to London.1292
The United Kingdom took up yet another strategy. They seemed to have opted for an
offense-is-the-best-defence strategy. During the designing BEPS period, they showed
themselves to be a country of two faces. On the one hand, they were very active in the EU in
developing and promoting measures to battle tax avoidance. The UK, particularly, was
active regarding measures increasing tax transparency (between governments) and
abolishing bank secrecy. On the other hand, the UK was moving rather aggressively with
regard to lowering their national corporate income tax rates and actively and repeatedly
advertised that, by 2015, the UK would have the most competitive tax regime in the G20.1293
This does not mean that the UK did not act unilaterally against tax avoidance at all. For
1288
See Tweede Kamer. (2013). Internationaal (fiscaal) Verdragsbeleid. Kamerstukken, Vergaderjaar 2012-
2013, 25087 nr 60. Retrieved from https://zoek.officielebekendmakingen.nl/kst-25087-60.html.
1289
See Lejour, A., & van’t Riet, M. (2013). Nederland belastingparadijs?. Nederland doorsluisland. CPB Policy
Brief. Centraal Planbureau; Lejour, A., Möhlmann, J., & van ’t Riet, M. (2019). Doorsluisland NL Doorgelicht.
CPB Policy Brief. Centraal Planbureau; and Merijn Rengers & Xander van Uffelen, CPB: Nederland is een
doorsluisland, de Volkskrant, 31 August 2013. Retrieved from https://www.volkskrant.nl/nieuws-
achtergrond/cpb-nederland-is-een-doorsluisland~bf464d55/.
1290
See for instance Berkhout, E. (2013). De Nederlandse route: Hoe arme landen inkomsten mislopen via
belastinglek Nederland [The Dutch route: how poor countries are deprived of revenues due to tax leakage in
the Netherlands]. Oxfam Novib, The Hague.
1291
See Tweede Kamer (2013); and Matt Steinglass, Netherlands to review tax treaties with developing
countries, Financial Times, September 6, 2013. Retrieved from http://ig-legacy.ft.com/content/1560d626-
16bf-11e3-bced-00144feabdc0#axzz6w4GuMXuw.
1292
See Starbucks, Starbucks moves European Head Office to London, Press Release, 15 April 2014
https://stories.starbucks.com/press/2014/starbucks-moves-european-head-office-to-london/; and
David Jolly, Critized on Taxes, Starbucks will move European Offices to London, The New York Times, 16 April
2014. Retrieved from https://www.nytimes.com/2014/04/17/business/international/starbucks-to-move-
european-offices-to-london.html.
1293
See for instance the Chancellor of the Exchequer's keynote speech at the Confederation of British
Industry's (CBI) annual dinner, 15 May 2013. Retrieved from
https://www.gov.uk/government/speeches/speech-by-chancellor-of-the-exchequer-rt-hon-george-osborne-
mp-cbi-annual-dinner-2013.
272
instance, in 2015, the UK introduced the diverted profits tax.1294 The aim of this tax might
have been to protect the UK tax base against contrived tax arrangements that result in base
erosion, which are used by large multinationals.1295 However, the overall UK strategy was
very much characterised for being insistent on both sides, fighting international tax
avoidance and engaging in tax competition.1296 In fact, one could argue that the push for
international tax transparency and the abolishment of bank secrecy might not have been
entirely disadvantageous for the financial services industry in London. Moreover, when it
came down to it, the effort to fight against tax avoidance in other areas—such as curbing tax
competition—was more perfunctory.1297 All in all, the British efforts might primarily have
been aimed at protecting their own national interests, and not without some measure of
success. 1298
1294
The primary aim of the tax is to counteract arrangements that exploit tax differentials, and it will apply
where the detailed conditions, including those on an ‘effective tax mismatch outcome’, are met. Diverted
profits relating to UK activity are taxed at a rate of 25%. The charge will arise if either of the two rules applies.
The first rule is designed to address arrangements which avoid a UK permanent establishment (PE) and comes
into effect if a person is carrying on activity in the UK in connection with supplies of goods and services by a
non-UK resident company to customers in the UK, provided that the detailed conditions are met. The second
rule applies to certain arrangements which lack economic substance involving entities with an existing UK
taxable presence. See also: HMRC. (2014). Diverted Profit Tax, Consultation Draft. Retrieved from
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/385741/
Diverted_Profits_Tax.pdf.
1295
See also: Vanessa Houlder & Murad Ahmed, Autumn Statement 2014: UK plans to raise £1bn with ‘Google
tax’, Financial Times, 3 December 2014. Retrieved from https://www.ft.com/content/127010ea-7af9-11e4-
b630-00144feabdc0; Jamie Smyth, Australia targets UK-style Google Tax, Financial Times, 9 December 2014.
Retrieved from https://www.ft.com/content/2d423164-7f54-11e4-bd75-00144feabdc0.
1296
See for instance: Larry Elliot & Heather Stewart, David Cameron Davos keynote speech targets tax avoiders,
The Guardian, 24 January 2013. Retrieved from https://www.theguardian.com/business/2013/jan/24/david-
cameron-tax-avoidance-trade-davos; Vanessa Houlder, Elizabeth Rigby, Bede McCarthy & Andrea Felsted,
Tougher tax rules would cost jobs, minster warns, Financial Times, 20 May 2013. Retrieved from
https://www.ft.com/content/2fe04a52-c16c-11e2-b93b-00144feab7de;
Vanessa Houlder & George Parker, UK premier David Cameron presses EU on tax evaders, Financial Times, 24
April 2013. Retrieved from https://www.ft.com/content/47dff508-ad03-11e2-9454-00144feabdc0;
Simon Bowers, Britain rules the world of tax havens, Queen is warned, The Guardian, 7 November 2013.
Retrieved from https://www.theguardian.com/business/2013/nov/07/britain-tax-havens-queen-secrecy-
justice-network.
1297
See for instance, Code of Conduct Group (Business Taxation) meeting documents for 2015 and 2016.
Retrieved from https://www.consilium.europa.eu/en/council-eu/preparatory-bodies/code-conduct-group/;
the minutes for the Committee of the Permanent Representatives of the Governments of the Member States
to the European Union (Coreper II) meetings in 2015 and 2016. Retrieved from
https://www.consilium.europa.eu/en/meetings/calendar/?Category=mpo&Page=1&dateFrom=2015%2F01%2
F01&dateTo=2016%2F12%2F31&filters=1662; and the meeting documents and minutes for the EU Economic
and Financial Affairs Council (ECOFIN) meetings in 2015 and 2016. Retrieved from
https://www.consilium.europa.eu/en/meetings/calendar/?Category=meeting&Page=1&dateFrom=2015%2F0
1%2F01&dateTo=2016%2F12%2F31&filters=-1&filters=1648.
1298
See, for instance, the UK Government Brochure “The UK – Number one for European Headquarters” issued
in May 2013 and withdrawn in May 2019. The brochure boasts with regard to corporate tax burden:
“The UK has generous tax allowances such as the Patent Box and the most extensive network of double
taxation treaties in the world. Our overall tax burden is well below countries such as Germany, France, the
Netherlands, Belgium, Sweden, Denmark and Italy, as well as below the average for the EU as a whole
(Eurostat, 2011)”. Retrieved from
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/802541/
UK_European_Headquarters_Brochure_withdrawn.pdf.
273
Chancellor George Osborne [said]: ‘I want Britain to be the place international
businesses go to, [n]ot the place they leave.’ And his success cannot be denied. To
these shores have come the headquarters of insurance broker Aon, Fiat Industrial,
General Electric’s oil and gas business, Starbucks Europe and legions more. A wave of
patent-owning companies have been lured by tax breaks that have sparked anger in
other countries. What chance, then, for the European commission’s harmonising tax
proposals? The answer from the UK treasury was quick and emphatic: none. David
Gauke, the minister responsible for tax policy, made it clear: where it has to choose,
Britain prefers tax competition to policy coordination.1299
The relative success of Ireland’s as well as the UK’s chosen strategies compared to that of
the Netherlands does not mean that they escaped international and national criticism. In
fact, the UK’s double attitude towards tax was especially much discussed. Particularly, as the
UK did make a show to push for measures, but, at the same time, would demonstrate less
conviction at the crucial moments of political decision making.1300
Finding Political Traction

With regard to the political reaction to government actions, there were a few trends that
emerged in the designing BEPS period. First off, there is broad criticism from opposition
parties that the administration is not taking the problem seriously enough and that their
actions are not going far enough.1301 These comments underline that the issue of tax
avoidance had become a very prominent political issue. At the same time, they also show
that the opposition’s comments, at this point, still are largely descriptive observations that
something is not right. Further, it is also mentioned that they are searching for where they
can do something to intervene.
1299
The Guardian, Tax laws for big business are broken. Britain wants them to stay that way, 21 June 2015.
Retrieved from https://www.theguardian.com/politics/2015/jun/21/tax-laws-business-broken-britain-stay-
that-way.
1300
See for instance:
Vanessa Houlder & Quentin Peel, UK under pressure Berlin over tax competition, Financial Times, 13 June 2013.
Retrieved from https://www.ft.com/content/fcf85732-d445-11e2-a464-00144feab7de.
1301
See for instance:
Vanessa Houlder, Tax avoiders runs rings around HRMC, Financial Times, 18 February 2013. Retrieved from
https://www.ft.com/content/6b8d4364-79de-11e2-9015-00144feabdc0;
Jonathan Ford, All carrot and no stick, Financial Times, 22 March 2013. Retrieved from
https://www.ft.com/content/43e7da5c-917d-11e2-b4c9-00144feabdc0;
Simon Bowers, MPs urge parliamentary inquiry into tax deal in wake of LuxLeaks, The Guardian, 14 January
2015. Retrieved from https://www.theguardian.com/business/2015/jan/14/meps-european-parliament-
inquiry-luxleaks;
Simon Bowers, PwC chief misled us over Lux tax avoidance schemes, claim MPs, The Guardian, 6 February
2015. Retrieved from https://www.theguardian.com/business/2015/feb/06/pricewaterhousecoopers-boss-
kevin-nicholson-misled-mps;
that-way;
Simon Bowers, UK tax policy is dictated by companies not ministers, says leading treasury expert, The
Guardian, 28 June 2015. Retrieved from https://www.theguardian.com/global/2015/jun/28/uk-tax-policy-
dictated-by-big-companies-not-ministers-treasury-adviser.
274
For instance, suggestions were brought up that accountants have too big a hand in writing
tax laws and, therefore, can easily game the tax system.1302 On this point, Margaret Hodge
said: “There is a spectrum between sensible tax planning and aggressive tax avoidance. The
problem is that the Big 4 has more staff than the government and they help write the
laws.”1303 However, calls to regulate the advisory firms did not get much political
traction.1304 Another example is that it was suggested that firms that engage in tax
avoidance should no longer be eligible for government contracts1305 or should even be
denied access to the market altogether.1306 Even though these plans did not lead to actual
legislative rules, they are indicative of the underlying political dynamic that has increased
the pressure on governments to take more decisive action.
This political pressure was further intensified when the story broke on LuxLeaks in
November 2014.1307 For, even though LuxLeaks only shone a light on the tax ruling practices
in Luxembourg, it fuelled a widely held suspicion that tax rulings led to undue advantages of
multinationals over local businesses. Further, LuxLeaks also fuelled the suspicion that these
practices were not exclusive to Luxembourg but that tax rulings in other countries would
show agreements that might legally be possible, but which were not necessarily in line with
the intention of the law.1308 For instance, it prompted Dutch politician Jesse Klaver to state
that he “hope[d] that multinationals would not sleep easy anymore after today”1309 in a bid
to make all (Dutch) tax rulings public with the aim to uncover any and all sweetheart deals
that (he suspected) might have been struck in the Netherlands. Moreover, even though the
European Commission had already started looking into possible state aid issues with tax
1302
See for instance:
The Guardian, To stop firms gaming the tax system, make them admit what they are doing, 27 January 2013.
Retrieved from https://www.theguardian.com/business/2013/jan/27/stop-companies-gaming-tax-system;
Adam Jones & Vanessa Houlder, MPs grill accountants over tax avoidance, Financial Times, 31 January 2013.
Retrieved from https://www.ft.com/content/35692ffa-6bb0-11e2-8c62-00144feab49a;
Vanessa Houlder, Big Four accountants wield undue influence over UK tax system, Financial Times, 25 April
2013. Retrieved from https://www.ft.com/content/8f45d2b4-adc1-11e2-82b8-00144feabdc0.
1303
See Robert Shrimsley, Lunch with the FT: Margaret Hodge, Financial Times, 6 December 2013. Retrieved
from https://www.ft.com/content/697e1a22-5c0e-11e3-931e-00144feabdc0.
1304
See for instance:
Vanessa Houlder, Treasury rejects regulation clamp on UK tax advisers, Financial Times, 19 March 2015.
Retrieved from https://www.ft.com/content/1e392106-ce54-11e4-86fc-00144feab7de.
1305
See for instance:
Simon Bowers, Tax avoidance firms will be banned from major government contracts, The Guardian, 14
February 2013. Retrieved from https://www.theguardian.com/business/2013/feb/14/tax-avoicance-contracts;
Vanessa Houlder, Government contract bidders responds to tax outcry, survey finds, Financial Times, 8 June
2014. Retrieved from https://www.ft.com/content/e2bd6e3e-ef06-11e3-8e82-00144feabdc0.
1306
See Robert Reich, Why should Apple have access to consumers if it refuses to pay its fair share of taxes?,
The Guardian, 26 May 2013. Retrieved from
https://www.theguardian.com/commentisfree/2013/may/26/technology-apple-amazon-google.
1307
See Section 8.3.2.; and ICIJ (2014).
1308
See for instance:
Guy Verhofstadt, The tax scandal is not Luxembourg’s alone, The Guardian,10 December 2014. Retrieved from
https://www.theguardian.com/business/2014/dec/10/tax-scandal-not-luxembourgs-alone.
1309
See:
Robert Giebels, Ik hoop dat multinationals na vandaag geen nacht meer rustig slapen, de Volkskrant, March
2015. Retrieved from https://www.volkskrant.nl/economie/ik-hoop-dat-multinationals-na-vandaag-geen-
nacht-meer-rustig-slapen~b981eb8b5/.
275
rulings before November 2014,1310 LuxLeaks markedly intensified the European
Commission’s actions on that front, as the European Commission requested more
information on tax rulings from multiple EU Member States and opened more investigations
into a number of these tax rulings.1311 The LuxLeaks scandal was also somewhat of an
embarrassment for the new president of the European Commission President, Jean-Claude
Juncker, as he was Luxembourg’s minister of Finance from 1989 until 2009 as well as the
country’s Prime Minister between 1995 and 2013.1312
In general, there was an increase of coverage of the NGO perspective in all the examined
newspapers during this period. The NGO perspective in the media became much more a mix
of reports on the effects of tax avoidance on developing countries on the one hand1313 and
1310
See:
State Aid Case SA.38373 - Aid to Apple. Retrieved from
https://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_SA_38373;
State Aid Case SA.38374 State aid implemented by the Netherlands to Starbucks. Retrieved from
https://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_SA_38374; and
State Aid Case SA.38375 State aid which Luxembourg granted to Fiat. Retrieved from
https://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_SA_38375;
Also See section 5.4.
1311
See for instance:
Christian Oliver, Vincent Boland & Vanessa Houlder, EC opens tax probe into Starbucks, Fiat and Apple,
Financial Times, 11 June 2014. Retrieved from https://www.ft.com/content/333f62d2-f159-11e3-9fb0-
00144feabdc0;
Alex Barker & Vanessa Houlder, Brussels slams Netherlands over Starbucks Tax Deal, Financial Times, 14
November 2014. Retrieved from https://www.ft.com/content/be073364-6be2-11e4-b1e6-00144feabdc0;
Duncan Robinson, EC probes Belgium for tax deals for multinationals, Financial Times, 3 February 2015.
Retrieved from https://www.ft.com/content/e69cb5f8-ab9b-11e4-b05a-00144feab7de;
Christian Oliver, Brussel demands tax deals from 15 more countries, Financial Times, June 8 2015. Retrieved
from https://www.ft.com/content/6fcf1734-0de5-11e5-9a65-00144feabdc0;
Christian Oliver, Jim Brunsden & Lindsay Whipp, Brussels poised to launch investigation into McDonalds, 2
December 2015. Retrieved from https://www.ft.com/content/57fbfd7a-98ff-11e5-9228-87e603d47bdc.
1312
See for instance:
Alastair Macdonald & Julia Fioretti, Luxembourg tax storm hits new EU chief Juncker, Reuters, 6 Nov 2014.
Retrieved from https://jp.reuters.com/article/instant-article/idUKKBN0IP30L20141106.
1313
See for instance:
Daniel Boffey, British sugar giant caught in global tax scandal, The Guardian, 9 Feb 2013. Retrieved from
https://www.theguardian.com/business/2013/feb/09/british-sugar-giant-tax-
scandal#:~:text=One%20of%20Britain's%20biggest%20multinationals,long%20investigation%20revealed%20o
n%20Sunday;
Xander van Uffelen, Als je geen belasting betaalt, roof je een land leeg, de Volkskrant, 27 April 2013. Retrieved
from https://www.volkskrant.nl/nieuws-achtergrond/als-je-geen-belasting-betaalt-roof-je-een-land-
leeg~b6b3b359/;
Financial Times, Zambia’s tax losses, 30 April 2013. Retrieved from https://www.ft.com/content/93b47d9a-
b196-11e2-b324-00144feabdc0;
Larry Elliot, Tax lost offshore could end world poverty, says Oxfam, The Guardian, 22 May 2013. Retrieved from
https://www.theguardian.com/business/2013/may/22/tax-lost-offshore-end-poverty-
oxfam#:~:text=Lost%20tax%20revenue%20from%20money,across%20the%20globe%20twice%20over;
276
the call for multinationals to pay their fair share of tax in advanced economies on the other
hand.1314 This shift in the NGO communication strategy helped to make the problem of tax
avoidance much more relatable for the general public. In fact, even though the work of
many NGOs still mostly focused on developing countries, NGO comments on more local
effects of tax avoidance appear to have received more attention in the media. Additionally,
the developing countries’ reports tended to be picked up mostly by the newspapers that are
less business-oriented, while the more local perspective is rather picked up by all of the
examined newspapers. This tendency gave NGOs a much more central position in the media
debate on tax avoidance. It even prompted the Catholic Church and the Church of England
to speak out against tax avoidance.1315
Wilco Dekker & Sybren Kooistra, Verdrag met Nederland kost arme landen een fortuin, de Volkskrant, 11 June
2013. Retrieved from https://www.volkskrant.nl/nieuws-achtergrond/verdrag-met-nederland-kost-arme-
landen-fortuin~b99502d6/;
Peter de Waard, Is slavenhandel ook verdedigbaar?, de Volkskrant, 14 June 2013. Retrieved from
https://www.volkskrant.nl/nieuws-achtergrond/is-slavenhandel-ook-verdedigbaar~b3854574/.
1314
See for instance:
Richard Brooks, Forget Starbucks. What UK companies are doing to avoid tax is far worse, The Guardian, 10
February 2013. Retrieved from https://www.theguardian.com/business/2013/feb/10/tax-loopholes-poorest-
countries;
Vanessa Houlder, Britons shun companies over tax avoidance, Financial Times, 1 March 2013. Retrieved from
https://www.ft.com/content/9828ccb2-81be-11e2-b050-00144feabdc0;
Martin van Geest, Als Starbucks geen belasting betaalt, draait Jan Modaal daarvoor op, de Volkskrant, 22 April
2013. Retrieved from https://www.volkskrant.nl/columns-opinie/als-starbucks-geen-belasting-betaalt-draait-
jan-modaal-daar-voor-op~bfde194c8/;
Vanessa Houlder & Jim Pickard, More evidence of low tax payments by US tech groups, Financial Times, 3
January 2014. Retrieved from https://www.ft.com/content/28e15a82-7230-11e3-9c5c-00144feabdc0;
Juliette Garside, Amazon UK boycott urged after retailer pays just 4.2 mln in tax, The Guardian, 9 May 2014.
Retrieved from https://www.theguardian.com/business/2014/may/09/margaret-hodge-urges-boycott-
amazon-uk-tax-starbucks;
Vanessa Houlder, UK UNCUT stages anti-tax avoidance protests, Financial Times, 14 May 2014. Retrieved from
https://www.ft.com/content/1355daf4-db7f-11e3-b112-00144feabdc0;
Stephen Burgen, Almost all Spanish stock market firms use tax havens, report finds, The Guardian, 30 May
2014. Retrieved from https://www.theguardian.com/business/2014/may/30/almost-all-spanish-stock-market-
firms-use-tax-havens-
report#:~:text=Almost%20all%20Spanish%20stock%20market%20firms%20use%20tax%20havens%2C%20repo
rt%20finds,-
This%20article%20is&text=Almost%20all%20of%20the%2035,that%20monitors%20corporate%20social%20res
ponsibility;
John Gapper, Technology’s tax defence is washing away, Financial Times, 1 October 2014. Retrieved from
https://www.ft.com/content/4460919e-48b6-11e4-9d04-00144feab7de;
Erica Buist, London’s tax dodge tour: visit the companies who don’t pay their dues, The Guardian, 15 February
2015. Retrieved from https://www.theguardian.com/money/shortcuts/2015/feb/15/london-tax-dodge-tour-
visit-companies-dont-pay-dues;
Mark Sweney, I paid 684 times more tax than Facebook, The Guardian, 15 October 2015. Retrieved from
https://www.theguardian.com/media/2015/oct/15/matthew-freud-i-paid-684-times-more-tax-than-facebook;
Vanessa Houlder, Activists to protest over multinationals’ tax bills, Financial Times, 3 November 2015.
Retrieved from https://www.ft.com/content/b0e15eda-8248-11e5-8095-ed1a37d1e096.
1315
See for instance:
Simon Bowers, Catholic bishops urge G8 to tackle tax avoidance, The Guardian, 6 June 2013. Retrieved from
https://www.theguardian.com/world/2013/jun/06/catholic-bishops-g8-tax-avoidance;
Clear Barret, Archbishop of Canterbury says companies should pay more tax, Financial Times, 4 February 2015.
Retrieved from https://www.ft.com/content/e65a5c44-ac63-11e4-9aaa-00144feab7de.
277
This new focus also allowed NGOs to enter the debate from different angles, giving NGOs a
strong and steady media presence. For instance, they would appeal to how good tax
behaviour could help the reputation of multinationals1316 while simultaneously warning the
general people against corporate brochuremanship.1317 NGOs also began explaining how
certain tax structures worked and why that meant that multinationals were not paying their
fair share in the country that they either extracted resources from or made their sales.1318
Moreover, they pointed towards governments stating that intended measures could not
always be expected to have much effect, or – even – that governments intended for some
measures to not have any real effect to begin with.1319 They also used the issue of tax
avoidance as an argument to protest something else altogether.1320 Finally, they were also
polling people in order to show that it is not NGOs but the people in the streets that want
governments to take action to curb tax avoidance. Moreover, these polls show that the
percentage of people wanting government action is growing over time.1321
1316
See for instance:
Vanessa Houlder, Companies discuss value of ‘fair tax’ kitemark, Financial Times, 2 February 2015. Retrieved
from https://www.ft.com/content/5960de76-a9f7-11e4-9fa7-00144feab7de;
Stefan Fern, Save tax penny, pay reputation pound, Financial Times, 18 February 2015. Retrieved from
https://www.ft.com/content/92394ba2-b2cb-11e4-a058-00144feab7de.
1317
See for instance:
Jurjen van der Garde, Wantrouw het moreel vertoon van bedrijven, de Volkskrant, 10 June 2013. Retrieved
from https://www.volkskrant.nl/nieuws-achtergrond/wantrouw-het-moreel-vertoon-van-
bedrijven~b26dd120/.
1318
See for instance:
Simon Bowers, Luxembourg tax files: how tiny state rubber-stamped tax avoidance on an industrial scale, The
Guardian, 5 November 2014. Retrieved from https://www.theguardian.com/business/2014/nov/05/-sp-
luxembourg-tax-files-tax-avoidance-industrial-scale;
Vanessa Houlder, Book review: “The Hidden Wealth of Nations: The Scourge of Tax Havens” by Gabriel Zucman,
Financial Times, 2 October 2015. Retrieved from https://www.ft.com/content/10f42a56-6830-11e5-97d0-
1456a776a4f5; and Daniel Bel-Ami, Book review: The Hidden wealth of nations, Financial Times, 11 March 2016
Retrieved from https://www.ft.com/content/0e3d738e-e78e-11e5-bc31-138df2ae9ee6.
1319
See for instance:
Patrick van IJzendoorn, Britse belastingbaas naar multinational, de Volkskrant, 31 May 2013. Retrieved from
https://www.volkskrant.nl/nieuws-achtergrond/belastingbaas-naar-multinational~b4de0386/;
The Guardian, Tough talk on tax means nothing if every country does different things, 5 October 2014.
Retrieved from https://www.theguardian.com/business/2014/oct/05/tough-talk-tax-means-nothing-country-
does-different-things;
that-way.
1320
See for instance:
Kiran Stacey, Greenpeace links frackers to tax havens, Financial Times, 16 December 2015. Retrieved from
https://www.ft.com/content/021f2e68-a34a-11e5-8d70-42b68cfae6e4.
1321
See for instance:
Vanessa Houlder, Voters in marginals seek clampdown on corporate tax avoidance, Financial Times, 30 April
2015. Retrieved from https://www.ft.com/content/9683d2a4-ee80-11e4-88e3-00144feab7de;
Aliya Ram, Today in the Election, Financial Times, 7 May 2015 (“A poll by development charities and other
organisations including Oxfam, Christian Aid and the Equality Trust has found some 58 per cent of people want
action on corporate tax avoidance, with 90 per cent or more of both Conservative and Labour voters agreeing
with the statement: “tax avoidance by large companies is morally wrong, even if it is legal”.); Shaxson, N.
(2015). New Christian Aid poll: 70% believe ‘legal’ tax avoidance is wrong. Tax justice Network. Retrieved from
https://www.taxjustice.net/2015/09/18/new-christian-aid-poll-70-believe-legal-tax-avoidance-is-wrong/.
278
In contrast to NGOs, the business community did not appear to change tactics much
compared to the pre-BEPS period. The business community remained reluctant to
communicate actively on their position regarding tax avoidance. If approached by the
media, the business community response would typically be (i) that businesses are following
all applicable rules and regulations,1322 which would often followed by (ii) some kind of
warning that any action to tighten up the rules would have adverse effects on the economy
as a whole.1323 A third staple in the business communication strategy was to call on
David Pegg, Tax avoidance by big firms is morally wrong, say 9 out of 10 in UK, The Guardian, 27 November
2017. Retrieved from https://www.theguardian.com/business/2017/nov/27/tax-avoidance-by-big-firms-is-
morally-wrong-say-nine-out-of-10-in-uk.
1322
See for instance:
Adam Jones, Accountants say that politicians are demonizing them, Financial Times, 3 February 2013.
Retrieved from https://www.ft.com/content/506c9cfa-6c7e-11e2-b774-00144feab49a;
Richard Waters, Apple denies using ‘tax gimmicks’ to lower US tax payments, Financial Times, 20 May 2013.
Retrieved from https://www.ft.com/content/c37ab4ee-c187-11e2-b93b-00144feab7de;
Robert Giebels, Sjoemelen? We doen niets verkeerd, de Volkskrant, 13 Sept 2013. Retrieved from
https://www.volkskrant.nl/nieuws-achtergrond/sjoemelen-we-doen-niets-verkeerd~b939c68c/;
Hans van den Hurk, Demagogie en onkunde regeren het fiscale debat, Financieele Dagblad, 26 May 2014,
https://fd.nl/frontpage/Print/krant/Pagina/Opinie___dialoog/33118/demagogie-en-onkunde-regeren-het-
politieke-fiscale-debat;
Vanessa Houlder, Starbucks tries to draw a line under tax controversy, Financial Times, 16 December 2015.
Retrieved from https://www.ft.com/content/1e092a96-a419-11e5-873f-68411a84f346.
1323
See for instance:
Vanessa Houlder, CBI warns: tax reporting rules put busines in straitjacket, Financial Times, 7 May 2013.
Retrieved from https://www.ft.com/content/9177f7dc-b736-11e2-841e-00144feabdc0;
Wilco Dekker & Merijn Rengers, Zorgen werkgevers om ophef belastingparadijs Nederland, de Volkskrant, 22
May 2013. Retrieved from https://www.volkskrant.nl/economie/zorgen-werkgevers-om-ophef-
belastingparadijs-nederland~b7438d2d9/;
Matt Steinglass & Jamie Smyth, Dutch crackdown on avoidance is being fiercely resisted by business
community, Financial Times, 12 September 2013. Retrieved from https://www.ft.com/content/c17a44a0-
1bc5-11e3-94a3-00144feab7de;
Clive Cookson, Technology sector says, government risks stifling bright ideas, Financial Times, 16 October 2013.
Retrieved from https://www.ft.com/content/53fb593c-2a98-11e3-8fb8-00144feab7de;
Vanessa Houlder, Business attacks international tax swoop against tech groups, Financial Times, 23 April 2014.
Retrieved from https://www.ft.com/content/0b5cd050-cb08-11e3-ba9d-00144feabdc0;
Vanessa Houlder, Business leaders attack UK ‘Google Tax’, Financial Times, 10 December 2014. Retrieved from
https://www.ft.com/content/12e12e3a-7fd9-11e4-adff-00144feabdc0;
Simon Bowers, Tech giants launch fierce fightback against global tax avoidance crackdown, The Guardian, 21
January 2015. Retrieved from https://www.theguardian.com/business/2015/jan/21/us-tech-tax-avoidance-
google-amazon-
apple#:~:text=US%20tech%20giants%20launch%20fierce%20fightback%20against%20global%20tax%20avoida
nce%20crackdown,-
This%20article%20is&text=Lobby%20groups%20representing%20Google%2C%20Amazon,structures%20used%
20to%20avoid%20tax;
Vanessa Houlder, US multinationals fight UK Google Tax, Financial Times, 9 February 2015. Retrieved from
https://www.ft.com/content/75c5f13e-ae32-11e4-8188-00144feab7de;
Jamie Smyth, Google warns Australia that Google Tax cuts both ways, Financial Times, 8 April 2015. Retrieved
from https://www.ft.com/content/dd6516b8-ddca-11e4-9d29-00144feab7de;
279
governments that plan to take measures against tax avoidance to also include measures
that improve the investment climate and attract foreign direct investments in order to
offset the negative economic effects of tightening up the rules.1324 Of course, there were
exceptions to this general picture.1325 These statements, however, appear to (still) mostly
reflect the personal opinion of the commentators and not the prevailing opinion of the
business community as a whole.
Perhaps what stands out the most is the efforts that the business community seemingly
took to not have to speak out in publicly at all—an approach that has proved to be
vulnerable as well. For instance, a number of multinational corporations declined an
invitation to appear at a hearing before the Dutch Parliament in 2013.1326 This sparked a lot
of negative media attention, which possibly affected the Dutch public opinion towards
multinationals more negatively than if they would just have accepted the Parliament’s
invitation.
One can observe that the combination of a lack of proactively communicating some sort of
(shared) position as well as responding defensively to media questions has continuously put
the business community on the back foot in the debate. This does not necessarily mean that
it did not wield a great amount of political influence, but — perhaps as a result of a lack of
supporting evidence — the business community’s defensive arguments appear to have
carried little weight in the debate in the media. In fact, one could argue that the business
community’s communication strategy has been conducive to weaken the public support for
the business community’s interests as a whole, and, on a more fundamental level, it has
diminished the public’s trust in large corporations.1327
Vanessa Houlder, CBI attacks lack of consultation over UK Budget tax changes, Financial Times, 7 September
2015. Retrieved from https://www.ft.com/content/1ade57d8-5572-11e5-9846-de406ccb37f2;
Vanessa Houlder, CBI urges restraint in crackdown on tax dodging by multinationals, Financial Times, 24
September 2015. Retrieved from https://www.ft.com/content/8a7cfdce-6139-11e5-a28b-50226830d644.
1324
See for instance:
Vanessa Houlder, Business calls for business tax concession to stimulate growth, Financial Times, 17 July 2013.
Retrieved from https://www.ft.com/content/e04f3d0a-ef00-11e2-bb27-00144feabdc0.
1325
See for instance:
Sarah Butler, Business leaders must take blame for losing popularity, says Sainsbury’s boss, The Guardian, 25
June 2014. Retrieved from https://www.theguardian.com/business/2014/jun/25/justin-king-business-leaders-
blame-sainsburys;
Harriet Agnew, Tax advice has a moral aspect, says PwC chairman, Financial Times, 6 October 2014. Retrieved
from https://www.ft.com/content/2cfa83fe-4d5f-11e4-bf60-00144feab7de.
1326
See:
Merijn Rengers & Xander van Uffelen, Multinationals weigeren Kamer uitleg over belastingontwijking, de
Volkskrant, 5 September 2013. Retrieved from https://www.volkskrant.nl/nieuws-achtergrond/multinationals-
weigeren-kamer-uitleg-over-belastingontwijking~b8a394fc/;
Telegraaf, Multinationals toch niet bij hoorzitting Kamer, 5 September 2013. Retrieved from
https://www.telegraaf.nl/nieuws/1062461/multinationals-toch-niet-bij-hoorzitting-kamer.
1327
See for instance:
George Parker, Public trust in big business falls away among Britons, Financial Times, 6 May 2014. Retrieved
from https://www.ft.com/content/978cd3bc-d52c-11e3-adec-00144feabdc0;
Daniel Hurst, Multinational tax avoidance risks losing citizens’ trust, The Guardian, 14 November 2014.
Retrieved from https://www.theguardian.com/business/2014/nov/14/multinational-tax-avoidance-risks-
losing-citizens-trust-says-joe-hockey.
280
The question of trust in multinationals also put the (media) spotlight on investors. This
happened in a few different ways. First, there was reporting on the push from NGOs and
other commentators for investors, and more specifically pension funds, to insist that
multinationals were more transparent regarding their tax policy and strengthen tax
governance.1328 However, there were reportedly concerns coming from investors
themselves, and these concerns did go in opposite directions. Some investors would prefer
that the companies that they invested in did not engage in aggressive forms of tax
avoidance,1329 while other investors urged companies to either lower their tax burden
further or worry about a higher tax burden as a result of the government action to curb tax
avoidance.1330 The difference in direction in which these investors pushed appeared to be
mostly dependent on whether they were short-term or long-term investors.
9.4.2.4 Concluding Observations on the Designing BEPS period
The designing BEPS period is signified mostly by framing efforts in the media. Given the
technical nature of the subject of tax and tax avoidance and that newspapers report a lot on
the subject, it seems to drive media to use a lot of frames to keep the subject
understandable and relatable. Media coverage on actual tax-technical content remains very
sparse.
For instance, media reporting strongly suggests that the corporate lobby is pervasive and
that they have had much influence over the design of (national) tax law. This is often framed
as there only being one set of rules for multinationals and a different set of rules for the rest
of society. Firstly, this frame is then often extended to (i) them having their own set of rules,
which makes it easy to avoid tax and thus enabling them to push that burden onto others.
Secondly, the frame is then often extended to (ii) that they can profess innocence under the
law and that they even can get away with declining to explain themselves to parliament. In
short, multinationals put themselves outside and over the rest of society. This frame likely
has been reinforced by the business community itself in that it continuously has put the
1328
See for instance:
Judith Evans, Pension funds criticised for investing in companies accused of tax avoidance, Financial Times, 1
November 2015. Retrieved from https://www.ft.com/content/a417429a-7d99-11e5-a1fe-567b37f80b64;
Financial Times, Pension funds urged to act over tax, 12 November 2014. Retrieved from
https://www.ft.com/video/b73cac85-2059-3a10-8f88-f078f91d46e5;
Chris Newlands & Madison Marriage, Fund managers urged to insist on greater tax transparency, Financial
Times, 22 November 2015. Retrieved from https://www.ft.com/content/2a3052d6-8ef2-11e5-8be4-
3506bf20cc2b.
1329
See for instance:
Simon Bowers, Google investors press for code of conduct on tax, The Guardian, 14 May 2014. Retrieved from
https://www.theguardian.com/technology/2014/may/14/google-code-of-conduct-tax;
Madison Marriage, Aggressive tax avoidance troubles large investors, Financial Times, 2 November 2014.
Retrieved from https://www.ft.com/content/e56ca00c-6010-11e4-98e6-00144feabdc0.
1330
See for instance:
Vanessa Houlder, Companies face investor push to cut tax burden despite the focus on tax avoidance, Financial
Times, 26 October 2015. Retrieved from https://www.ft.com/content/7dbe7ab6-7897-11e5-a95a-
27d368e1ddf7;
Chris Flood, Fund investors face ‘collateral damage’ in tax reform, 31 October 2015, Financial Times. Retrieved
from https://www.ft.com/content/4c539996-767d-11e5-933d-efcdc3c11c89.
281
negative effects (for businesses) of the proposed measures over the problems that these
measures mean to tackle.
All in all, media reporting during the designing BEPS period produced two main frames with
regard to tax avoidance:
(i) Multinational firms, in general, and big tech companies in particular, are identified
as the bad guy, as they first influence the legislative process and then use that
legislation to get an unintended and unfair advantage over others.
(ii) Ordinary, middle-class citizens and local, family-owned businesses are identified as
the real victims of tax avoidance practises, bolstering the sense of urgency that
(international) action is needed to fight corporate tax avoidance.
As discussed before, Achen & Bartels note that public opinion might not drive political
action as much as we might think.1331 One might argue, though, this frame is a very powerful
political narrative regardless of the actual public opinion response. This is because the frame
focuses on victims from a demographic that most political parties consider a very important
part of their constituency, while the perpetrators are not able to vote at all.
On top of that, big tech firms are not only criticised for their behaviour in the tax area but
also with regard to how they collect and use personal data from their users for their own
benefit.1332 This is important, as the discussion on tax avoidance is about more than just the
question of whether taxpayer A, B or C acted in line with political morality. It goes to
questions on economic inequality, such as who wields political power and, more generally,
questions about justice and fairness, the public’s trust in their government, its institutions,
and the functioning of society in general.1333
Thus, the changing political narrative between 2004 and 2015 built up a lot of pressure on
governments to take action against multinationals. Moreover, on the short term, there
seems to be a considerable political upside with hardly any downside to taking action.
However, the stars had not yet aligned fully for all governments to agree to move forward.
Concerns about the effects on the investment climate of open economies kept key political
figures in Europe from agreeing to concrete legislative action. However, that is until the
media, in 2016, uncovered a tax scandal that definitively helped to clear the way.
9.4.3 Post-BEPS and BEPS 2.0 (2016-2021)
Media reporting on tax avoidance fell considerably in this period. If one looks at the average
number of articles per day throughout the whole period, the decline does not seem so
spectacular. According to the data, a person reading all six of the examined newspapers
1331
Achen & Bartels (2004), at p. 7.
1332
See for instance, Sam Thielman, World’s biggest tech companies get failing grade on data-privacy rights,
The Guardian, 3 November 2015. Retrieved from
https://www.theguardian.com/technology/2015/nov/03/data-protection-failure-google-facebook-ranking-
digital-rights.
1333
Joseph Stiglitz, The American Economy is Rigged: And what we can do about it, Scientific American, 1
November 2018. Retrieved from https://www.scientificamerican.com/article/the-american-economy-is-
rigged/.
282
daily would go from an average of 1.8 articles on corporate tax avoidance per day in the
designing BEPS period to an average of 1.2 articles per day in the post-BEPS period. The
main reason for this relatively high average number is that 2016 was the year with the
overall highest number of articles on tax avoidance of all the years examined. To illustrate,
in 2021, there was about 75% less newspaper coverage compared to 2016.
The reason why 2016 is an outlier is that several significant developments occurred that
generated a lot of media attention in 2016. For instance, in 2016, the European Commission
published its decision that Ireland had to recover the enormous sum of 13 billion EUR in the
Apple state aid case.1334 Also, the European Commission put forward a number of legislative
proposals following the final OECD/G20 BEPS reports.1335 Moreover, the European Council
managed to come to an agreement in a record six months on one of those proposals — the
Anti-Tax Avoidance Directive1336 — which received much media attention throughout the
process. In addition, there were legislative proposals in the U.S. to put a stop to tax
inversions.1337 Lastly, but certainly not least, 2016 was the year that the International
Consortium of Investigative Journalists (ICIJ) came out with one of the biggest leaks and
largest collaborative investigations in journalism history, the Panama Papers.1338 This 2016
investigation included more than 11.5 million financial and legal records that exposed a
system that made use of secretive jurisdictions and offshore companies to hide assets and
enable all sorts of crimes, corruption and wrongdoings.
After the Panama Papers in 2016, the BEPS implementation period saw quite a range of
other tax scandals. For instance, in 2017, the ICIJ came out with the Paradise Papers,
exposing the offshore interests of wealthy individuals (amongst which there were politicians
and world leaders) as well as the tax avoidance schemes of more than 100 multinational
corporations (including Apple and Nike).1339 In 2017 and 2018, there were the so-called
CumEX Files,1340 a scandal surrounding cum-ex trades that allowed foreign investors to
collect dividend tax that was never paid.1341 Estimated losses for countries’ treasuries were
totalled at around 55 billion EUR, including 36.2 billion EUR in Germany, 17 billion EUR in
1334
Commission Decision (EU) 2017/1283 of 30 August 2016 on State aid SA.38373 (2014/C ex 2014/NN)
implemented by Ireland to Apple. Retrieved from http://data.europa.eu/eli/dec/2017/1283/oj; Also see Cases
T-778/16 and T-892/16. Judgment of the General Court (Seventh Chamber, Extended Composition) of 15 July
2020. Ireland and Others v European Commission. ECLI:EU:T:2020:338.
1335
See for an overview European Commission. (2016c). Anti-Tax Avoidance Package. Retrieved from
https://ec.europa.eu/taxation_customs/anti-tax-avoidance-package_en.
1336
Also see section 8.3.2.
1337
See the United States Stop Corporate Earnings Stripping Act of 2016. Retrieved from
https://waysandmeans.house.gov/legislation/bills/hr-4581-stop-corporate-earnings-stripping-act-2016.
1338
International Consortium of Investigative Journalists (ICIJ). (2016) The Panama Papers: Exposing the Rogue
Offshore Finance Industry. Retrieved from https://www.icij.org/investigations/panama-papers/.
1339
International Consortium of Investigative Journalists (ICIJ). (2017) Paradise Papers: Secrets of the Global
Elite. Retrieved from https://www.icij.org/investigations/paradise-papers/.
1340
CORRECTIV. (2018). Recherchen fur die Gesellshaft, The CumEx files: A cross border investigation. Retrieved
from CORRECTIV: https://correctiv.org/en/latest-stories/2018/10/18/the-cumex-files/.
1341
New York Times, Where in the World Is Denmark’s $2 Billion?, 5 October 2018. Retrieved from
https://www.nytimes.com/2018/10/05/business/denmark-skat-tax-scandal.html.
283
France, 4.5 billion EUR in Italy, 1.7 billion EUR in Denmark and 0.2 billion EUR in Belgium.1342
Moreover, in 2020, much media attention on tax avoidance sparked following the New York
Times coverage on more than two decades of tax data obtained on the personal and
business tax returns of the president of the United States, Donald Trump,1343 in which the
New York Times showed that he had not paid any income taxes in ten of the preceding 15
years as a result of chronic losses as well as engaging in tax avoidance practices. Finally, in
2021, the ICIJ came out with the Pandora Papers.1344
These scandals were uncovered through investigative journalism. This demonstrates that
tax avoidance has become a subject studied in much more detail and that the media
consider it important enough to devote time and resources on. This development is also
underlined by the fact that academic writing on tax avoidance has increased tremendously
in the post-BEPS period. This academic writing, in turn, is also picked up in media reporting
and is used as a source of information as evidence for statements that are made in the
various news reports.
The tax scandals all seemed to have a reinforcing effect on the general public, namely, that
equal (tax) treatment for everyone does not exist. This was, perhaps, most pronounced in
the 2018 Gilet Jaunes protests that started in France and quickly spread across the EU. It
was a proposed increase in fuel tax in France rather than (corporate) tax policy that sparked
the protests. However, the underlying sentiments very much focused on the issue that the
middle class was impacted the most by the austerity measures and accompanying tax
measures of the previous years, while the rich elite—including large corporations—
appeared to be either unaffected by these measures, or they appeared to be able to easily
escape their impact by the grace of the mobility of their assets:
The working class are now the group most likely to criticize the taxation level, even
though they benefit most from the tax-based redistribution system. The degree of
dissatisfaction varies geographically. People furthest from the big cities are most
likely to feel unfairly taxed; those in the countryside and outer suburbs are much
more critical of the system than Parisians. […] In some areas, the feeling of injustice
stems from deteriorating public services and transport, especially rail line closures. To
people in such situations who mainly travel by car and suffer most from gasoline-
price increases, it feels as if their key institutions—the local manifestation of the
social redistribution of tax receipts—are vanishing, from post office to school and
railway station. […] Then there was a series of leaks: Luxleaks, Swissleaks, Offshore
Leaks, the Panama Papers, and the Paradise Papers, all of which shed light on the
tax-evasion schemes of multinationals, politicians, and celebrities from the worlds of
sport and entertainment. These revelations exposed the myth of equal treatment for
1342
LePoint, « CumEx Files » : la fraude fiscale à 55 milliards d'euros, 18 October 2018. Retrieved from
https://www.lepoint.fr/economie/cumex-files-la-fraude-fiscale-a-55-milliards-d-euros-18-10-2018-
2263950_28.php.
1343
New York Times, The President’s tax files: Long-concealed records show Trump’s chronic losses and years of
tax avoidance, 27 September 2020. Retrieved from
https://www.nytimes.com/interactive/2020/09/27/us/donald-trump-taxes.html.
1344
International Consortium of Investigative Journalists (ICIJ). (2021) Pandora Papers: Offshore havens and
hidden riches of world leaders and billionaires exposed in unprecedented leak. Retrieved from
https://www.icij.org/investigations/pandora-papers/.
284
all under the tax system. In reality, there were two systems: In one, ordinary
taxpayers were told they had to help to restore public finances; in the other, the
powerful flouted the law and faced no consequences.1345
Remarkably though, even in the face of this glaring injustice and public outrage, all the
examined news media seemed to rapidly lose interest in the subject of tax avoidance. The
levels of reporting prominence in 2019, 2020 and 2021 are similar to those of 2008, 2009
and 2010. Accordingly, media coverage levels in 2021 are comparable to the period before
the subject of tax avoidance even really was picked up by the media.
In the post-BEPS period, the EU stepped up its efforts to legislate the outcome of the
OECD/G20 BEPS process.1346 In their 2015 Work Programme, the European Commission
outlined plans to fight tax fraud and evasion, came out with proposals to increase tax
transparency — specifically with regard to tax rulings — and set out an Action Plan to
combat tax avoidance:
[Building on] the work done on base erosion and profit shifting at OECD and G20
levels, the Commission will set out an Action Plan including measures at EU level in
order to move to a system on the basis of which the country where profits are
generated is also the country of taxation, including in the digital economy, which also
requires agreement on a Common Consolidated Corporate Tax Base.1347
These efforts led to a lot of news coverage in all of the examined newspapers.1348
Additionally, as part of these efforts, it became more and more apparent that the actions
1345
Alexis Spire, The Anger of the ‘Gilets Jaunes’: France’s unfair taxes have driven the Yellow Vest protest
movement, The Nation, 11 December 2018. Retrieved from https://www.thenation.com/article/archive/gilets-
juanes-yellow-vest-taxes/.
1346
See section 8.3.2.
1347
European Commission (2015a); and European Commission (2015b).
1348
See for instance:
Jim Brunsden & Vanessa Houlder, EU to clamp down on corporate tax avoidance schemes, Financial Times, 22
January 2016. Retrieved from https://www.ft.com/content/ac633f3a-c060-11e5-846f-79b0e3d20eaf;
Christian Oliver & Jim Brunsden, US blasts Brussels over tax probe bias, Financial Times,29 January 2016.
Retrieved from https://www.ft.com/content/c63db5c8-c6b1-11e5-808f-8231cd71622e;
Jim Brunsden, Brussels to force big companies to disclose more tax details, Financial Times, 21 March 2016.
Retrieved from https://www.ft.com/content/d525b786-ef86-11e5-9f20-c3a047354386;
Stefan Wagstyl & Anne-Sylvain Chassany, Paris and Berlin call for a global tax haven blacklist, Financial Times,
11 April 2016. Retrieved from https://www.ft.com/content/044cb1f2-fff1-11e5-9cc4-27926f2b110c;
Jim Brunsden, German finance minister objects to tax transparency proposals EC, Financial Times, 23 April
2016. Retrieved from https://www.ft.com/content/f046e7c2-0950-11e6-9456-444ab5211a2f;
Jim Brunsden, Brussels plans to force multinationals to open up on profits, Financial Times, 12 April 2016.
Retrieved from https://www.ft.com/content/ac0b79f8-009d-11e6-99cb-83242733f755;
Jim Brunsden, Brussels to get tough on tax avoidance, Financial Times, 21 April 2016. Retrieved from
https://www.ft.com/content/25cfc334-07d3-11e6-b6d3-746f8e9cdd33;
Jim Brunsden, EU hails breakthrough deal to curb tax avoidance, Financial Times, 17 June 2016. Retrieved from
https://www.ft.com/content/5d85311e-3498-11e6-bda0-04585c31b153;
285
with regard to taxing ‘the digital economy’ put further strain on the relations between the
EU and the US. Not in the least, as this reporting on this impending tax war also made clear
that the tech companies and the digitalised economy made up the very front on which these
tax wars would have to be fought.1349
Jim Brunsden, Brussels proposes EU-wide corporate income tax, Financial Times, 25 October 2016. Retrieved
from https://www.ft.com/content/4bfe986c-9ac4-11e6-b8c6-568a43813464;
Rochelle Toplensky, EU to hit Amazon with bill for Luxembourg back taxes, Financial Times, 3 October 2017.
Retrieved from https://www.ft.com/content/7ce5bf96-a83d-11e7-ab55-27219df83c97;
Rochelle Toplensky, EU proposes tax reform to crack down on 50 billion EUR VAT fraud, Financial Times, 4
October 2017. Retrieved from https://www.ft.com/content/a6cdc2d4-a8bc-11e7-ab55-27219df83c97;
Rochelle Toplensky, European Commission probes tax schemes favoured by multinationals, Financial Times, 26
October 2017. Retrieved from https://www.ft.com/content/a8da9283-8b1e-30b9-9cce-2e7c4db25aa3;
Mehreen Khan, Netherlands to investigate 4,000 corporate tax deals, Financial Times, 8 November 2017.
Retrieved from https://www.ft.com/content/df1156dc-c497-11e7-a1d2-6786f39ef675;
Rochelle Toplensky, EU launches probe into IKEA tax arrangements, Financial Times, 17 December 2017.
Retrieved from https://www.ft.com/content/a139e89a-1316-363b-9094-7befae4958e3;
Rochelle Toplensky, EU finance ministers approve rules on ‘aggressive’ tax schemes, Financial Times, 13 March
2018. Retrieved from https://www.ft.com/content/7e5df342-26ba-11e8-b27e-cc62a39d57a0;
Javier Espinoza, Sam Fleming, Mehreen Khan & Jim Brunsden, EU refuses to admit defeat after Apple tax
setback, Financial Times, 16 July 2020. Retrieved from https://www.ft.com/content/6cc18c26-04e0-410d-
9c0a-3f1baf1a1685;
Sam Fleming & Mehreen Khan, Brussels ready to clamp down on sweetheart corporate tax deals, Financial
Times, 24 September 2020. Retrieved from https://www.ft.com/content/7c156756-57a1-4554-af78-
d795a41d13f9.
1349
See for instance:
John Gapper, Alphabet and Apple spell global tax war, Financial Times, 27 January 2016. Retrieved from
https://www.ft.com/content/7414a126-c41d-11e5-b3b1-7b2481276e45;
Jim Brunsden & Josh Noble, European Commission to investigate Google tax deal, Financial Times, 28 January
2016. Retrieved from https://www.ft.com/content/dc1e3cd4-c592-11e5-808f-8231cd71622e;
Rowena Mason & Jennifer Rankin, EU could force Google to pay more UK tax, The Guardian, 28 January 2016.
Retrieved from https://www.theguardian.com/politics/2016/jan/28/eu-could-force-google-to-pay-more-uk-
tax;
Harriet Agnew & Jim Brunsden, France urges new momentum over US tech group tax, Financial Times, 10
August 2017. Retrieved from https://www.ft.com/content/090a3160-7db8-11e7-9108-edda0bcbc928;
Jim Brunsden & Mehreen Khan, France drives EU tax blitz on revenues of US tech giants, Financial Times, 8
September 2017. Retrieved from https://www.ft.com/content/371733e8-94ae-11e7-bdfa-eda243196c2c;
Mehreen Khan & Jim Brunsden, Macron launches attack on “Anglo Saxon” tech giants, Financial Times , 29
September 2017. Retrieved from https://www.ft.com/content/efe954f4-a53a-11e7-9e4f-7f5e6a7c98a2;
Financial Times, Tax affairs American tech groups come under fire, 3 October 2017. Retrieved from
https://www.ft.com/content/8cdba452-a779-11e7-ab55-27219df83c97;
James Politi & Rochelle Toplensky, Italian plans tax crackdown on US internet groups, Financial Times, 20
November 2017. Retrieved from https://www.ft.com/content/41a36778-cd07-11e7-b781-794ce08b24dc;
Madison Marriage, Vanessa Houlder & Aliya Ram, UK Budget 2017: Tech groups targeted over tax avoidance,
Financial Times, 22 November 2017. Retrieved from https://www.ft.com/content/40e058b6-cf94-11e7-b781-
794ce08b24dc;
Barney Jopson, Trump administration lashes out at tax proposals targeting tech companies, Financial Times, 16
March 2018. Retrieved from https://www.ft.com/content/2bbe6dc6-2933-11e8-b27e-cc62a39d57a0;
Barney Jopson & Rochelle Toplensky, Tech Tax deepens EU-US trade rift, Financial Times, 16 March 2018.
Retrieved from https://www.ft.com/content/e9c37b1e-2932-11e8-b27e-cc62a39d57a0;
Josh Noble & Harriet Agnew, French plan to tax big tech stirs controversy, Financial Times, 6 March 2019.
Retrieved from https://www.ft.com/content/ec5fdca1-95e5-43df-93dc-75c33a989bcb;
Philip Inman, IMF Chief joins calls for big tech firms to pay more tax, The Guardian, 25 March 2019. Retrieved
from https://www.theguardian.com/business/2019/mar/25/imf-big-tech-firms-tax-christine-lagarde;
286
Based on the media coverage, one could conclude that multinationals and wealthy
individuals were steadily losing political support in many countries. Also, there is a visible
trend in media reporting to paint a picture that increasing the tax burden on these
taxpayers would have no economic effects (even on the longer term). This trend could also
be attributed to the growing civil unrest — as evidenced in France by the Gilets Jaunes
protests — amongst the middle class with regard to the fact that the public services that
were provided to them were deteriorating, while the tax burden they faced increased
steadily, as “the cost of tax avoidance falls on those least able to bear it,”1350 which meant
that their disposable income over the years had either been stagnant or had decreased
effectively.1351
In any case, it led to media reporting that is mostly critical of governments for not going in
harder even though many national (corporate) tax avoidance measures were being adopted,
and national politicians raised concerns with regard to the tax affairs of specific companies.
In fact, it can be observed that governments were willing to take action in ways that were
previously not very likely to get enough political support.1352
Kiran Stacey, Rochelle Toplensky & Demetri Sevastopulo, Donald Trump attacks EU Action against US tech
groups, Financial Times, 26 June 2019. Retrieved from https://www.ft.com/content/3eb00398-9815-11e9-
8cfb-30c211dcd229;
Philip Stephens, Europe must set its own digital rules, Financial Times, 8 August 2019. Retrieved from
https://www.ft.com/content/b8056536-b911-11e9-96bd-8e884d3ea203;
Chris Giles, OECD takes aim at tech giants with plans to shake up global tax, Financial Times, 9 October 2019.
Retrieved from https://www.ft.com/content/b16fd228-ea72-11e9-a240-3b065ef5fc55;
Chris Giles, OECD proposes global minimum corporate tax rate, Financial Times, 8 November 2019. Retrieved
from https://www.ft.com/content/f17a406e-021a-11ea-b7bc-f3fa4e77dd47.
1350
Philip Stephens, Populism is the true legacy of the 2008 crisis, Financial Times 29 August 2018. Retrieved
from https://www.ft.com/content/687c0184-aaa6-11e8-94bd-cba20d67390c.
1351
See for instance:
Ben Hall, Harriet Agnew & David Keohane, Macron cancels fuel tax increase after ‘gilets jaunes’ protests,
Financial Times, December 5 2018. Retrieved from https://www.ft.com/content/bd880bf8-f8a5-11e8-8b7c-
6fa24bd5409c;
David Keohane & Harriet Agnew, Macron enlists French business to quell ‘gilets jaunes’, Financial Times,
December 14 2018. Retrieved from https://www.ft.com/content/17953504-feea-11e8-aebf-99e208d3e521;
Emma Agyemang, Wealthy pay less tax than official headline rates, study finds, Financial Times, June 14 2020.
Retrieved from https://www.ft.com/content/09f373cb-bda7-4989-8793-472ac338956a;
Kharas, H., & Seidel, B. (2018). What’s happening to the world income distribution? The elephant chart
revisited. Global Economy and Development Working Paper, (114); and
Lonergan, E., & Blyth, M. (2020). Angrynomics. Agenda publishing.
1352
See for instance:
Robert Cookson, MPs question Google’s tax deal, Financial Times, 24 January 2016. Retrieved from
https://www.ft.com/content/872d8f84-c2ba-11e5-b3b1-7b2481276e45;
Vanessa Houlder, IKEA avoided 1 billion euro in tax, claim MEPs, Financial Times, 12 February 2016. Retrieved
from https://www.ft.com/content/28a1109e-d1a1-11e5-831d-09f7778e7377;
Jonathan Ford, Why tax morale is crumbling in UK, Financial Times, 21 February 2016. Retrieved from
https://www.ft.com/content/8ab81322-d881-11e5-98fd-06d75973fe09;
Vanessa Houlder, Britain narrows gap in league of favourite tax regimes, Financial Times, 11 March 2016.
Retrieved from https://www.ft.com/content/16897254-e617-11e5-a09b-1f8b0d268c39;
Financial Times, Washington slams shut Pfizer tax loophole, Financial Times, 5 April 2016. Retrieved from
https://www.ft.com/content/235eb710-fb24-11e5-b3f6-11d5706b613b;
287
Dutch Special Parliamentary Committee
The publication of the Panama Papers led to the decision of the Dutch House of
Representatives to set up a Special Parliamentary Committee to investigate two specific
subjects: the flow through of capital through Dutch letterbox companies and the transfer of
Financial Times, Australia to implement diverted profit tax, Financial times, 3 May 2016. Retrieved from
https://www.ft.com/content/21f1e7d7-4df9-3468-907a-500fac45345a;
John Murray Brown, May promises ‘bold action’ on corporate governance, Financial Times, 5 September 2016.
Retrieved from https://www.ft.com/content/29dc3586-f848-3c9b-ba4f-cf27dc643ac4;
Luke Harding, Panama Papers: Denmark buys leaked data to use in tax evasion inquiries, The Guardian, 7
September 2016. Retrieved from https://www.theguardian.com/news/2016/sep/07/panama-papers-
denmark-becomes-first-country-to-buy-leaked-
data#:~:text=Panama%20Papers%3A%20Denmark%20buys%20leaked%20data%20to%20use%20in%20tax%20
evasion%20inquiries,-
This%20article%20is&text=Denmark%20has%20become%20the%20first,archive%20may%20have%20evaded%
20tax;
Merryn Somerset Webb, Tax crackdown shows nobody dares to defend the wealthy, Financial Times, 4
November 2016. Retrieved from https://www.ft.com/content/3994953c-a1c2-11e6-aa83-bcb58d1d2193;
George Parker, Labour steps up attack on irresponsible big business, Financial Times, 14 April 2017. Retrieved
from https://www.ft.com/content/b2567da2-2104-11e7-a454-ab04428977f9;
Jim Pickard, Andy Bounds & Henry Mance, Corbyn pledges reckoning for those ‘ripping off’ Britain, Financial
Times, 9 May 2017. Retrieved from https://www.ft.com/content/a10ad86c-34a1-11e7-bce4-9023f8c0fd2e
Vanessa Houlder, Nations agree to corporate tax avoidance crackdown, Financial Times, 6 June 2017.
Retrieved from https://www.ft.com/content/274cd10a-4a0f-11e7-a3f4-c742b9791d43;
Kara Scannel, US intensifies fight against tax evasion by using data mining, Financial Times, 19 June 2017.
Retrieved from https://www.ft.com/content/719544f6-529b-11e7-bfb8-997009366969;
Vanessa Houlder, Google Tax’ take swells to 281 million pounds as levy starts to bite, Financial Times, 13
September 2017. Retrieved from https://www.ft.com/content/4f7aed86-989f-11e7-a652-cde3f882dd7b;
Vanessa Houlder, HRMC ‘shoot first’ policy brings in 1.3 billion pounds disputed tax from SMEs and individuals,
Financial Times, 15 September 2017. Retrieved from https://www.ft.com/content/d7643e86-9927-11e7-b83c-
9588e51488a0;
Rochelle Toplensky & Madison Marriage, European Parliament to bar Monsanto lobbyist, Financial Times, 28
September 2017. Retrieved from https://www.ft.com/content/5c1c61e6-a457-11e7-b797-b61809486fe2;
Barney Jopson, US tax reform targets avoidance by multinationals, Financial Times, 3 November 2017.
Retrieved from https://www.ft.com/content/23060b2c-c037-11e7-9836-b25f8adaa111;
Vanessa Houlder, UK squeezes extra 136 million pounds tax payment from Apple, Financial Times, 9 January
2018. Retrieved from https://www.ft.com/content/797fd406-f57f-11e7-8715-e94187b3017e;
Mehreen Khan, Dutch government set out plan to counter tax haven reputation, Financial Times, 17 February
2018. Retrieved from https://www.ft.com/content/ef9b87ac-1af5-11e8-aaca-4574d7dabfb6;
Henry Mance, LibDems want multinationals to publish tax returns, Financial Times, 17 October 2018. Retrieved
from https://www.ft.com/content/5be246fc-ce39-11e8-9fe5-24ad351828ab;
Delphine Strauss, HRMC announces new clampdown on diverted profits, Financial Times, 10 January 2019.
Retrieved from https://www.ft.com/content/04b7ca06-1500-11e9-a581-4ff78404524e;
Emma Agyemang, HRMC revenue soars from hunt for hidden offshore wealth, Financial Times, 25 June 2019.
Retrieved from https://www.ft.com/content/f51a1632-972f-11e9-8cfb-30c211dcd229;
Stefan Wagstyl, HRMC targets hidden foreign income individuals, Financial Times, 6 March 2020. Retrieved
from https://www.ft.com/content/edec9b8c-5f9d-11ea-8033-fa40a0d65a98;
Mehreen Khan & Judith Evans, Dutch plan to tax departing multinationals gains momentum, Financial Times,
16 August 2020. Retrieved from https://www.ft.com/content/d5e84695-5f9b-498a-bb05-ba1a080a9b0f;
Emma Agyemang, UK targets big business in latest move on tax avoidance, Financial Times, 15 November
2020. Retrieved from https://www.ft.com/content/93ec3c1e-895a-48fd-841d-d9cc3cd09a71.
288
private assets of Dutch citizens to shell companies in tax havens.1353 The Committee held a
number of public hearings in 2017 and came out with their report titled Papieren
Werkelijkheid in September 2017.1354
One of the more striking conclusions of the Committee is that they feel that the public
hearings demonstrated that the spirit of the law no longer exists in tax: “Tax advice and the
services of trust offices can be used to comply with the legal requirements, without
respecting the spirit of the law.”1355 According to the report, advisors all interpret the spirit
of the law in different ways, and none of the advisors appear to be overly concerned to keep
in line with that spirit.
Tax advisors and trust offices indicated that the legislator should clarify the limits of
undesirable constructions. During the hearings, the committee understood that the
heard parties were not themselves prepared to judge if a certain tax structure was in
line with the spirit of the law. Black letter law often seems to be the only measure of
morality that is respected for those involved in setting up these tax structures.1356
These conclusions led to media coverage stating that tax advisors and trust services are
deliberately deceiving tax authorities by creating a web of fictitious transactions.1357
Moreover, this means that legislation should be much more detailed with regard to what
types of tax structures that are undesirable, because "the advisers and tax specialists who
set up the structures do not assess whether they are morally correct, but only whether they
are legally correct. And if the law allows a legal construction to avoid tax, why shouldn't they
set it up?"1358
The Covid-19 Effect

During the post-BEPS period, the debate on corporate tax avoidance became entangled in
the debate on Covid-19 aid packages to keep companies in business. This manifested in two
ways. First, there was the question of who will bear the burden for all the extra government
expenditures that result from the aid measures that were necessary because of the
1353
Tweede Kamer. (2016). Voorstel voor een parlementaire ondervraging naar fiscale constructies.
Kamerstukken, vergaderjaar 2016-2017, nr 34 566 nr 2. Retrieved from
https://zoek.officielebekendmakingen.nl/kst-34566-2.html.
1354
See, for more information on the Special Parliamentary Committee
https://www.tweedekamer.nl/kamerleden_en_commissies/commissies/pofc/doel; and Tweede Kamer.
(2017a). Rapport van de Parlementaire ondervragingscommissie Fiscale Constructies. Kamerstukken,
vergaderjaar 2017-2018, 34 566 nr 3. Retrieved from
https://www.tweedekamer.nl/kamerstukken/detail?id=2017Z09720&did=2017D20242; Tweede Kamer.
(2017b). Evaluatie van de Parlementaire ondervragingscommissie Fiscale constructies. Kamerstukken,
vergaderjaar 2017-2018, 34 566 nr 6. Retrieved from
https://www.tweedekamer.nl/kamerstukken/detail?id=2017Z12878&did=2017D27093.
1355
Tweede Kamer (2017a), at p. 18.
1356
Tweede Kamer (2017a), at p. 20.
1357
Laurens Berentsen, Trust- en adviessector misleiden fiscus met papieren werkelijkheid, Financieele Dagblad,
5 July 2017. Retrieved from https://fd.nl/economie-politiek/1209237/belastingadviseurs-misleiden-fiscus-met-
papieren-werkelijkheid.
1358
Robert Giebels, Belastingwetten zijn lang niet streng genoeg, zegt commissie, de Volkskrant, 5 July 2017.
Retrieved from https://www.volkskrant.nl/nieuws-achtergrond/belastingwetten-zijn-lang-niet-streng-genoeg-
zegt-commissie~b01190d9/?referrer=https%3A%2F%2Fwww.google.com%2F.
289
pandemic.1359 International bodies such as the OECD,1360 the IMF1361 and the European
Commission1362 say, in their Covid-19 policy response information, that countries should not
be too quick to take austerity measures but rather should look to measures that stimulate
sustainable investment. Interestingly, the IMF also says the following in their April 2021
Fiscal Monitor.
To help meet pandemic-related financing needs, policymakers could consider a

temporary COVID-19 recovery contribution, levied on high incomes or wealth. To
accumulate the resources needed to improve access to basic services, enhance
safety nets, and reinvigorate efforts to achieve the Sustainable Development Goals,
domestic and international tax reforms are necessary, especially as the recovery
gains momentum.1363
So, while there seemed to be consensus that austerity measures should be held off for the
moment, there was much less trepidation to raise taxes on high income or wealth and
capital. For instance, Argentina had already approved a wealth tax.1364 Also, there were
those who called to look to profits that have been shifted to tax havens,1365 or more
generally to restructure the corporate income tax system to raise more revenue.1366 In the
2021 UK Budget, Chancellor Sunak made it clear that companies — especially those which
business models allowed them to have benefitted from the ‘new normal’ during the
pandemic — would be expected to contribute to a swift recovery by paying more in tax. He
said:
The government is providing business with over 100 billion GBP of support to get
through this pandemic, [so] it is fair and necessary to ask them to contribute to our
recovery. […] [I]n 2023, the rate of corporation tax, paid on company profits, will
increase to 25%. […] We’re also introducing some crucial protections […] any struggling
businesses will, by definition, be unaffected. Second, I’m protecting small businesses
with profits of £50,000 or less, by creating a Small Profits Rate, maintained at the
1359
See for instance:
Ben King, Budget 2021: How much will it costs the UK and how will we pay?, BBC News, 3 March 2020.
Retrieved from https://www.bbc.com/news/business-52663523.
1360
OECD. Key Policy Responses from the OECD, Tackling Coronavirus (COVID-19). Contributing to a Global
Effort. Retrieved from https://www.oecd.org/coronavirus/en/policy-responses
(Last accessed 19-05-2022).
1361
International Monetary Fund. (2021b). Policy responses to Covid-19, Policy Tracker. Retrieved from
https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19
(Last accessed 19-05-2022).
1362
European Council, A Recovery Plan for Europe. Retrieved from
https://www.consilium.europa.eu/en/policies/eu-recovery-plan/ (Last accessed 19-05-2022).
1363
International Monetary Fund. (2021a). Fiscal Monitor April 2021. Retrieved from
https://www.imf.org/en/Publications/FM/Issues/2021/03/29/fiscal-monitor-april-2021.
1364
Maximillian Heath, Argentine congress approves wealth tax as Covid-19 hits state coffers, Reuters, 5
December 2020. Retrieved from https://www.reuters.com/article/argentina-economy-tax-idINKBN28F0FM.
1365
Shaxson, N. (2020). Could the wealth in tax havens help us pay for the Coronavirus response? Tax Justice
Network. Retrieved from https://www.taxjustice.net/2020/03/27/could-the-wealth-in-tax-havens-help-us-pay-
for-the-coronavirus-response/.
1366
Financial Times, Seize the opportunity of Covid-19 to restructure taxes, 10 May 2020. Retrieved from
https://www.ft.com/content/2c3cc564-8eac-11ea-a8ec-961a33ba80aa.
290
current rate of 19%. […] That means only 10% of all companies will pay the full higher
rate.1367
Second, there was the question of whether companies that (have) engaged in aggressive tax
planning behaviour should be allowed to have access to the government aid measures.1368
Denmark was one of the first EU Member States to exclude companies from Covid-19 aid
measures if they (i) were registered in tax havens, (ii) paid out a dividend in 2020 or 2021, or
(iii) reacquired shares in 2020 or 2021.1369 As a justification for these exclusions, Denmark
wrote the following in the appendix to the relevant political agreement:
The parties to the agreement agree that companies seeking compensation following the
extension of the arrangements should follow the UN Guidelines on Business and Human
Rights and that companies pay the tax that they are obliged to under international
agreements and national rules. This means that companies based in tax havens cannot
receive compensation under EU guidelines to the extent that it is possible to exclude
them under EU law and any other international obligations undertaken by Denmark or
the EU. […] The precise administrative requirements will need to be developed in more
detail.1370
In other words, if a company did not pay their fair share of tax in Denmark, they should not
expect any help from the Danish government. While this, in and of itself, might be
justifiable, the problem is that the exclusion grounds were fairly wide. This could mean that
even legitimate business decisions — falling within all reasonable interpretations of the law
— could still lead to the conclusion that a company did not qualify for the Danish aid
packages.
After more Member States started to follow Denmark’s example, the European Commission
came out with an amendment on the Temporary Covid-19 State Aid Framework in May
2020 stating that excluding tax avoiders through bans on paying out dividends and stock
buybacks were not problematic from a state aid perspective.
At the same time, the Temporary Framework sets a number of safeguards to avoid
undue distortions of competition in the Single Market. Furthermore, Member States
are free to design national measures in line with additional policy objectives, such
1367
HM Treasury. (2021). Oral Statement to Parliament. Budget Speech 2021. The Budget 2021 speech as
delivered by Chancellor Rishi Sunak. Retrieved from https://www.gov.uk/government/speeches/budget-
speech-2021.
1368
See for instance:
Business Insider, Denmark and Poland are refusing to bail out companies registered in offshore tax havens, 20
April 2020. Retrieved from https://www.businessinsider.com/coronavirus-companies-tax-havens-banned-
denmark-poland-bailout-2020-4?r=US&IR=T.
1369
See Aftale om hjælpepakker til lønmodtagere og virksomheder mv. i forbindelse med gradvis genåbning af
Danmark, 18 April 2020. Retrieved from https://www.regeringen.dk/media/9369/aftale-om-hjaelpepakker-til-
loenmodtagere-og-virksomheder-mv-i-forbindelse-med-gradvis-genaabning-af-danmark.pdf.
1370
See Aftale om hjælpepakker til lønmodtagere og virksomheder mv. i forbindelse med gradvis genåbning af
Danmark, Bilag 13: Virksomheders Samfundsbidrag, 18 April 2020. Retrieved from
https://www.regeringen.dk/media/9369/aftale-om-hjaelpepakker-til-loenmodtagere-og-virksomheder-mv-i-
forbindelse-med-gradvis-genaabning-af-danmark.pdf.
291
as further enabling the green and digital transformation of their economies or
preventing fraud, tax evasion or aggressive tax avoidance.1371
Therefore, Covid-19 had a direct impact on the debate on corporate income tax. There are
some similarities to the reasoning of the UK Uncut protests, which is that companies should
pay their fair share to prevent austerity measures. The big difference is that this message is
not conveyed by some protest organisation that nobody had heard of before, but it is the
IMF, the European Commission and various national governments that are saying that (i)
companies need to abide by the spirit of international tax law to be able to receive
government aid and that (ii) we need to come together to deal with this global crisis, which
means that all wealthy individuals and all companies have to pay their fair share so that they
(are seen to) contribute to the economic recovery.1372
The OECD/G20 Inclusive Framework efforts to reach an agreement on the Two-Pillar

Solution might have been delayed by the Covid-19 crisis, but they were certainly not
stopped. Interestingly, the media attention in both the period leading up to the global
agreement and in the period after its conclusion were relatively low. Newspapers seemed to
only devote a handful of articles to the, so-called, historic agreement. In fact, the G7 deal in
June 2021 received more media attention.1373 It is even more interesting that the media
1371
European Commission. (2020b) State Aid: Commission Expands Temporary Framework to Recapitalisation
and Subordinated Debt Measures to Further Support the Economy in the Context of the Coronavirus Outbreak,
IP/20/838, 8 May 2020.
1372
See for instance:
Sam Fleming & Javier Espinoza, Taxing times for Europe as pandemic cripples government revenue, Financial
Times, 15 July 2020. Retrieved from https://www.ft.com/content/67221218-b319-40d2-9bfe-564dec9f0083.
1373
See for instance:
Rupert Neate, ‘Silicon Six’ tech giants accused of inflating tax payments by almost $100bn, The Guardian, 31
May 2021. Retrieved from https://www.theguardian.com/business/2021/may/31/silicon-six-tech-giants-
accused-of-inflating-tax-payments-by-almost-100bn;
Philip Inman & Michael Savage, Rishi Sunak announces ‘historic agreement’ by G7 on tax reform, The Guardian,
5 June 2021. Retrieved from https://www.theguardian.com/world/2021/jun/05/rishi-sunak-announces-
historic-agreement-by-g7-on-tax-reform;
Marc Peeperkorn, G7 bereikt ‘historisch akkoord’ tegen belastingontwijking multinationals, de Volkskrant, 5
June 2021. Retrieved from https://www.volkskrant.nl/nieuws-achtergrond/g7-bereikt-historisch-akkoord-
tegen-belastingontwijking-multinationals~bf466e01/;
Marc Peeperkorn, Akkoord van G7 over minimum winstbelasting is ‘historisch’, maar multinationals zullen er
niet van schrikken, de Volkskrant, 5 June 2021. Retrieved from https://www.volkskrant.nl/nieuws-
achtergrond/akkoord-van-g7-over-minimum-winstbelasting-is-historisch-maar-multinationals-zullen-er-niet-
van-schrikken~b6454710/;
Paul Tang, 15 procent? Echt tevreden kunnen we pas zijn met een nog hogere winstbelasting, de Volkskrant, 8
June 2021. Retrieved from https://www.volkskrant.nl/columns-opinie/15-procent-echt-tevreden-kunnen-we-
pas-zijn-met-een-nog-hogere-winstbelasting~b2b97405/;
Richard Partington, OECD deal imposes global minimum corporate tax of 15%, The Guardian, 8 October 2021.
Retrieved from https://www.theguardian.com/business/2021/oct/08/oecd-deal-imposes-global-minimum-
corporate-tax-of-15;
Ben van Raaij, OESO: wereldwijd akkoord bereikt dat paal en perk moet stellen aan belastingontwijking, de
Volkskrant, 8 October 2021. Retrieved from https://www.volkskrant.nl/nieuws-achtergrond/oeso-wereldwijd-
akkoord-bereikt-dat-paal-en-perk-moet-stellen-aan-belastingontwijking~b3cd31701/;
Laurens Berentsen, Definitief akkoord minimumtaks multinationals binnen handbereik, Financieele Dagblad, 8
October 2021. Retrieved from https://fd.nl/politiek/1415353/definitief-akkoord-minimumtaks-multinationals-
binnen-handbereik.
292
outlets elaborated primarily on the minimum tax rate of 15%, while most outlets said very
little on the Pillar One proposals except that the deal should ensure that DSTs would be
rolled back. In fact, the European Commission’s communication on Business taxation in the
21st century of 18 May 2021 suffered a similar fate. Effectively, only some of the business-
oriented newspapers reported on the latter publication.1374
Parallel to the increased government efforts on both the international and national level,
the NGOs appeared to have further intensified their media efforts. First, the NGOs
frequently commented on the government actions that are under discussion, specifically,
with regard to their effectiveness.1375 Second, NGOs released several reports, research, and
opinions with regard to tax avoidance. These publications aim to show that the magnitude
1374
Ria Cats, Brussel voert strijd tegen belastingontwijking bedrijven verder op, Financieele Dagblad, 18 May
2021. Retrieved from https://fd.nl/economie-politiek/1384382/brussel-voert-strijd-tegen-belastingontwijking-
door-bedrijven-verder-op.
Wilco Dekker, Brussel pakt brievenbusfirma’s aan, belastingparadijs Nederland onder vuur, de Volkskrant, 22
December 2021. Retrieved from https://www.volkskrant.nl/economie/brussel-pakt-brievenbusfirma-s-aan-
belastingparadijs-nederland-onder-vuur~bdb16f7c/.
1375
See for instance:
John Gapper, The stateless company plays a risky game, Financial Times, 6 January 2016. Retrieved from
https://www.ft.com/content/e9b4a640-b2e5-11e5-b147-e5e5bba42e51;
George Parker & Vanessa Houlder, Backlash builds against Google’s tax deal, Financial Times, 24 January 2016.
Retrieved from https://www.ft.com/content/1df11896-c383-11e5-b3b1-7b2481276e45;
Sarah Butler & Jennifer Rankin, Cheap Google deal sets bad precedent, says tax expert, The Guardian, 24
January 2016. Retrieved from https://www.theguardian.com/politics/2016/jan/24/cheap-google-deal-sets-
bad-precedent-says-tax-expert-richard-murphy;
Vanessa Houlder, Ministers urged to be transparent on tax deals, Financial Times, 8 February 2016. Retrieved
from https://www.ft.com/content/4ed296f4-caa6-11e5-be0b-b7ece4e953a0;
Simon Marks, EU tax transparency plans won’t work, say campaigners, The Guardian, 23 March 2016.
Retrieved from https://www.theguardian.com/business/2016/mar/23/eu-tax-transparency-plans-
campaigners-google-amazon;
Heather Brooke, Transparency thwarts the abuse of power to enrich the powerful, Financial Times, 13 April
2016. Retrieved from https://www.ft.com/content/7ba47200-015c-11e6-99cb-83242733f755;
Alex Barker & Arthur Beesley, Apple hit with €13bln EU tax penalty over illegal Irish aid, 30 August 2016.
Retrieved from https://www.ft.com/content/b573ac02-6e90-11e6-a0c9-1365ce54b926;
Vincent Boland, Ireland will struggle serving both the EU and corporate America, Financial Times, 1 September
2016. Retrieved from https://www.ft.com/content/0c0cbfe6-7025-11e6-9ac1-1055824ca907;
Jim Brunsden, Ceci n’est pas une blacklist, Financial Times, 15 September 2016. Retrieved from
https://www.ft.com/content/29825d0a-6e6e-3165-8b02-f5b7910a73c0;
Rebecca Gowland, Let’s act now on country-by-country reporting, Financial Times, 19 July 2017. Retrieved from
https://www.ft.com/content/9e2089c0-6be3-11e7-bfeb-33fe0c5b7eaa;
Vanessa Houlder, UK Treasury accused of taking soft line on Amazon, Financial Times, 24 January 2018.
Retrieved from https://www.ft.com/content/3d6cbab8-0116-11e8-9650-9c0ad2d7c5b5;
Dan Sabbagh, Dirty Money: U-turn as Tories plan to make tax havens transparent, The Guardian, 1 May 2018.
Retrieved from https://www.theguardian.com/politics/2018/may/01/uk-to-introduce-public-ownership-
registers-for-overseas-territories;
Tim Harford, Super-rich are an easy target for tax, Financial Times, 1 February 2019. Retrieved from
https://www.ft.com/content/1527e588-2482-11e9-8ce6-5db4543da632;
Marietje Schaake, There has never been a better time to make Big Tech pay its way, Financial Times, 20 May
2020. Retrieved from https://www.ft.com/content/1af55118-99bf-11ea-871b-edeb99a20c6e;
Tabby Kinder & Emma Agyemang, It’s a matter of fairness: squeezing more tax from multinationals, Financial
Times, 8 July 2020. Retrieved from https://www.ft.com/content/40cffe27-4126-43f7-9c0e-a7a24b44b9bc.
293
of the problem continues to be undervalued by policymakers as well as that more needs to
be done to combat tax avoidance and/or that tax avoidance is an issue that the general
public is — or, at least, should be — very passionate about. These reports are often picked
up by the media and/or cited by other tax scholars and (European) policymakers.1376
1376
See for instance:
Vanessa Houlder, UK public angered by tax avoidance and believes it is widespread, Financial Times, 22
February 2016. Retrieved from https://www.ft.com/content/6ea75c1e-d977-11e5-a72f-1e7744c66818;
Tom Burgis, How fury over tax havens moved from the margins to the mainstream, Financial Times, 6 April
2016. Retrieved from https://www.ft.com/content/ebbf9556-fa72-11e5-8f41-df5bda8beb40;
Aditya Chakrabortty, The 1% hide their money offshore – then use it to corrupt politics, The Guardian, 10 April
2016. Retrieved from https://www.theguardian.com/news/commentisfree/2016/apr/10/money-offshore-
corrupt-democracy-political-influence;
Rob Davies, US corporations have 1.4tn dollar hidden in tax havens, claims Oxfam report, The Guardian, 14
April 2016. Retrieved from https://www.theguardian.com/world/2016/apr/14/us-corporations-14-trillion-
hidden-tax-havens-
oxfam#:~:text=US%20corporations%20have%20%241.4tn%20hidden%20in%20tax%20havens%2C%20claims%
20Oxfam%20report,-
This%20article%20is&text=US%20corporate%20giants%20such%20as,by%20anti%2Dpoverty%20charity%20Ox
fam;
Henry Mance, Economists call for an end of tax havens, Financial Times, 8 May 2016. Retrieved from
https://www.ft.com/content/6464c7c0-1525-11e6-b197-a4af20d5575e;
Rachel Banning-Lover, The missing development trillions: how you would fund the SDGs, the Guardian, 3 June
2016. Retrieved from https://www.theguardian.com/global-development-professionals-
network/2016/jun/03/the-missing-development-trillions-how-you-would-fund-the-sdgs;
John Aglionby, Misinvoicing of commodities costs billions, Financial Times, 18 July 2016. Retrieved from
https://www.ft.com/content/6d38e0b8-4a98-11e6-8d68-72e9211e86ab;
Roman Lanis, Brett Govendir & Ross McClure, Counting the missing billions: how Australia is losing out to oil
and gas giants, The Guardian, 25 April 2017. Retrieved from
https://www.theguardian.com/business/2017/apr/26/counting-the-missing-billions-how-australia-is-losing-
out-to-oil-and-gas-giants;
Daniel Boffey, The Netherlands and UK are biggest channels for corporate tax avoidance, The Guardian, 25 July
2017. Retrieved from https://www.theguardian.com/world/2017/jul/25/netherlands-and-uk-are-biggest-
channels-for-corporate-tax-avoidance;
Owen Jones, Tax avoidance may be legal but it’s bankrupting our social order, The Guardian, 7 November
2017. Retrieved from https://www.theguardian.com/commentisfree/2017/nov/07/paradise-papers-bankrupt-
social-order-tax-avoiders;
Tomas van Dijk, Acht miljoen doden minder door stoppen belastingontwijking – klopt dit wel?, de Volkskrant,
13 November 2017. Retrieved from https://www.volkskrant.nl/nieuws-achtergrond/acht-miljoen-doden-
minder-door-stoppen-belastingontwijking-klopt-dit-wel~bdf71930/;
Juliette Garside, The heat is on: inaction on tax havens will make May appear complicit, The Guardian, 14
November 2017. Retrieved from https://www.theguardian.com/news/2017/nov/14/paradise-papers-tax-
havens-theresa-may-margaret-hodge-transparency;
David Pegg, Tax avoidance is morally wrong, say nine out of ten in UK, The Guardian, 27 November 2017.
Retrieved from https://www.theguardian.com/business/2017/nov/27/tax-avoidance-by-big-firms-is-morally-
wrong-say-nine-out-of-10-in-uk;
Rana Foroohar, Why the world richest firms are facing a ‘tech lash’, Financial Times, 21 March 2018. Retrieved
from https://www.ft.com/video/83112dd7-20c1-43c9-97e2-7bcaae799c90;
Tim Adams, Moneyland: Why thieves and crooks now rule the world and how to take it back - review, The
Guardian, 9 September 2018. Retrieved from https://www.theguardian.com/books/2018/sep/09/moneyland-
oliver-bullough-review-wealth-corruption-oligarchs;
Martin Wolf, The world needs to change the way its taxes companies, Financial Times, 7 March 2019. Retrieved
from https://www.ft.com/content/9a22b722-40c0-11e9-b896-fe36ec32aece;
294
Compared to the pre-BEPS period and the designing BEPS period, it is interesting to note
that, now, the business-oriented newspapers, such as the Financial Times — at least before
the Covid-19 crisis — picked up on these reports at least as much as the more NGO-oriented
newspapers such as the Guardian.
Of course, the 2016 Panama Papers and 2017 Paradise Papers by the ICIJ were both good
for a trove of news coverage on tax avoidance and tax evasion. Particularly, the Panama
Papers dealt mostly with wealthy individuals that were hiding assets from the tax
authorities using offshore shell companies. The Paradise Papers did disclose details on how
some of the larger U.S. multinationals avoided paying corporate income tax. Additionally,
the Paradise Papers largely exposed how small business owners and wealthy individuals
used offshore tax structures to hide assets in order to avoid paying taxes in their country of
residence. In fact, much of the more in-depth media reporting went to the offshore assets in
the family trust of the UK Prime Minister, David Cameron, that was revealed in the Panama
Papers as well as the private estate of Queen Elizabeth that was held through an offshore
company that was exposed in the Paradise Papers in 2017.1377
Nicholas Shaxson, No, corporate tax avoidance is not legal, Financial Times, 16 May 2019. Retrieved from
https://www.ft.com/content/67cabeef-23a2-3601-a18d-5604880b109d;
Tom Cardamone, Big Four’s stranglehold on corporate tax planning must end, Financial Times, 25 July 2019.
Retrieved from https://www.ft.com/content/1d8ada78-aed9-11e9-8030-530adfa879c2;
Martin Sandbu, More than a third of foreign investment is multinational tax dodging, Financial Times, 8
September 2019. Retrieved from https://www.ft.com/content/37aa9d06-d0c8-11e9-99a4-b5ded7a7fe3f;
John Gapper, Do global businesses have too much power?, Financial Times, 24 November 2019. Retrieved from
https://www.ft.com/content/95403b22-e42a-11e9-b8e0-026e07cbe5b4;
Kate Beioley, UK growing more financially secretive, campaign group says, Financial Times, 18 February 2020.
Retrieved from https://www.ft.com/content/41149fb2-526a-11ea-90ad-25e377c0ee1f;
Laurens Berentsen, Rechters beslissen heel verschillend in belastingzaken, Financieele Dagblad, 5 March 2020.
Retrieved from https://fd.nl/economie-politiek/1336919/rechters-beslissen-heel-verschillend-in-
belastingzaken#:~:text=Er%20zijn%20rechters%20die%20in,hebben%20trouwens%20weinig%20te%20kiezen.
&text=Dat%20is%20ook%20de%20verwachting%20van%20burgers%20die%20naar%20de%20rechter%20stap
pen;
Elisabeth Braw, Companies should start showing more national loyalty, Financial Times, 31 May 2020.
Retrieved from https://www.ft.com/content/6584d36c-9a81-11ea-871b-edeb99a20c6e;
Paolo Gentiloni, An EU crackdown is essential for sustainable growth, Financial Times, 14 July 2020. Retrieved
from https://www.ft.com/content/92081b99-86a1-4c8f-b10a-39939b40bc09;
Philip Inman, UK overseas territories top list of world’s leading tax havens, The Guardian, 9 March 2021.
Retrieved from https://www.theguardian.com/business/2021/mar/09/uk-overseas-territories-top-list-of-
worlds-leading-tax-havens;
David Conn, Almost all Tory voters agree company tax avoidance morally wrong, poll finds, the Guardian, 22
October 2021. Retrieved from https://www.theguardian.com/news/2021/oct/21/almost-all-tory-voters-agree-
company-tax-avoidance-morally-wrong-poll-finds;
Larry Elliot, Almost $500bn ‘lost to tax abuse by firms and super-rich in 2021’, The Guardian, 16 November
2021. Retrieved from https://www.theguardian.com/world/2021/nov/16/almost-500bn-lost-to-tax-abuse-by-
firms-and-super-rich-in-2021.
1377
See for instance:
Richard Brooks, Tax havens don’t need to be reformed. They should be outlawed, the Guardian, 4 April 2016.
Retrieved from https://www.theguardian.com/news/commentisfree/2016/apr/04/tax-havens-reformed-
outlawed-panama-papers;
Geoff Dyer, Max Seddon & Richard Milne, Panama Leaks highlights global elite’s use of tax havens, 4 April
2016, Financial Times. Retrieved from https://www.ft.com/content/549c1e96-f9e7-11e5-8f41-df5bda8beb40;
295
Irrespective of their actual content, both the Panama Papers and Paradise Papers were
primarily framed as proof of extensive tax avoidance by multinationals. In particular, the
Panama Papers—even though these arguably had the least to do with tax avoidance by
multinationals—were of particular importance for the UK to change their mind politically on
corporate tax avoidance. This change of heart was instrumental for the European
Commission’s proposal for the Anti-Tax Avoidance Directive to get unanimous support from
all the EU Member States. Further on, this sequence of events and why exactly the Panama
Papers became a political turning point in the UK is explored further.
It is worth noting that, specifically in reporting on the Paradise Papers, there was discussion
on how “tax avoidance is within the letter of the law, but not the spirit”1378 and that “the line
between tax evasion and tax avoidance is sometimes thin, but it is rarely invisible.”1379 In
fact, this line of reasoning was expounded further by scholars who argue that tax avoidance
should be equated with illicit financial flows.1380
Moreover, the point is made that tax avoidance by wealthy individuals and big corporations
undermines the democracy, and how much of the political power in society lies exactly with
the ones who try and hide their assets.1381 This exacerbates inequality, and it leads to
Matthew Weaver, How the truth about Cameron’s family finances slowly emerged, The Guardian, 8 April 2016.
Retrieved from https://www.theguardian.com/politics/2016/apr/08/truth-about-david-camerons-family-
finances-offshore-fund;
Jeroen Segenhout, Panama Papers werpen licht op dubbele moraal, Financieele Dagblad, 9 April 2016.
Retrieved from https://fd.nl/economie-politiek/1146816/panama-papers-werpen-licht-op-een-dubbele-
moraal;
Vanessa Houlder, The Queen’s offshore investments revealed in leak, Financial Times, 6 November 2017.
Retrieved from https://www.ft.com/content/21db0302-c25c-11e7-a1d2-6786f39ef675;
Gareth Hutchens, Paradise Papers reveals ‘commoditisation’ of tax avoidance, The Guardian, 15 January 2018.
Retrieved from https://www.theguardian.com/news/2018/jan/15/paradise-papers-revealed-commoditisation-
of-tax-evasion-
australia#:~:text=The%20Paradise%20Papers%20have%20helped,the%20Australian%20tax%20authorities%20
say;
David Pegg, Paradise Papers: Davos panel calls for global corporate tax reform, The Guardian, 25 January 2018.
Retrieved from https://www.theguardian.com/business/2018/jan/25/paradise-papers-davos-panel-calls-for-
global-corporate-tax-reform;
1378
Merryn Somerset Webb, Paradise Papers reveal turning tide on tax avoidance, Financial Times, 17
November 2017. Retrieved from https://www.ft.com/content/4f9843f2-c565-11e7-a1d2-6786f39ef675.
1379
Financial Times, Stranger than paradise: The truth about tax, 10 November 2017, Financial Times.
Retrieved from https://www.ft.com/content/b83e697a-c625-11e7-b2bb-322b2cb39656.
1380
Picciotto, S. (2018). Why Tax Avoidance is Illicit. International Centre for Tax and Development. Retrieved
from https://www.ictd.ac/blog/why-tax-avoidance-is-illicit/; Fowler, N. (2018). Illicit Financial Flows and the
Tax Havens and Offshore Secrecy System. Retrieved from https://taxjustice.net/2018/02/08/illicit-financial-
flows-tax-haven-offshore-secrecy-system/;
Cobham, A. (2019) Combatting Illicit Financial Flows: definition, measurement and policy response. Tax Justice
Network, 14 March 2019, Retrieved from https://www.taxjustice.net/wp-content/uploads/2019/03/IFFs-
Cobham-190319.pdf.
1381
See for instance:
Martin Wolf, The world needs to change the way its taxes companies, Financial Times, 7 March 2019. Retrieved
from https://www.ft.com/content/9a22b722-40c0-11e9-b896-fe36ec32aece;
296
further concentration of power and wealth. As a result, the political purpose might diverge
from doing the right thing, and, for that reason, tax avoidance needs to be addressed. Thus,
in order to restore the general public’s faith in democracy, it is important that tax avoidance
even where no laws are broken still is not permissible, insofar these arrangements run
counter to the spirit of the law.
Much the same as with the reporting on government action after 2019, the reporting
volumes on NGO activity also went down drastically. To illustrate, the ICIJ published the
Pandora Papers on 3 October 2021,1382 and the media attention was nowhere near at the
same level as with the ICIJ publications in 2016 and 2017.1383
In contrast to the two previous periods, the business community appeared to have
moderated their tone.1384 This could be because OECD/G20 had come out with the final
BEPS reports, which means that the business community now could focus more on concrete
proposal, the further development of technical details as well as their implementation. It
could also be that businesses more or less resigned themselves to the fact that it was now
Martin Wolf. Martin Wolf: Why rigged capitalism is damaging democracy, Financial Times, 18 September
2019. Retrieved from https://www.ft.com/content/5a8ab27e-d470-11e9-8367-807ebd53ab77;
John Gapper, Do global businesses have too much power?, Financial Times, 24 November 2019. Retrieved from
https://www.ft.com/content/95403b22-e42a-11e9-b8e0-026e07cbe5b4.
1382
ICIJ (2021);
Michael Persson, Wopke Hoekstra maakte gebruik van brievenbusfirma op Britse Maagdeneilanden, de
Volkskrant, 3 October 2021. Retrieved from https://www.volkskrant.nl/economie/wopke-hoekstra-maakte-
gebruik-van-brievenbusfirma-op-britse-maagdeneilanden~ba694080/.
1383
For instance, the Guardian devoted more than three times the number of articles on the Panama Papers
compared to the Pandora Papers. For Financial Times, this ratio is about 5:1.
1384
See for instance:
Vanessa Houlder, Tax specialists criticise Google tax deal as opaque, Financial Times, 25 January 2016.
Retrieved from https://www.ft.com/content/191d7f30-c38d-11e5-b3b1-7b2481276e45;
Sarah Gordon, One in three FTSE 100 companies worries about tax, Financial Times, 13 June 2016. Retrieved
from https://www.ft.com/content/5e757cbc-3157-11e6-bda0-04585c31b153;
Jamie Smyth, Rio Tinto cuts exposure to tax havens, Financial Times, 29 June 2016. Retrieved from
https://www.ft.com/content/9e8175c8-3dc2-11e6-8716-a4a71e8140b0;
Vanessa Houlder, Public opinion brings shift in business attitude to tax planning, Financial Times, 29 August
2016. Retrieved from https://www.ft.com/content/bca9bb20-6aca-11e6-ae5b-a7cc5dd5a28c;
Vanessa Houlder, Business wary over further cuts to UK corporation tax, 21 November 2016. Retrieved from
https://www.ft.com/content/245bde5a-affa-11e6-9c37-5787335499a0;
Andrew Hill, CEOs take long-term view over short-term profit, Financial Times, 17 January 2017. Retrieved from
https://www.ft.com/content/6c356f7c-b714-11e6-961e-a1acd97f622d;
Aime Williams, Wealthy turn their backs on offshore tax havens, Financial Times, 15 June 2017. Retrieved from
https://www.ft.com/content/31e5cad8-4d32-11e7-919a-1e14ce4af89b;
Madison Marriage, Tax disputes costs soar at UK’s biggest companies, Financial Times, 17 September 2017.
Retrieved from https://www.ft.com/content/85d64b04-9a35-11e7-a652-cde3f882dd7b;
Financial Times, Business must help fix the failures of capitalism, Financial Times, 22 October 2017. Retrieved
from https://www.ft.com/content/da9aa4ce-b7e4-11e7-8c12-5661783e5589;
Kate Beioley, FTSE 100 groups cut back on cash pots for tax disputes, Financial Times, 5 August 2019. Retrieved
from https://www.ft.com/content/ff25e060-afc2-11e9-8030-530adfa879c2;
Jennifer Thompson, Investment groups want companies to disclose global taxes, 4 December 2019. Retrieved
from https://www.ft.com/content/d84eeafc-16c6-11ea-9ee4-11f260415385.
297
only a matter of time until the OECD/G20 proposals would be enacted into national
legislation rather than holding on to the hope that they could still stop measures by warning
against their adverse economic effects.
Perhaps because of the change in tone, businesses were also more often portrayed in the
media in a somewhat different light. In particular, this was the case in the more business-
oriented newspapers, where they were painted less as entities that are only selfishly looking
out for their own interests and more as products of capitalism — a system that might force
them to put the short-term gains of shareholders before the interests of other stakeholders.
Notwithstanding of the (slightly) moderated tone in general, there was still quite a bit of
negative reporting on the business community in the media, as well as there was push-back
from business.1385 Business was most vocal with regard to big tech companies. This was
especially the case after the European Commission had announced their decision in the
Apple state aid case.1386 It is also of note that the media attention was (almost) exclusively
1385
See for instance:
Lenore Taylor, Big Business accused of using strawman argument against tax avoidance crackdown, The
Guardian, 25 January 2016. Retrieved from https://www.theguardian.com/business/2016/jan/26/big-
business-accused-of-using-straw-man-arguments-against-tax-avoidance-crackdown;
John Kay, Transparency over tax is not the answer to evasion, Financial Times, 19 April 2016. Retrieved from
https://www.ft.com/content/00f1c6f0-0609-11e6-9b51-0fb5e65703ce;
Barney Jopson, US modifies plan to crack down on tax inversions, Financial Times, October 13 2016. Retrieved
from https://www.ft.com/content/87d30dc4-9190-11e6-a72e-b428cb934b78;
Barney Jopson, Companies urge Trump to dump anti-inversion rules, Financial Times, 3 May 2017. Retrieved
from https://www.ft.com/content/80bc2c1c-3020-11e7-9555-23ef563ecf9a
Tom Kreling, Trustkantoor hoeft niet bang te zijn voor ingrijpen, de Volkskrant, 17 June 2017. Retrieved from
https://www.volkskrant.nl/economie/trustkantoor-hoeft-niet-bang-te-zijn-voor-ingrijpen~b313303d/;
Madison Marriage, Business slams HRMC over long tax investigations, Financial Times, 15 January 2018.
Retrieved from https://www.ft.com/content/9a3ee380-f7b4-11e7-8715-e94187b3017e.
1386
See for instance:
John Gapper, Google strikes 130 mln pound back tax deal, Financial Times, 23 January 2016. Retrieved from
https://www.ft.com/content/d50ad5f4-c125-11e5-9fdb-87b8d15baec2;
Financial Times, Google’s tax deal is a welcome sign of political winds shifting, Financial Times, 24 January
2016. Retrieved from https://www.ft.com/content/5ee8249c-c2b7-11e5-808f-8231cd71622e;
Murad Ahmed, Vanessa Houlder & Jim Pickard, Facebook faces profits hit after tax shake up, Financial Times, 4
March 2016. Retrieved from https://www.ft.com/content/7115354a-e1ef-11e5-96b7-9f778349aba2;
Christian Oliver, Tim Bradshaw & Barney Jopson, Apple tax affairs spark a transatlantic face-off, Financial
Times, 4 April 2016. Retrieved from https://www.ft.com/content/2e7baf4e-fa49-11e5-8f41-df5bda8beb40;
Barney Jopson, Corporate America rallies to Apple’s cause, Financial Times, 16 September 2016. Retrieved
from https://www.ft.com/content/cbd8f51c-7bd6-11e6-ae24-f193b105145e;
Julia Kollewe, “Political Crap” Tim Cook condemns Apple tax ruling, The Guardian, 1 September 2016. Retrieved
from https://www.theguardian.com/business/2016/sep/01/political-crap-tim-cook-apple-tax-ruling;
James Politi & Vanessa Houlder, Google agrees to EUR 306 million Italian tax settlement, Financial Times, 4
May 2017. Retrieved from https://www.ft.com/content/4adb933e-30d0-11e7-9555-23ef563ecf9a;
Harriet Agnew, Google wins challenge to 1.1 bln EUR tax bill, Financial Times, 12 July 2017. Retrieved from
https://www.ft.com/content/1d500f02-6722-11e7-8526-7b38dcaef614;
Richard Waters, Who gets a serving of Apple’s tax pie?, Financial Times, 18 January 2018. Retrieved from
https://www.ft.com/content/88ea8b44-fc72-11e7-9b32-d7d59aace167;
Financial Times. Taxing revenues is a poor fix for tech’s tax avoidance, Financial Times, 27 February 2018.
Retrieved from https://www.ft.com/content/f0a59896-1bc6-11e8-956a-43db76e69936;
298
reserved for large tech companies during the post-BEPS period. This could be due to the size
of the tax settlements, or simply because they are tech companies, or because they are
among the companies with the largest market caps in the world and their CEOs are among
the richest people on the planet.1387 In any case, at this stage, any media coverage on
specific companies almost always concerned one of the big tech companies or the tech
companies as a group (as US tech groups, Tech Giants, FAANGS etc).
Furthermore, Covid-19 also triggered some media responses from the business community,
and, more specifically, advisors. They, for instance, expressed their worry over a number of
compliance issues and over the government adapting to the new online way of working.1388
The overall decrease in media reporting towards the end of the post-BEPS period also
meant that business was less the subject of media scrutiny. With regard to the global tax
agreement, the comments towards businesses were mostly on that the impact that the
proposals might have, could be fairly limited.1389
9.4.3.4 Concluding Observations on the Post-BEPS and BEPS 2.0 period
Financial Times, Apple ruling strengthens case for tax crackdown, 15 July 2020. Retrieved from
https://www.ft.com/content/d1fffd14-c68c-11ea-9d81-eb7f2a294e50;
Julia Kollewe, Facebook to close Irish holding companies at centre of tax dispute, The Guardian, 27 December
2020. Retrieved from https://www.theguardian.com/technology/2020/dec/27/facebook-to-close-
controversial-irish-holding-
companies#:~:text=Facebook%20is%20winding%20up%20Irish,and%20hundreds%20of%20other%20countries
.&text=Facebook%20said%20in%20a%20statement,aligns%20with%20our%20operating%20structure.
1387
Of note in this regard, is the report Corporate Tax Settlements by the House of Commons Committee of
Public Accounts of 23 February 2016 that summarises: ”[T]he six year investigation by HM Revenue & Customs
(HMRC) has resulted in Google paying a further £130 million to settle its corporation tax liabilities over the last
10 years. This vindicates the previous Committee’s concerns in 2012 and 2013 that Google did not appear to be
paying the full tax it owed in the UK. However, in the absence of full transparency over the details of this
settlement and how it was reached we cannot judge whether it is fair to taxpayers. The sum paid by Google
seems disproportionately small when compared with the size of Google’s business in the UK, reinforcing our
concerns that the rules governing where corporation tax is paid by multinational companies do not produce a
fair outcome. Google’s stated desire for greater tax simplicity and transparency is at odds with the complex
operational structure it has created which appears to be directed at minimising its tax liabilities. Google admits
that this structure will not change as a result of this settlement.” The full report is available at
https://publications.parliament.uk/pa/cm201516/cmselect/cmpubacc/788/788.pdf.
1388
See for instance:
Lucy Warwick-Ching, HRMC suspends some tax investigations due to pandemic, Financial Times, 15 April 2020.
Retrieved from https://www.ft.com/content/70471597-dc42-4c70-aff2-d7e03eeabdac;
Emma Agyemang, Advisers warn of coming wave of tax probes of stockpiled cases, Financial Times 8 October
2020. Retrieved from https://www.ft.com/content/8f2f8f5f-8ddc-423e-a92b-8ec734a061e8;
Emma Agyemang, Tax tribunal struggling to cope with remote hearings, lawyers say, Financial Times, 28 April
2020. Retrieved from https://www.ft.com/content/38eba72b-239e-4721-95c5-104d47a12592.
1389
Richard Waters, Emma Agyemand, Aziza Kasumov & Tim Bradshaw, Multinationals shrug off G7 tax assault,
Financial Times, 11 June 2021. Retrieved from https://www.ft.com/content/8dbf9b04-0e2e-411f-a562-
ce267e269e74;
Marc Peeperkorn, Akkoord van G7 over minimum winstbelasting is ‘historisch’, maar multinationals zullen er
niet van schrikken, de Volkskrant, 5 June 2021. Retrieved from https://www.volkskrant.nl/nieuws-
achtergrond/akkoord-van-g7-over-minimum-winstbelasting-is-historisch-maar-multinationals-zullen-er-niet-
van-schrikken~b6454710/.
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A striking element of this period is how quickly the media attention went from an all-time
high in 2016 to levels of reporting in 2019, 2020 and 2021 that were similar to the levels of
before the levels of news reporting started to really go up.
The framework on newsworthiness might suggest that a decline in news coverage is likely.
For example, the discourse analysis does seem to suggest that the subject of corporate tax
avoidance, in general, appears to become less contested as more legislative measures to
tackle the problem of tax avoidance are agreed upon and implemented. Moreover, as the
OECD/G20 proposals have become highly technical, it could well be that most people would
have a harder time to relate to or identify this work. Moreover, the shock value of tax
avoidance and tax evasion might be wearing off with each subsequent tax scandal, and
perhaps the scandals also became less scandalous.1390
For example, the latter point seems to apply for the 2021 publication of the Pandora Papers.
The ICIJ stated that they: “unearthed offshore dealings of 35 current and former world
leaders and more than 300 other current and former public officials and politicians around
the world.”1391 Further examination of the Pandora Papers, however, showed that often the
unearthed offshore dealings were included in national tax statements, which at least meant
that the assets had not been hidden from the tax authorities. Moreover, some of the
uncovered investments date back as far as 2009. Boer argues that, because of this, the
Pandora Papers are more a reflection of the fact that (the political) morality has changed
with regard to offshore investment rather than that it being an actual scandal.1392
It could thus be said that with all the legislative actions taken, including the Two-Pillar
Agreement in the OECD/G20 Inclusive Framework, the legal rules have caught up with the
changing political morality on corporate tax avoidance. Further, it can be said that
newspapers no longer consider the topic as newsworthy as before, because, elements of
newsworthiness, such as controversy and relevance for the reader, have decreased.
Moreover, it might be considered that information no longer directly affects the people in
the direct community, as the new rules should ensure that multinational corporations will
start to pay their fair share.
Even though the issue of corporate tax avoidance might be less contested, this might not
fully explain the rate at which the decline in newspaper coverage occurred.1393 Much of the
news reporting in the pre-BEPS and designing BEPS periods was on the political dynamic of
getting an international agreement on the proposals to fight tax avoidance. As discussed in
earlier sections of this study, particularly, discussions on the allocation of taxing rights and
the sharing of tax revenue are exceptionally difficult for countries to agree on.1394
1390
Lammers (2021), at p. 1005.
1391
ICIJ (2021).
1392
Boer, K. (2021). Pandora Papers: kwaad van mythische proporties of de tijdgeest ontsnapt uit de doos?
Retrieved from Snelrecht: https://www.mr-online.nl/pandora-papers-kwaad-van-mythische-proporties-of-de-
tijdgeest-ontsnapt-uit-de-doos/.
1393
See Lammers (2021), at pp. 1005-1006.
1394
See section 5.4.1.
300
Given that, one could expect that newspapers would have considered the political
discussions regarding the OECD/G20 Two-Pillar Agreement more newsworthy than is
reflected in the number of articles that have been published on the matter in recent years.
The data do show that, particularly, the Guardian has a significant increase in the number of
articles in 2021 compared to 2020. The same has not been found in the other examined
newspapers. It is perhaps too early to tell if the 2021 upturn in the Guardian’s reporting is to
be considered a precursor or an outlier.
9.5 Google Trends data
News media will run news stories for as long as the public is interested. Of course, agenda-
setting, priming and framing are designed to peak the public’s interest. However, if the
public just does not — or no longer — picks up on a given subject, then obviously news
media will also drop it. A possible way to gage if the public interest in this subject at all
overlaps with the media reporting is to compare topical tax events that are reported on with
the Google search results from the same period.1395
In general, news stories and news subjects tend to have a limited lifespan. Moreover, how a
news story develops is — at least in part — dependent on the question of whether the news
story was anticipated by the public or not. Events that are expected ahead of time are also
able to capture the public’s attention afterwards and tend to have a symmetric increase and
decline in interest. More unexpected news events tend to have a quick rise followed by a
slow fall in interest. Finally, there are important events that have additional or secondary
reactions. These asymmetric events cause multiple peaks of public interest with valleys in
between.1396 It seems fair to say that the latter — the asymmetric form — is closest to the
reporting on tax avoidance in the newspapers.
Since the newspaper coverage followed the actions of the OECD and the EU on corporate
tax avoidance pretty closely — at least up until 2019 — one would expect to find that the
Google Trends data on internet searches on related corporate tax avoidance topics would
be at its highest around the periods where the OECD or the EU produced tangible outputs
such as proposals, discussion drafts or final agreements. As these moments of output
usually were known ahead of time, the pattern of internet searches is anticipated to also
show a symmetrical increase and decrease around these moments.
1395
Evidence suggests that there is a correlation between the lifespan of news stories on political or social
subjects and the how much people use search terms for these same subjects. See Schema, et al. (2021).
1396
Schema, et al. (2021).
301
Figure 9
Google Trends Data on the United
Kingdom
Base Erosion and Profit Shifting

Tax Havens
Tax Avoidance
Data Source: Google Trends
Figure 9 shows the UK results for the search topics ‘tax avoidance’, ‘tax havens’ and ‘base
erosion and profit shifting’ in Google.1397 According to the Google Trends data, the public’s
interest in the subject of tax avoidance peaked around June 2012, and, after that, there are
6 smaller visible peaks in December 2012, May 2014, February 2015, April 2016, November
2017 and, finally, October 2019.1398 Moreover, the data on internet searches suggest that, in
the UK, there was little search activity with regard to tax havens or BEPS.
What is particularly interesting in this graph is that the internet search activity in the UK
does not really connect to the newspaper reporting on the (legislative) proposals on
corporate tax avoidance of the OECD/G20 Inclusive Framework or the EU. Instead, the
Google search results from 2012 onwards appear to overlap with other events that were of
particular significance in the UK political arena: (i) the tax scandal concerning Jimmy Carr
(June 2012), (ii) the hearings in UK parliament of Starbucks, Google and Amazon by the
Public Accounts Committee chaired by Margaret Hodge (November 2012), (iii) UK Uncut
protests of Starbucks stores after Starbucks moved their HQ from Amsterdam to London
(May 2014), (iv) the scandal surrounding the HSBC bank (February 2015), (v) the publication
of the Panama Papers (April 2016), (vi) the publication of the Paradise Papers (November
1397
The search terms and topics are reflected in each country’s native language. Also, several variations of
these search terms have been compared (in both English and the native language) to ensure that the outcome
is representative. Finally, the terms “Tax Avoidance”, “Tax Havens” and “Base Erosion and Profit Shifting”
represent the entire topic (and thus also includes variant search terms).
1398
The values represent the search interests relative to the highest point on the chart for the given region and
time. A value of 100 is the peak popularity for a term. A value of 50 means that a term is half as popular.
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2017), and (vii) the OECD publication of the Pillar 1 proposal (October 2019). By cross-
referencing the above search terms with terms relating to the listed events above, it can be
shown that there is a distinct overlap in search peaks with regard to Jimmy Carr in 2012,
Starbucks in 2014 as well as the Panama Papers and the Paradise Papers in 2017. For the
other events, the Google Trends data are inconclusive.
Other noteworthy observations one could make are (i) that the public interest peaks are
markedly smaller in size in 2017 and 2019, and (ii) that they are also further apart.
Therefore, one could argue that internet searches on the subject of tax avoidance became
much less frequent.
Figure 10
Google Trends Data on Germany
Tax avoidance
Tax Havens
Data Source: Google

Trends
Figure 10 for Germany also shows an interesting pattern, which is not too dissimilar from
the UK. The first thing that catches the eye in this graph is that the search interest with
regard to tax avoidance is much more evenly spread out over the whole period. Secondly,
specifically in Germany, the issue of tax havens seemed to spark much search interest.
Interestingly, also in Germany, the peaks overlap with tax-related events that were mostly
of specific German political importance. For instance, the 2013 peak (tax haven) coincides
with the publication by the ICIJ of the so-called Offshore Leaks,1399 which showed that much
more German individuals than expected benefitted from hiding assets in tax havens.1400 The
1399
International Consortium of Investigative Journalists (ICIJ). (2013). Offshore Leaks. Secrecy for Sale: Inside
the Global Offshore Money Maze. Retrieved from https://www.icij.org/investigations/offshore/.
1400
Bild Zeitung, «Focus»: Mindestens 100 000 Nutzer von Steueroasen in Deutschland, 6 April 2013. Retrieved
from https://www.bild.de/news/aktuell/focus-mindestens-100-000-nutzer-von-steueroasen-
29892712.bild.html.
303
political response was that (SPD)1401 politician Peer Steinbrück called for harsh penalties for
the German banks involved up to withdrawing their banking licences.1402 Moreover, this led
to a lot of media coverage in Germany. However, the political discourse in Germany would
suggest that Steinbrück’s plan was not triggered by the ICIJ publication.
At the time, Steinbrück was the SPD-candidate in the 2013 elections to become federal
Chancellor. In fact, in 2012, Steinbrück was elected by the SPD to challenge Angela Merkel,
at least in part, based on his “plan for sweeping financial regulation that […] includes
compelling banks to finance a 200 billion Euro rescue fund, and splitting investment from
retail banking – a move that would hit Deutsche Bank, the country’s only real global
player.”1403 Therefore, coming down hard on banks was the main basis of his election
platform in 2012.
Furthermore, the peak in 2007 (tax haven) refers to the national discussion of whether or
not individual Bundesländern1404 could set their own personal income tax rate.1405 The peak
in 2009 was as the result of German proposals to limit banking secrecy. Here, Steinbrück
was also central in the discussion.1406 Further, the peaks in April 2016 and November 2017
correspond with the ICIJ publication of the Panama Papers and Paradise Papers.
The third interesting point that follows from Figure 10 is the fact that BEPS appeared to be
of much more interest in Germany than in the UK. This would suggest that there was much
more interest in the (legislative) proposals regarding corporate tax avoidance than in the
UK.
At first glance, Figure 11 for the Netherlands shows that the data on internet searches line
up much more with the newspaper coverage on (legislative action on) corporate tax
avoidance. In fact, what is most interesting in this graph is that there hardly seems to be any
internet search activity on these topics outside of when international organisations were
active on the subject.
1401
The Social Democratic Party of Germany. See for more information https://www.spd.de/.
1402
Der Spiegel, Steinbrück fordert härtere strafen für banken, 4 April 2013. Retrieved from
https://www.spiegel.de/wirtschaft/soziales/steueroasen-steinbrueck-fordert-haertere-strafen-fuer-banken-a-
892557.html.
1403
Financial Times, Steinbrück chosen to challenge popular Merkel, 28 September 2012. Retrieved from
https://www.ft.com/content/207a719c-0951-11e2-a5e3-00144feabdc0.
1404
The Federal Republic of Germany, as a federal state, consists of 16 partly sovereign federated states, which
are commonly referred to as Bundesländer. Since the German nation state was formed from an earlier
collection of several states (only some of which still exist), it has a federal constitution, and the constituent
states retain a measure of sovereignty.
1405
Bild Zeitung, Gibt es bald “steueroasen” in Deutschland?, 18 February 2007. Retrieved from
https://www.bild.de/news/2007/paradies-deutschland-1417048.bild.html.
1406
Bild Zeitung, Schweizer vergeleichen Steinbrück mt Nazis!, 19 March 2009. Retrieved from
https://www.bild.de/politik/2009/schweizer-blick-am-abend-bezeichnet-ihn-als-haesslich-7711926.bild.html.
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Figure 11
Google Trends Data on the
Netherlands

Tax Havens
Tax Avoidance
Data Source: Google Trends
The Google Trends data are inconclusive as to why the pattern of internet search results in
the Netherlands might differ from that of the UK and Germany. However, if one accepts that
the highest peaks in internet search results most likely are closely connected to political
topics that were particularly relevant at the national level, there is perhaps a logical
explanation.
For example, over the examined period, the Netherlands increasingly has struggled with its
reputation as a jurisdiction that performs a hub-function for many of the world’s aggressive
tax structures using letterbox companies.1407 Moreover, the national political discussion and
the subsequent media reporting does not distinguish letterbox companies used for tax
evasion purposes by Russian oligarchs, from conduit companies that are used for tax
avoidance through treaty shopping by famous performing artists, or from intermediate
holding companies that were used in CV/BV structures to ensure perpetual tax deferral in
the United States. As far as the general political discourse was concerned, these examples
were just symptoms of a larger problem that there was an industry in the Netherlands
which business it was to game the international tax system.1408
Therefore, one could argue that there was a strong overlap with the work of the OECD/G20
and the EU with regard to corporate tax avoidance and the national political discourse. This
1407
See, for instance, Mehreen Khan, Dutch government set out plan to counter tax haven reputation, Financial
Times, 17 February 2018. Retrieved from https://www.ft.com/content/ef9b87ac-1af5-11e8-aaca-
4574d7dabfb6.
1408
See, for instance, Tweede Kamer (2017a); Tweede Kamer (2017b); Also, see Section 9.4.3.1.
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was also the case, for instance, because much of the work of BEPS Action 5 centred on the
design of national IP regimes, and the Dutch innovation box was one of the important IP
regimes in the EU.1409 Accordingly, if national political discussion lines up with and is directly
influenced by international political discussions, it makes sense that the Google search
interest in the Netherlands is more in line with the international work on corporate tax
avoidance than in the UK and Germany.
9.5.1 Concluding Observations on the Google Trends Data
Across the examined countries and newspapers, one can observe that the media coverage is
either mostly about governments and international organisations taking action against
corporate tax avoidance or that the reporting is triggered by this action. However, the
Google Trends data suggest that the search interest in the UK, and to a lesser extent in
Germany, only partly overlaps with this focus in media reporting. This is interesting, as it
suggests that the national political discourses in the UK and Germany were about other
subjects than the discourse of the OECD/G20 and the EU. In fact, one can also observe these
differences in discourse in the actual newspaper coverage. As such, even though the UK
newspapers report on corporate tax avoidance, the discourse analysis shows that these
news outlets frame these discussions from the perspective of a national political issue.
A good example of this is the reporting on the Panama Papers. Particularly between 4 April
and 7 April 2016, the media in the UK talked mostly about one particular company that
featured in the Panama Papers, Blairmore Holdings Inc. This was an investment fund that,
until 2012, was based in the Bahamas and managed tens of millions of pounds on behalf of
wealthy families while never having paid any taxes in the UK. The focal point was that David
Cameron’s father was registered as one of the fund’s five directors until shortly before his
death in 2010.1410 On 7 April 2016, David Cameron admitted having benefitted from the
investment fund, causing Labour MP Richard Burgon to comment that this admission
showed “a ‘crisis of morals’ at the heart of the Conservative government.”1411
Another example is the reporting on the Pandora Papers in the Netherlands. The Dutch
media homed in on the fact that the minister of Finance in the Netherlands, Wopke
Hoekstra, appeared in the Pandora Papers. The newspapers pointed out the discrepancy
between Hoekstra being tasked with stamping out tax avoidance and his appearance in the
Pandora Papers suggesting that he engaged in such behaviour himself.1412 However, the
news attention subsided quickly again, as it became clear that the investment of € 26.500
had been declared in Hoekstra’s tax statements. However, this example suggests that a
connection to the national political debate is very important for news media to report on a
1409
See OECD (2015e).
1410
See, for instance, Juliette Garside, Fund run by David Cameron’s father avoided tax in Britain, The
Guardian, 4 April 2016. Retrieved from https://www.theguardian.com/news/2016/apr/04/panama-papers-
david-cameron-father-tax-bahamas.
1411
Robert Booth, Holly Watt & David Pegg, David Cameron admits he profited from father’s Panama offshore
trust, The Guardian, 7 April 2016. Retrieved from https://www.theguardian.com/news/2016/apr/07/david-
cameron-admits-he-profited-fathers-offshore-fund-panama-papers.
1412
Michael Persson, Wopke Hoekstra maakte gebruik van brievenbusfirma op Britse Maagdeneilanden, de
Volkskrant , 3 October 2021. Retrieved from https://www.volkskrant.nl/economie/wopke-hoekstra-maakte-
gebruik-van-brievenbusfirma-op-britse-maagdeneilanden~ba694080/.
306
story. Moreover, as suggested by Boer, such reporting could be more indicative of the
zeitgeist — or, in fact, the current political discourse — than anything else.1413
If Google Trends data do not line up with the OECD/G20 and/or EU agenda and the resultant
newspaper coverage, this could be an indication that the national political discourse on
other issues was more dominant than the international political discourse on corporate tax
avoidance. Conversely, where the data do line up, it suggests an overlap with the political
debate in that country with the international political discourse. This insight could be
indicative of the development of the political morality and the political discourse on
corporate tax avoidance in different countries.
Another observation that appears to be true for all examined countries is that the intensity
of internet search behaviour is steadily declining, at least from 2016 onwards. The Google
Trends data are not conclusive on whether the decline in newspapers has caused this
decline in search interest or vice versa. However, prior research does suggest that there is a
correlation between the two,1414 and this analysis seems to confirm this. However, the data
show that the decline in search intensity can be observed mostly with regard to the topics of
BEPS and tax havens. Specifically on the topic of tax avoidance, the Netherlands and
Germany show a slightly upward trend again in internet search intensity in 2021. This
appears to be linked with the global tax agreement of October 2021. However, it is too early
to tell whether this spike breaks the downward trend of the previous years or not.
1413
Boer (2021).
1414
See Schema, et al. (2021).
307
10 Conclusions from the Discourse Analysis
Part I of this study concludes that the spirit of international tax law can be defined based on
two approaches. The first approach is built on the definition of the concept of law, as it
exists as a fixed quantity. The second approach is based on the definition of the concept of
law as a continuously developing discourse. It has been argued that this second approach is
most appropriate, and, as a result, the discourse analysis has focused on the spirit of
international tax law as a reflection of the changing political and doctrinal morality in
In Part II of this dissertation, the aim was to discover whether there is a discernible
development in how different stakeholders use the concept of the spirit of international tax
law, and if such a development could be relevant for future tax reform. To examine this, a
discourse analysis has been performed on the official publications of the OECD and the EU
as well as on the reporting of six different European newspapers over the course of more
than 15 years. In this discourse analysis, the focus is on how the meaning of terms like
fairness is constructed in the context of corporate tax avoidance, and the development of
standards of international tax law to counter corporate tax avoidance and to make the
international tax system more robust in general. Moreover, it looks at how different actors
relate to each other and how their roles are constructing a reality that, in the end, makes up
the coherent legal reality.
The analysis demonstrates that the OECD is currently widely considered as the setter of
international tax standards. The analysis also shows that in order to achieve this position,
the OECD had to carefully construct the roles that it plays in designing tax policy as well as in
organising the political backing through the G20. The spirit of international tax law —
meaning the changing political morality in the discourse of international tax law — has been
both developed and utilised by the OECD to further establish, strengthen, and expand its
own position.
In doing so, the OECD has shown itself as a think tank that is able to solve almost impossible
international tax problems, as well as to be the forum in which countries can agree on ways
to solve prisoner’s dilemmas and come to cooperative solutions. Moreover, it provides a
platform for stronger economies to impose best practises on their weaker brothers, while,
308
at the same time, it enables countries that on their own do not have a lot of bargaining
power to build alliances to persuade stronger economies to see things their way.1415 In fact,
since 2016, particularly these roles have become more important, as non-OECD Members
were included in the negotiations in the OECD/G20 Inclusive Framework on BEPS, expanding
the reach of the OECD from the original 37 OECD member countries to 141 countries and
jurisdictions today.1416 Cooperation can thus mean that countries gain much in the way of
fiscal self-determination by giving up a small measure of freedom to implement certain
fiscal policies domestically. De jure tax sovereignty is traded off for de facto tax
sovereignty.1417
Additionally, the development of international standards through international cooperation

provides an almost perfect shield against domestic political resistance with regard to the
implementation of agreed-upon measures in the domestic legislation. This effect is further
fortified, as the EU adopted the international tax standards that were developed in the BEPS
Project in several pieces of EU legislation, thus ensuring its (almost) uniform implementation
across all Member States.
Seeking the cover of international cooperation can also have its downsides. Having 141
countries and jurisdictions working together within the OECD/G20 Inclusive Framework
increases the lock-in effect that already makes fundamental international tax reform almost
impossible. Non-OECD Members will invariably be subject to the syndication of past and
present OECD tax standards.1418 Moreover, the discourse analysis revealed a hierarchy in tax
policy concerns that permeates the work of the OECD/G20 and the EU. Global cooperation
within the OECD/G20 Inclusive Framework also entails the promotion of this hierarchy of
policy concerns on a global scale.
This means that, effectively, national tax revenue concerns will likely remain placed well
above inter-nation equity concerns in designing future international tax standards. This will
invariably make more fundamental tax reforms even harder to accomplish, reducing the
margins for, specifically, developing countries to exact change.1419 The reason is the —
according to Cui, unjustly held — self-evident truths that corporate income tax influences
cross-border transactions and that the economic impact of the corporate income tax is
mostly on highly mobile capital.1420 This causes a blockade on fundamental reform, as these
self-evident truths mean that reform will be believed to lead to a redistribution of the
current tax revenue streams.1421 Thus, global uniformity also comes at a price, particularly,
for those countries that benefit the least from the international tax rules.1422
1415
Also, see Peters (2013), at pp. 229-236 (on deliberative international tax law).
1416
It is recognized that as of May 2021 Costa Rica ascended as the 38th OECD member country, however, as
this happened after the establishment of the OECD/G20 Inclusive Framework above the original 37 members
are mentioned.
1417
Morriss & Moberg (2012), at p. 60.
1418
Christians, A. (2010). Taxation in a Time of Crisis: Policy Leadership from the OECD to the G20. Nw. JL &
Soc. Pol'y, 5, 19, at p. 20.
1419
1420
See Section 5.4.4.
1421
Cui (2021), at p. 45.
1422
Dagan (2017), at p. 140.
309
In this regard, it should be noted that, although the Two-Pillar Agreement at the OECD/G20
Inclusive Framework projects the image that the institutional support for the new
international tax standards is spanning globally, this might be somewhat overstated. Even
though 141 countries and jurisdictions make up the OECD/G20 Inclusive Framework, the
largest economy of Africa, Nigeria, has not signed up to the 8 October 2021 Agreement.
Together with Kenya, which is another holdout to the Two-Pillar Agreement, about 25% of
total African GDP finds the Two-Pillar Agreement unsatisfactory.1423 According to these
countries, the Agreement does not generate enough tax revenue for developing countries,
while the application of the new rules is very complicated. Moreover, it would forbid them
to introduce unilateral measures, such as a digital services tax and require of them to
introduce binding dispute resolution mechanisms.1424
The media analysis confirms that the debate on corporate tax avoidance increased political
pressure on national governments to seek international cooperation in the OECD/G20. This
is, for example, visible in the change in the core messages of sitting administrations.
Between 2010 and 2015, governments were sometimes observed to express concern for
negative spill-over effects from measures curbing corporate tax avoidance. However, these
concerns seemed to fade into the background, as more concerns were being expressed for
the level playing field between domestic and international businesses, for individuals having
to bear a bigger tax burden than international businesses, and for the overall acceptance of
the tax system. Moreover, NGOs partly replaced their calls to protect the tax revenue of
developing countries with warnings that (local) public services were at risk if multinational
corporations did not pay more taxes in the places where their clients are located.
The focus of both the government and the NGO reasoning pushed the political narrative
further towards the need to increase national tax revenues collected from multinational
corporations. Stating that there was a danger of underfunding of public services made
alternative routes to change the tax mix to the benefit of individuals in advanced economies
almost impossible. The narrative effectively eliminated both the cutting of public spending
and the lowering of taxes for citizens as policy options. Moreover, it left very little room to
allocate more taxing rights to developing countries based on inter-nation equity concerns.
The extra revenue wants of both developing countries and advanced economies would have
to come from increasing the tax burden on multinational corporations.
However, the discourse analysis also demonstrates that, from 2013 to 2015, a number of
key countries still considered that attracting investment (by engaging in tax competition to
promote foreign direct investment) was more important than this political narrative. One
could therefore argue that, even though the political narrative had changed more towards
the inter-taxpayer equity concerns, the underlying architecture in thinking about tax and tax
policy in politics had not. This means that the underlying political morality, with self-
1423
OECD. (2021f). International community strikes a ground-breaking tax deal for the digital age, Press
Release, 8 October 2021. Retrieved from https://www.oecd.org/tax/international-community-strikes-a-
ground-breaking-tax-deal-for-the-digital-age.htm.
1424
Mureihti, C. (2021). Why Kenya and Nigeria haven’t agreed to a historic global corporate tax deal, Quartz
Africa, 2 November 2021. Retrieved from https://qz.com/africa/2082754/why-kenya-and-nigeria-havent-
agreed-to-global-corporate-tax-deal/.
310
interested states at its core, had not changed enough to affect fundamental reform.
This point is also reflected in the 2013 BEPS Action Plan and the 2015 Final BEPS Reports.1425
Schön and others have argued that BEPS provided a way to ensure that no taxing rights end
up in tax havens.1426 This was achieved through requiring taxpayers to provide more
information through tax reporting and by embracing the concept of full taxation.1427 This
required a more holistic and global view of multinational corporations and their tax
behaviour. Tax competition itself, however, has not fundamentally changed, nor has the
motivation for countries to engage in tax competition. It is still a scramble to secure and
expand the national tax base, powered by notions that have been held to be self-evident,
such as the notions that tax differentials matter for real investment decisions and that
highly mobile capital is most susceptible to such tax differentials.
National tax revenue concerns are also central to the discourse in the post-BEPS period. On
the one hand, because of the publication of several tax scandals, and, on the other hand,
because of Covid-19. Large multinational corporations and wealthy individuals were losing
more and more political support. Also, civil movements, such as the Gilets Jaunes, very
much subscribed to the widely repeated political narrative that the cost of tax avoidance
would no longer fall on those that are least able to bear it if tax avoiders would just pay
their fair share.1428 The discourse analysis shows that this led to an alignment across the
political spectrum on the message that multinational corporations should pay more in
corporate income tax (in each of the jurisdictions where they were active). Covid-19 also
triggered the political discussion that companies that engaged in aggressive tax planning
should not count on financial help from the government. This was soon followed by
statements that large multinationals should be seen to contribute to the economic recovery
afterwards through their tax payments.1429
At first sight, the proposal for Amount A within Pillar One is the clear exception in this
discourse, which is focused on domestic tax revenue in advanced economies.1430 For, the
purpose of Amount A is to reallocate a portion of the tax base from the residence country to
market jurisdictions that contribute to overall value creation but do not have the right to tax
under the current rules. At the same time, the political discussion on Pillar One underlines
many of the points that were made on tax revenue policy concerns above. For example, on
12 June 2020, the previous U.S. Secretary of the Treasury, Steven T. Mnuchin, wrote a letter
to the ministers of Finance of France, Spain and Italy as well as the Chancellor of Exchequer
of the United Kingdom.1431 The letter states:
1425
See section 5.4.1; section 8.3; and OECD (2013b), at p. 11.
1426
See Schön (2019), at p. 6.; Jiménez (2018), at p. 5.
1427
See Section 5.4.
1428
Philip Stephens, Populism is the true legacy of the 2008 crisis, Financial Times, 29 August 2018. Retrieved
from https://www.ft.com/content/687c0184-aaa6-11e8-94bd-cba20d67390c.
1429
Both points were confirmed on the international level by OECD/G20, IMF and the EU.
1430
See section 8.4.
1431
Even though the letter itself was not (meant to be) public, it was leaked to the press and has been reported
on across newspapers. See for instance, Sam Fleming, Jim Brunsden, Chris Giles & James Politi, US upends
global digital tax plans after pulling out of talks with Europe, Financial Times, 17 June 2020; Allan Rappeport,
Ana Swanson, Jim Tankersley & Liz Alderman, US withdraws from global digital tax talks, New York Times, 17
311
The United States believe that any reform of the international tax standards that
have served the global community well for decades […] must not place the financial
burdens predominantly on […] the fiscal interests of a single country or industry. […]
Pillar 1 would change the most fundamental principles of international taxation,
including the taxable nexus threshold of physical presence and the arm’s-length
principle. We believe that such a change should be made only after a thorough
evaluation and discussion. […] The United States does not believe that 2020 is a
suitable time to be conducting such negotiations. This is a time when governments
around the world should focus their attention on dealing with the economic issues
from COVID-19. The amounts involved with Pillar 1 and digital service taxes are
modest compared with the economic challenges facing the world’s economies. The
United States therefore calls upon the OECD to pause discussion of Pillar 1, with a
view to resuming later this year.1432
On 17 June 2020, the four European Finance Ministers responded to the U.S. call for a
pause. They wrote:
The current COVID-19 crisis has confirmed the need to deliver a fair and consistent
allocation made by multinationals operating without – or with little – physical
taxable presence. The pandemic has accelerated a fundamental transformation in
consumption habits and increased the use of digital services, consequently
reinforcing digital business models’ dominant position and increasing their revenue
at the expense of more traditional businesses […] It is fair and legitimate to expect
that they pay their fair share of tax within the countries where they create value
and profit.1433
This exchange succinctly captures the political difficulty of inter-nation equity discussions, as
well as how an effective outcome can be blocked by viewing redistributing tax revenue as a
zero-sum game. The U.S. letter stresses that the United States has been accommodating in
the discussion to “renew international consensus in taxation of multinational enterprises”,
but until this consensus is reached these are still their taxing rights. The European Finance
Ministers, however, point to how delivering a solution is fair, as their taxing rights have been
diminished by the global economic development, and the benefit principle should allow for
them to compensate for that.
The issue of re-allocation of taxing rights remains a difficult political problem to solve. Even
though the United States did sign up to the Two-Pillar Solution Agreement, the political fate
of Pillar One is not yet clear at the time of writing. For example, the Republican ranking
June 2020; The letter itself can be retrieved from here

https://assets.kpmg/content/dam/kpmg/us/pdf/2020/06/tnf-mnuchin-oecd-jun19-2020.PDF.
1432
See https://assets.kpmg/content/dam/kpmg/us/pdf/2020/06/tnf-mnuchin-oecd-jun19-2020.PDF.
1433
The 17 June 2020 letter by the four European Finance Ministers in response to the 12 June 2020 U.S. letter
(as referenced above) is also not a public document. A copy of the response letter can be retrieved from
https://www.allisonchristians.com/blog/finmins-reply-mnuchin-digital-tax (emphasis added).
312
member of the United States Senate Committee on Finance, Mike Crapo,1434 wrote in April
2022: “Ultimately, it will be up to Congress to decide whether to approve and implement the
OECD agreement. Thus far, Treasury’s approach has weakened the United States’ hand at
the negotiating table and hamstrung our capacity to produce good outcomes for American
businesses and workers.”1435 Moreover, the U.S. Congress’ attitude towards Pillar One is also
causing political ramification on adopting the legislation in the EU, as the EU Council has
failed to reach a consensus on the EU legislative proposal on Pillar Two in the ECOFIN
meetings of March, April and May 2022.1436
Thus far, it appears that the political discourse on corporate tax avoidance has been holistic,
only insofar as it concerns correcting the behaviour of multinational corporations. Politically,
countries can relatively easily agree to work together regarding increasing tax transparency
and aligning certain tax policies and international tax standards, as these serve the common
goal of maximising each country’s tax revenue. The same, however, is not necessarily true
when cooperation also includes the division of tax revenue.
Notwithstanding the above assertion, the discourse analysis also shows that, even though
some countries were willing to cooperate, they were still engaging in tax competition in
order to attract foreign investments. For example, in June 2015, the Guardian pointed out
that tax coordination in the EU was unlikely, because the UK was so eager to lower their
rates for foreign investors.1437 Also, David Gauke, the UK Financial Secretary to the Treasury,
and George Osborne, Chancellor of the Exchequer, both stated, up until March 2016, that
the UK would have the most attractive tax rules for businesses in the EU.1438 The UK was
willing to coordinate interest deduction rules and hybrid mismatch rules, but it was set
1434
United States Senate Committee on Finance, Membership. Retrieved from
https://www.finance.senate.gov/about/membership.
1435
Mike Crapo, Failing to engage Congress risks OECD tax agreement’s viability, Bloomberg Tax, 27 April 2022.
Retrieved from https://news.bloombergtax.com/tax-insights-and-commentary/failing-to-engage-congress-
risks-oecd-tax-agreements-viability.
1436
The discussion on the proposal for a Council Directive on ensuring a global minimum level of taxation for
multinational groups in the Union was removed from the 24 May 2022 ECOFIN meeting’s agenda because it
was clear that French presidency was not successful in finding a compromise that was acceptable to all
Member States. Poland’s main issue was that they believe there should be political connection between Pillar
One and Pillar Two. See https://www.consilium.europa.eu/media/56378/cm02983-re01-fr22.pdf.
1437
The Guardian, Tax laws for big business are broken. Britain wants them to stay that way, 21 June 2015,
available at https://www.theguardian.com/politics/2015/jun/21/tax-laws-business-broken-britain-stay-that-
way.
1438
See Council of the European Union. (2016). Economic and Financial Affairs Council, 12 February 2016,
Retrieved from https://www.consilium.europa.eu/en/meetings/ecofin/2016/02/12/; HM Treasury. (2016).
Oral Statement to Parliament. Budget 2016: George Osborne's speech, 16 March 2016. Retrieved from
https://www.gov.uk/government/speeches/budget-2016-george-osbornes-speech (see at 24m12s: “I cut
corporation tax dramatically. But I also introduced the Diverted Profits Tax, to catch those trying to shift profits
overseas. As a result Britain went from one of the least competitive business tax regimes to the most
competitive – and we raised much more money for public services. Today the Financial Secretary and I are
publishing a roadmap to make Britain’s business tax system fit for the future. It will deliver a low tax regime
that will attract the multinational businesses we want to see in Britain, but ensure that they pay taxes here too.
And it will level the playing field, which has been tilted against our small firms. The approach we take is guided
by the best practice set out by the OECD, work which Britain called for, Britain paid for and Britain will be
among the very first to implement.”).
313
against the EU going further than those OECD BEPS Actions that had resulted in a common
approach.
Therefore, even though the perspective on the corporate income tax has become more
international, the considerations for actually complying with the international agreements
still seem largely based on local, self-interested arguments as well as national politics. This
means that the changed international political morality is not always applied consistently.
Countries easily fall victim to their own narrow self-interests, and a country’s willingness to
enter into international agreements to coordinate does not often go beyond this national
self-interest.1439
Interestingly, this inconsistency is not only observable in government reasoning. NGOs have
markedly shifted their attention towards the funding of domestic public services, where the
previous focus was primarily on tax revenue being shifted away from developing countries.
Both from a perspective of newsworthiness and political impact, this shift makes sense.1440
However, it also highlights that the international perspective is not applied consistently
across the discourse. Moreover, the discourse analysis would suggest that the gap between
the international perspective to correct taxpayer behaviour and the national perspective
focused on national self-interests is not easily bridged.
The question is how to overcome this inconsistency. Dagan rightfully points out that it is too
easy to suggest that policymakers should just try harder to put aside their narrow self-
interests and cooperate towards building a multinational regime.1441 A widely accepted
political narrative that is based on the idea that countries’ tax revenues are slowly but surely
eroding to the point where public services can no longer be provided, is not so easily
overcome.1442 The argument that cooperative efforts should not focus so much on states
sustaining or increasing their tax revenues by limiting tax competition, preventing a race to
the bottom or imposing a minimum tax rate, is of great importance.1443 However, to achieve
this, the political discourse needs to change as well. Therefore, it is suggested here that
perfecting tax competition, as Dagan advocates, is not enough. The reason for this is that it
does not effectively recalibrate the self-interest of states, and, thus, it does not redirect the
political narrative fully towards the international, more holistic perspective. At the end of
the day, the political discourse would still be that the success of (international) tax policy
would be measured, first and foremost, in (short-term) national tax revenue effects.1444
Such a strong focus on tax revenue effectively stands in the way of countries achieving a
fully holistic approach to tax policy, including on the allocation of taxing rights.
1439
As argued above, international tax coordination can come at a price for especially (capital-poor) developing
countries, as it increases the lock-in effect and strengthens the biases of the existing system. Also, see Dagan
(2017), at pp. 130-139. Still, international coordination can be in the self-interest of these countries, as not
participating could result in an even greater diminished capacity of fiscal self-determination.
1440
The Google Trends data also suggest that, broadly speaking, internet search interests regarding the effects
of international corporate tax avoidance are focused more on the local perspective than on the perspective of
developing countries.
1441
Dagan (2017), at p. 140.
1442
Dagan (2017), at p. 203.
1443
Dagan (2017), at p. 224.
1444
This also means that an anti-trust agency for states, as Dagan suggests (at p. 242), would have an uphill
battle, as the system would still foster the self-interests of states.
314
Part III
Conclusions and Recommendations
315
11 Conclusions and Recommendations
The project to understand the spirit of international tax law started with the premise that a
better understanding would help to design a better international tax system. The overall
aim of this study, therefore, has been to firstly explore the concept of the spirit of
international tax law in order to understand what it is and to shed light on how different
actors in the international debate on corporate taxation use the concept in the international
debate on corporate income tax. Secondly, the aim has been to understand how the use of
concept might affect the position these different actors take in the debate as well as to give
direction as to how it could help to promote improvement and enhance the robustness of
the international corporate income tax system.
This study has demonstrated that a better understanding of the spirit of international tax
law is important in order to make the international tax law system more robust, as morality
and fairness are concepts that are relevant for the legitimacy and authority of legal rules.
The analysis shows that even legal positivists agree that morality is important in law. The
constitution of legal rights and obligations might be dependent on whether legal rules are
made in the correct way but exercising these legal rights and enforcing these legal
obligations cannot happen exclusively based on their correct enactment. Especially, as legal
rules develop over time, they must continuously flow from and be supported by the
principles of political morality that underpin them. This is what gives them sustained
legitimacy and authority. This means two things. First, this means that morality and fairness
are an integral part of the concept of law from the inception of a legal rule until its
abolishment. Second, this also means that the correct application of a legal rule or
international tax standard is at least as dependent on the development of political morality,
the legal rule’s social function, its effects, and its place in the doctrinal development on the
whole legal system, as its original purpose or even its literal textual meaning.
Legal rules cannot be interpreted correctly in a vacuum. The letter of the law is thus not
enough in and of itself, since looking at the text alone would yield an incomplete
316
interpretation of a legal rule. Even the most obvious of legal rules must be interpreted, and
that can only be done in its wider context.1445
Moreover, it is not always exactly clear what commentators in the international tax debate
mean when they use the term spirit of international tax law. In most cases, the use of the
term spirit implies that the correct meaning of international tax law can be discovered by
looking at the purpose of the legal rules and international tax standards, their legal history
or the intention of the legislator. Others look to other systems or norms and rules such as
social norms and ethics. In any event, the term spirit of the law is always used in some sort
of corrective manner to indicate that the application of national legal rules and international
tax standards leads to a result that is deemed morally wrong. This could be due to the fact
that a taxpayer stretches the existing system of national and international tax rules to their
very limits, as the rules that allocate taxing rights are biased towards residence countries.
For this study, it was presumed that, for the spirit of international tax law to be legally
enforceable, it at least needs to be part of the concept of law. This is because no tax can be
levied except under the authority of law.1446 This presumption raises the question of
whether the spirit of international tax law is part of the concept of the law or part of other
norm systems, and thus, where the dividing line between law and non-law is precisely.
This study has shown that in the public debate, the concept of the spirit of international tax
law is used to indicate three different things. Firstly, it is used to indicate that a certain end
result is inconsistent with the purpose of the existing national and international tax
standards as they exist and are generally interpreted today. Secondly, it is used to indicate
that a certain end result is inconsistent with the changed political and doctrinal morality
with regard to international tax law that might not have found its way into national and
international tax rules just yet. This use of the term therefore indicates that the current
(interpretation of the) legal rules might be out of sync with the political and doctrinal
morality. Thirdly, the term is used to indicate that a certain end result is inconsistent with a
non-legal set of norms and/or personal moral preferences. These three different uses,
however, are very hard to distinguish in the public debate:
The problem with spirits is that they tend to reflect less the views of the world whence
they come than the views of those who seek their advice.1447
1445
See Chomsky, C. (2000). Unlocking the mysteries of Holy Trinity: Spirit, letter, and history in statutory
interpretation. Colum. L. Rev., 100, 901 for a comprehensive overview of historic U.S. case law to this effect,
and specifically Church of the Holy Trinity v United States, 143 U.S. 457 (1892); Also see Thompson v. State, 20
Ala. 54 (1852), available at https://cite.case.law/ala/20/54/ (at para. 62 “If it be said the letter of the statute is
opposed to this view […] we reply, that an interpretation should never be adopted which would defeat the
purpose of the statute […] and that the literal interpretation of an act is not always that which either reason or
the law approves. The inartificial manner in which many of our statutes are framed, the inaptness of
expressions frequently used, and the want of perspicuity and precision not unfrequently met with, often require
the court to look less at the letter or words of the statute, 'than at the context, the subject-matter, the
consequences and effects, and the reason and spirit of the law, in endeavoring to arrive at the will of the law
giver.”).
1446
1447
Public Citizen v. United States Department of Justice, 491 U.S. 440, 473 (1989) (Kennedy, J., concurring).
317
11.1 The Spirit of International Tax Law Defined
Chapter 6 in Part I gives an extensive overview of the argumentation regarding how the
spirit of international tax law could be defined. These arguments will not be repeated in
detail here. However, it should be pointed out that Part I concludes that the definition of
the spirit of international tax law can be considered in two ways. First, the spirit of
international spirit of the law can be defined based on the concept of law as it exists as a
fixed quantity. Second, the spirit of international tax law can be defined based on the
concept of law as a discourse.
The first approach means that the spirit of international tax law cannot and does not exist
beyond the concept of law. This means that the spirit of international tax law can be
determined through normal interpretive methods based on (all) existing legal sources. This
confirms the most important principle of tax law, as it is considered by Vanistendael, that no
tax can be levied except under the authority of law.1448 Consequently, violating the spirit of
the law means that this is also legally enforceable.
However, this approach might not fully consider law as a continuously changing
discourse.1449 The dynamic attribute of law in general and the spirit of international tax law
in particular are usually left rather implicit in the debate on the international tax system.
However, this study has shown that these dynamic properties are central to the debate.
Therefore, it has been examined at which moment a spirit transforms from a personally held
moral conviction into a moral conviction held widely enough to be considered part of
principles of political morality that underpin the legal rules.
Seen from the second perspective, when commentators state that something is in line with
the letter but not the spirit of international tax law, it is likely that they refer to the fact that
the applicable law is no longer in line with political and doctrinal morality as it exists today.
This is problematic, because, if legal rules are not supported by the principles of political
morality that underpin them, they will lose their legitimacy and authority. In this context,
the spirit of international tax law can be defined as the fuzzy boundary between law and
non-law. Or in other words, the term spirit signifies a moment in time when new
(ideological) legal principles are forming concurrent to how the political and doctrinal
morality is changing, while these budding legal principles do not quite have enough
institutional support to be considered legally enforceable yet.
Moreover, the act of violating the spirit of international tax law should be viewed as
behaviour that actively seeks to ignore this change in the shared moral discourse in
society.1450 The acts of not paying one’s fair share or implementing predatory tax policies is
not something that is, but something one does. These acts are deliberate actions with the
intent to utilise specifically those elements of moral thinking that are not (yet) sufficiently
1448
1449
See chapter 6.
1450
This type of behaviour can be found both in taxpayers and policymakers.
318
covered by existing international tax standards. This also implies that there are possible
gradations of violations of the spirit of international tax law.1451
Great virtue in tax consists in making a choice with regard to one's own behaviour after
careful consideration. Such a choice, on the one hand, avoids the absolute pursuit of
self-interest and, on the other hand, the absolute priority of the collective interests of
the global community. Neither the one nor the other bears witness to practical wisdom.
What is needed is self-control and a fantastic sense of rhythm of society.1452
11.2 The Discourse on The Spirit of International Tax Law
In Part II of this study, it was concluded that the discourse analysis of official OECD and EU
publications suggests a hierarchy in the policy concerns with regard to international tax law
that is recurring in both the work of the OECD/G20 Inclusive Framework and in the EU
publications. This hierarchy places tax revenue concerns and concerns about economic
distortions well above equity concerns. The media analysis confirms, to a great extent, the
focus on national tax revenue in particular. In the media analysis, however, the loss of tax
revenue is more often framed in a way that either individual taxpayers have to pay more in
tax or that public services suffer as a result of corporate tax avoidance. Furthermore, the
focus on national tax revenue concerns was even more pronounced in 2020 and 2021 as a
result of the COVID-19 pandemic. Finally, the data on internet search behaviour with regard
to tax avoidance suggest a greater focus of the general public on the national political
discourse as opposed to the international discourse.
The discourse analysis also demonstrates that the OECD has been very successful in
strengthening its position as the forum where these problems should be addressed. This
means that the OECD secretariat has played a central role in identifying and addressing the
core issues of the international tax system, as well as in developing new international tax
standards as solutions to these issues. This central role also means that the development of
how morality underpins the international tax system has been influenced strongly by the
dominant discourse within the OECD, including the hierarchy in policy concerns.
Moreover, the political processes at the level of the OECD/G20 play a major role in
organising institutional support for the design of these international tax standards as well as
for their underpinning reasoning. As discussed, the work of the OECD/G20 might not
formally be part of the international legal doctrine in and of its own right, but the analysis
suggests there to be a recursive loop due to a combination of legislative efforts of,
particularly, the EU, academic writing that discusses the ongoing work and outcomes of the
OECD/G20 process, as well as commentaries from interest groups.1453
1451
Happé, R. H. (2011). Belastingethiek: een kwestie van fair share. Belastingen en ethiek, Geschriften van de
Vereniging voor Belastingwetenschap, (243), at p. 27.
1452
Happé (2011), at p. 60 (original quote in Dutch: “Fiscale deugdzaamheid bestaat daarin dat men na
zorgvuldige afweging een keuze maakt met betrekking tot het eigen gedrag. Zo’n keuze vermijdt enerzijds het
volstrekt nastreven van het eigenbelang door middel van agressieve tax planning en anderzijds het absoluut
voorrang geven aan het belang van de gemeenschap waartoe de burger behoort. Noch het een, noch het
ander getuigt van praktische wijsheid. Wat nodig is, is zelfbeheersing en maatschappelijk maatgevoel”).
1453
See Section 5.3.2.
319
This means that the development of political and doctrinal morality is influenced by the
emphasis that is placed on certain policy concerns in the process of developing the
international tax standards. Moreover, the importance placed on certain policy concerns
has also become embedded in this institutional support. Given that the OECD/G20 Inclusive
Framework currently includes a total of 141 countries and jurisdictions, the implied
institutional support for the hierarchy in policy concerns has become a global phenomenon.
Hence, the hierarchy of these policy considerations has become part of the concept of the
law, as it materialises almost everywhere as the intention of this (pseudo-)legislator.
The changing political morality is, therefore, guided by the spirit of international tax law,
and the spirit of international tax law is guided by the ever-changing political morality. This
means that, if the hierarchy of the policy concerns has shaped the political narrative of the
past, and the hierarchy or the narrative do not change, then the same political narrative will
also shape the tax policy developments of the future.
The discourse analysis demonstrates that preventing loss of tax revenue in combination
with achieving economic efficiency are the most important policy concerns that drive policy
action against corporate tax avoidance in the international tax system. There is a logic in
this, as empirical data suggest that the loss of revenue is significant and that—if left
unchecked—revenue loss from tax avoidance could put the integrity of the international tax
system at risk. However, the problem with the combination of tax revenue and tax
neutrality as the main policy drivers is that they seem agnostic, but that in practice they are
not agnostic at all. They represent active policy choices that are designed to promote the
status quo of the international tax system. As such, these policy drivers stand in the way of a
more global and holistic outlook particularly with regard to a reform of the international
standards that allocate taxing rights.
If you always do what you’ve always done, you will always get what you’ve always
gotten.1454
The combined policy concerns on tax neutrality and tax revenue effectively exclude the
option of fundamental reform, and thus limit the policy options of the OECD/G20 Inclusive
Framework to designing technical solutions to repair the imperfections in the existing
international tax system. This observation does not mean to suggest that the increase in tax
transparency, the prevention of harmful tax practises or the BEPS actions were not
necessary. In fact, given the differences between national tax systems of 20 years ago
compared to today, the alignment of national tax systems through international tax
standards was likely the best course of action. The increased concerted action has brought
the system to a point where it is much more resistant against avoidance, and it has likely
increased tax revenue, as it becomes harder for corporate profits to remain untaxed. In that
sense, cooperation within the current political narrative has been successful. However,
these developments have also come at a cost. First, the efforts to foster economic efficiency
and to close off tax avoidance escape routes have dramatically increased the complexity of
1454
Doyle, C., Mieder, W., & Shapiro, F. (2012) The Dictionary of Modern Proverbs. Yale University Press, at p.
57.
320
the international tax system. Less advanced economies are increasingly struggling with
correctly applying the fast-changing rules of the international corporate income tax system.
In addition, this added complexity leads to higher compliance costs for corporations that
trade internationally. Secondly, progressively aligning national tax systems with globally
agreed-upon international tax norms will increase the lock-in effect and make fundamental
reform more difficult.
The above observation is meant to point out that there is a danger that these two effects
are mutually reinforcing, meaning that the system will get increasingly complex and
increasingly locked-in. Moreover, additional fiscal policy coordination will further strengthen
the existing bias towards capital-rich (residence) countries, while capital-poor (developing)
countries will increasingly struggle with complying with the additional rules. Such a recursive
loop will inevitably lead to a situation where countries that can no longer apply the
increasingly complex rules and/or do not benefit enough from these rules will break away.
For example, this will likely result in capital-poor countries designing more unilateral
measures to engage in (harmful) tax competition to attract investments or in unilateral
measures springing up to raise revenue (outside of the corporate income tax system).
Measures that work to further perfect tax competition, as Dagan suggests, or measures that
impose a global minimum tax rate are unlikely to lead to a different result. The reason is
that they would still be based on the same reasoning that has, at its core, that countries feel
very few responsibilities towards each other, as long as they play by the international rules
that (have the intention to) curb their self-interests only to the extent to which they do not
cause harm to others. At the same time, more radical reform suggestions, such as global
(re)distribution based on formulary apportionment approaches,1455 are unlikely to find
political support, because they do not fit the political narrative based on the hierarchy of
policy concerns.
11.3 The Spirit of International Tax Law and Future Tax Reforms
To overcome this lock-in effect, two approaches could be considered. The first approach is
to start over and redesign the entire international system of profit taxation from first
principles.1456 Another approach is to change the political narrative by recalibrating the
policy concerns and/or their hierarchy.
Designing an entirely new system is not only very challenging, but the likelihood that it
would lead to an effective replacement of the current system in one fell swoop is also very
low.1457 Aside from that, this would also require an enormous and unprecedented effort in
international coordination, as the uncertainty of vis-à-vis the effects regarding the current
system’s policy concerns alone might be enough to prevent a transition into a completely
new system.
1455
See Section 5.4.2.3 for several views regarding different approaches to the entitlement principle. See
Section 5.4.4 on why such approaches might clash with the dominant political narrative.
1456
See Devereux, et al. (2020), at p. 14.
1457
See for instance the discussions in the EU on the Common Consolidated Corporate Tax base as discussed in
Section 8.3.2. For further considerations see Dagan (2017), at pp. 238-239.
321
To illustrate this point, Devereux et al. have formulated a number of criteria to evaluate the
current international tax system in their 2020 book Taxing Profit in a Global Economy. These
criteria are fairness, economic efficiency, robustness to avoidance, ease of administration
and incentive compatibility. The authors hold that there is “little dispute about the broad
attributes of a good tax system” and that these criteria date back as far as late 18th century
seminal work The Wealth of Nations by Adam Smith.1458 Unsurprisingly, there is a great deal
of overlap between these criteria and the earlier-described policy concerns in the political
narrative. Also, unsurprisingly, Devereux et al. have found that the current system has many
problems based on these evaluative criteria.
With regard to fairness, they consider inter-taxpayer equity questions regarding to how the
tax burden is shared between corporations and citizens (including considerations on the tax
incidence) and whether there is a level playing field between domestic and international
corporations. In addition, the authors consider questions on inter-nation equity regarding
which country that should get the right to tax and whether more taxing rights should be
granted to less well-off countries. They conclude that these different approaches to fairness
are difficult to operationalise within profit taxation and that other tax instruments might be
better suited to create a fair and progressive tax system that redistributes income and
wealth between individuals.1459 In any case, it is underlined that the BEPS Project did not
address these fairness concerns directly, and, particularly, it did not address how taxing
rights should be allocated.1460
On economic efficiency, the authors state that most taxes impose an excess burden or
deadweight loss. Distortionary taxes are not wrong per se, as they can help to correct
market failures. However, the authors consider that profit taxation is not a Pigouvian tax1461
and that, therefore, the deadweight loss of this tax should be minimalised.1462 In evaluating
the current system, they conclude that there is a large body of evidence pointing to the
current tax system raising the cost of capital, affecting location decisions and creating
distortion between the use of debt and equity.1463
The criteria robustness to avoidance and incentive compatibility combined correspond to

the tax revenue concerns. With regard to robustness to tax avoidance, the authors explain
that there is a great deal of uncertainty with regard to empirical estimates on the magnitude
of tax avoidance, because tax avoidance is not defined consistently in available research,
and there are issues with the availability of comprehensive data. However, as tax avoidance
does weaken the overall performance of tax systems, it remains of critical importance.
Moreover, the BEPS Project has likely made the international tax system more robust, but
the authors consider that it is too early to tell how much more robust the system has
1458
Devereux, et al. (2020), at p. 33.
1459
1460
1461
A Pigouvian tax is a tax on a market transaction that creates a negative externality or an additional cost,
which is borne by those that are not directly involved in the transaction. The aim of a Pigouvian tax is to price
in these externalities to correct for such an inefficiency.
1462
1463
Devereux, et al. (2020), at pp. 114-115.
322
become. In any event, they expect that the system still “remains somewhat vulnerable to
tax avoidance.”1464
Incentive compatibility refers to whether the system is at the Nash equilibrium or not. It
implies that failing to cooperate would not benefit a country, and, therefore, it reflects the
robustness-by-design of the tax system or its resistance to (harmful) preferential tax
regimes. The authors state that the current system creates the incentives and structures for
countries to compete to the extent that it could destabilise the system and threaten its
long-term viability.1465
In short, according to Devereux et al., the current system gives cause to all of the policy
concerns, as they also appear in the hierarchy.1466 Subsequently, Devereux et al. attempt,
through presenting increasingly fundamental reform options, to solve these policy
concerns.1467 In evaluating the proposals, the authors consider that the Residual Profit
Allocation by Income (RPAI) would perform better on all criteria. Specifically with regard to
fairness, however, the authors state that it is difficult to say whether the RPAI would be
fairer compared to the existing system. The reason for this is that even though low-income
countries would gain extra tax revenue, a small number of residence countries would lose
this amount in revenue.1468
The evaluation of the Destination-Based Tax Flow Tax (DBCFT) shows that the DBCFT is quite
amazing with regard to economic efficiency, as it does not distort business decisions at all.
Also, in terms of vertical inter-taxpayer equity, it makes the system more progressive. In
terms of inter-nation equity, the fairness of the DBCFT is a bit less straightforward. Under
the DBCFT, exporting countries that have relatively small domestic markets would likely lose
tax revenue compared to the current tax system, while large domestic markets that have
trade deficits would likely gain tax revenue. In addition, developing countries without
natural resources would be among the winners and developing countries with natural
resources would likely lose out. Finally, the DBCFT would close off most routes of tax
avoidance that exist today, and countries could set their own tax rates, as the DBCFT would
neutralise competitive forces as you could not attract foreign investment by setting lower
rates.
The problem with the DBCFT is that all countries in the world would collectively have to
switch to this new system for it to obtain these results.1469 If, for instance, only one country
1464
1465
1466
Moreover, the concerns appear to follow the same hierarchy by and large.
1467
The two proposals presented are Residual Profit Allocation by Income (RPAI) and a Destination-Based Tax
Flow Tax (DBCFT). The RPAI taxes routine profits according to, by and large, the existing tax rules, while the
residual profts are apportioned across countries based on a formulary rule (Devereux, et al., 2020, at p. 189).
The DBCFT taxes net receipts arising in businesses, which is based on the domestic sales of goods and services
minus the domestic expenses in each country. The DBCFT excludes any goods or services that are produced
domestically but consumed elsewhere, while imports would be included in the tax base. (Devereux, et al.
2020, at pp. 268-279).
1468
1469
Notwithstanding the redistributive effects between both advanced economies and developing countries
that would likely make a collective global switch difficult.
323
in the world would switch to the DBCFT, it would effectively constitute a massive tax subsidy
on exports, making it, probably, the most aggressive form of tax competition imaginable.
The authors reflect that “this might be considered unfair, but [it] is simply the result of the
two countries having a different basis for taxation.”1470 It might be the “ultimate move in the
tax competitive game” as seen from the perspective of the adopting country,1471 but it
seems unlikely that other countries would think that this is just all in the game. Moreover,
from the perspective of inter-nation equity, a, by and large, unilateral adoption of the
DBCFT in advanced economies could—and likely would—draw all investments away from
developing countries without natural resources, while conceivably exacerbating BEPS
problems in the developing countries with natural resources. Therefore, while there might
be great upsides to the DBCFT for the international corporate income tax system when
collectively adopted, there are also major downsides if the DBCFT was not going to be
introduced globally.
The most interesting aspect of the evaluation of both the RPAI and the DBCFT, for the
purpose of this section, is that the success of the fundamental policy reforms as well as the
level of fairness is almost exclusively measured in the delta in economic distortion and tax
revenue. Devereux et al., therefore, follow the dominant political discourse that revenue
concerns and economic efficiency (tax neutrality) are the most important issues when it
comes to profit taxation.
Devereux et al. do not discuss what the long-term economic effects would be if the current
inefficiencies of the international tax system would be removed. As with the dominant
political discourse, there is an implicit assumption that a system of profit taxation without
deadweight loss would produce a fair result. However, the question is whether that
assumption is correct. As discussed earlier, the 1998 OECD report on harmful tax practices
considered that tax competition between countries could be used to level the playing field
between countries when they aim to compensate for structural, non-policy-related
disadvantages such as geographic location, lack of natural resources or the size of their
domestic market.1472 Neutralising the ability to compensate for such non-policy-related
disadvantages means that, effectively, foreign investments would automatically gravitate
more towards larger advanced economies. Also, it could induce domestic businesses from
smaller economies to relocate to these larger markets.1473 In other words, (in part) these
inefficiencies could arguably have been put in place to create a level-playing field and not to
distort it.
Moreover, other policy-related factors besides taxation can raise or lower the overall cost of
investment or cross-border trade and, thus, affect business decisions such as regulatory
(trade and investment) openness, product-market regulation, labour-market arrangements
and infrastructure.1474 The same rationale behind that larger economies tend to have higher
corporate income tax rates also applies to regulations on trade and investment and, possibly
also, to the rules governing the labour market. Large countries tend to have much more
1470
1471
1472
See Section 8.2.
1473
Bauer (2020), at p. 24.
1474
Bauer (2020), at p. 116.
324
restrictive rules than small open economies. Absent tax competition and the distortive
effects of the current corporate income tax system would thus be replaced by the
inefficiencies of existing trade barriers in larger markets. In fact, neutralising tax competition
“would likely incentivise the governments of large countries to maintain long-standing
barriers to trade and investment or to erect additional barriers that would restrict market
access for companies from small open economies.”1475 Such a development might, on
balance, lead to less production efficiency compared to the current situation and that would
and should also impact the evaluation of how fair changes to the current international tax
system are in the longer run.
The main purpose for discussing the book Taxing Profit in a Global Economy (2020) in some
detail here, is to suggest that too strong of a focus on economic efficiency and tax revenue
effects might not lead to a new system that every country would think fair. The reason for
this is that such a new system does not give all countries equal access to available resources.
As this unequal access is not to everyone’s advantage, it would likely act as a political non-
starter for reform—at least for the countries that lose out. In short, there is a risk that one
unfair system is only being replaced by another unfair system. The only difference between
these systems is that the new system is perceived to be unfair by a different group of states
than the current system.
11.3.1 Recalibrating the Political Narrative
The current political discourse of economic efficiency prevents the OECD/G20 Inclusive
Framework of doing much more than designing technical solutions to repair the
imperfections in the existing international tax system. However, the question is whether the
OECD and national governments should limit their role in fixing problems only after the
invisible hand has failed to keep the tax market in check. Arguably, they should rather lead
by formulating bold objectives regarding the delivery of outcomes that society needs and
thus design corresponding international tax standards and (other) policy instruments to
achieve these ambitious outcomes.1476 If one accepts that the OECD/G20 Inclusive
Framework should have a leading role, this means that the political narrative should be
recalibrated. In that way, the spirit of international tax law could be used to guide future tax
reform. This recalibrated political narrative could thus be embedded in the design of new
international tax standards at the foundational level, permeating every international tax
standard that follow from it.
11.3.2 From Inter-Nation Equity to a Mission-Oriented Moon-Shot
It is important to state that, obviously, striving for tax neutrality is not just l’art pour l’art.
The underlying goals to ensure that investment decisions are based on economic
considerations rather than tax considerations and that these investments are conducive to
1475
Bauer (2020), at p. 24.
1476
Mazzucato, M. (2021). Mission economy: A moonshot guide to changing capitalism. Penguin UK, at p. 19.
325
building a sustainable tax base, are valid.1477 Governments and the OECD, therefore, do
have a responsibility to address market failures and economic distortions that are to the
detriment of everyone. However, this does not mean that all economic distortions are
wrong and should be eliminated, and it does not mean that the success or failure of changes
to the international tax system need to be measured in (short-term) effects on tax revenue.
Moreover, many have pointed out that the revenues from corporate income tax are modest
compared to other types of taxes.1478 Also, the corporate income tax revenues have been
rather stable since 1965, both in relation to GDP and in relation to the total tax revenue.1479
However, it is also clear that particularly low-income countries — and to a lesser extent
middle-income countries — rely on corporate tax revenue much more than advanced
economies, because they are less able to apply other types of taxes, especially personal
income taxes.1480 In addition, developing countries’ higher reliance on corporate income tax
in combination with generally weaker enforcement capabilities also mean that international
tax avoidance hits developing countries much harder, which, in turn, hinders sustainable
development.1481
The point is, therefore, not to just abandon tax neutrality altogether or disregard tax
revenue effects as irrelevant. Instead, the aim is to point out that it is important to not just
accept the normative universe of policymaking as a self-evident truth. The application of
CIN, CEN or CON lead to different neutral outcomes. 1482 The choice for any one of these
concepts as the basis for international tax standards, therefore, implies an inherent policy
choice that is not neutral at all. Moreover, it is a policy choice that is not necessarily
advantageous for developing countries. At the end of the day, there has to be a trade-off
between economic efficiency, neutrality and maximising tax revenue on one side and the
goals that are to be achieved by international tax policy on the other side. The term fairness
was consciously avoided in the previous sentence, but, in essence, the question could be
how economic efficiency in the international tax system should be weighed against a fairer,
more socially optimal outcome. Ideally, of course, the two perfectly overlap. However,
which of the two should be strived more for if that is not the case?
Telling in this respect is the remark by Vella et al. (referencing Devereux, et al.) that there
are many factors that could be taken into account for determining a fair (or unfair) position,
but, instead of offering their own position, they “focus primarily on the other four criteria
(economic efficiency, ease of administration, robustness against tax avoidance and incentive
1477
See, for instance, Ter Haar, B. (2021). The Road to Acceptable Conduit Activities, Committee on Conduit
Companies, October 2021, at p. 24. The Netherlands has very high inbound and outbound FDI ratios in relation
to its GDP, but it is noted that the actual contribution of conduit companies to the Dutch economy is
negligible; Also, see Kerste, M., et al. (2013). Uit de schaduw van het bankwezen: Feiten en cijfers over
bijzondere financiële instellingen en het schaduwbankwezen. Amsterdam SEO Economisch Onderzoek, at p.
107, on how the annual total tax contribution of conduit companies in the Netherlands (consisting of
corporate income tax and dividend withholding tax) amounts to 2.3 billion EUR.
1478
See for instance, Devereux, et al. (2020), at pp. 8-10.
1479
OECD. (2021e). Revenue Statistics 2021: The Initial Impact of COVID-19 on OECD Tax Revenues. OECD
Publishing, at pp. 16 and 73.
1480
See, for instance, Devereux, et al. (2020), at p. 9.
1481
OECD (2015i), at p. 79.
1482
326
compatibility).”1483 Leaving out fairness because it is hard to evaluate in its abstraction
denies the fact that tax policy is not perfectly economically efficient and that it does have
social effects and, therefore, is always doing something even if it strictly is not meant to.
This does not mean that fairness should just take precedence over the other policy
concerns, nor that it should be considered in isolation. Instead, fairness should be made a
much more integral part of the policy choices regarding the international tax system. As
Vella et al. demonstrate, this also means that fairness has to be presented as a concrete
policy goal that is to be achieved by the system of international tax law, or, otherwise,
fairness runs the risk of being mentioned as an important consideration only to be put aside
later on as too abstract a notion.
With the creation of the OECD/G20 Inclusive Framework, the OECD has strengthened its
position as the global setter of international tax standards. As such, the OECD is best
positioned to be the leading agent to achieve international tax policies that not only set the
conditions that could enable growth and prosperity but also to create strategies where
these international tax standards actively work to promote growth and prosperity to the
benefit of everyone. Possibly, this could include extra emphasis on developing growth and
prosperity in those regions that have traditionally benefitted the least from the
international tax system because of its current architecture.
One can observe already that the OECD has taken on a more entrepreneurial role in
designing and promoting the Two-Pillar solution. First, this is true with regard to the
content, as the solutions were designed to go beyond the traditional arm’s length principle
to benefit market jurisdictions. Second, this shows regarding the process as on-going work
that was published in the name of the OECD secretariat rather than the CFA or the
OECD/G20 Inclusive Framework.1484 Moreover, even though it is clear that the path of the
Two Pillar Agreement is beset with many political problems, it is necessary for the OECD to
take the next step on this road.
This does not mean that eliminating market failures caused by the international tax system
is no longer important, but it is not effective if the inefficiencies of market failure are
replaced by inefficiencies caused by government failures resulting from government action
trying to correct those market failures. Moreover, explicitly imbuing the international tax
system with an international spirit or purpose aimed at a shared goal that promotes and
furthers the collective interests of all countries involved pulls the discussion of the spirit of
the law out of the relatively vague realm of determining the political morality of a system
that means to be agnostic. Instead, as the purpose of international tax system is more
explicitly aimed at a concrete and tangible goal rather than an abstraction, it also becomes
easier to assess whether the behaviour of taxpayers or governments defeats this purpose.
The BEPS efforts could, therefore, be augmented with an action plan with the explicit goal of
using the international tax system to help developing economies in catching up with
advanced economies. Such an action plan should go beyond allocating tax revenue from
residence countries to market jurisdictions (in developing countries) in the hope that they
1483
Vella, J., Collier, R., & Devereux, M. (2021). Comparing proposals to tax some profit in the market
country. World Tax Journal, 13(3), at p. 415.
1484
See Section 8.3.1.
327
will use this revenue to create prosperity and growth for themselves. It should entail a move
from fixing market failures to shaping the tax market. This means that the OECD/G20
Inclusive Framework takes proactive action to build a new market and a regulatory
ecosystem hereto. This should include proposals to share tax revenue between states.
However, instead of a Rawlsian approach to the duty of assistance, this could take a much
more programmatic approach. Capital-rich countries do not give away their tax revenue,
but they make targeted investments in developing countries for them to build a sustainable
and growth-inducing domestic tax base with built-in mechanism for all partners to share in
both the risk and the reward.1485
A detailed proposal for such an action plan requires further research across different
disciplines and goes well beyond the scope of this study. However, very broad strokes of a
comprehensive mission-oriented long-term strategy could include:
(i) Jointly developed goal-oriented public investments from capital-rich countries to
capital-poor countries that fit their economy, level of development and specific
demands to build a sustainable tax base, including specific KPIs and realistic
timelines.1486
(ii) International co-creation of the market on the demand side by designing tax
instruments targeting specific types of private (foreign direct) investments in capital-
poor countries.1487
(iii) Appropriate governance mechanisms that, if needed, could also provide more
specific input for further BEPS measures.
1485
Mazzucato (2021), at p. 174.
1486
This could, for example, include international agreements anchored in taxation and tax policy and in close
coordination with the OECD, the UN, the IMF and the World Bank that are inspired by the EU Structural and
Cohesion Funds with concrete goals and roadmaps to (a) accelerate the convergence of the least developed
states and regions by improving growth and employment conditions, (b) support economic and social change,
promote innovation, entrepreneurship, environmental protection and the development of labour markets,
and (c) strengthen cooperation at cross-border, transnational and interregional levels for urban, rural and
coastal development, and foster the development of economic relations and networking between small and
medium-sized enterprises (SME's). Such agreements could also include—besides financing options through a
specific fund provided for by advanced economies—the implementation of temporary taxes on gross revenues
under specific circumstances and subject to specific jointly agreed conditions, tax base or tax revenue sharing
initiatives, or contributions in kind regarding specific areas of expertise (for example, in Tax Inspectors without
Borders). The suggestion here is not to re-invent the wheel but to augment existing successful practices
explicitly and deliberately with an overarching mission-oriented goal, stating what international tax law aims to
achieve and what international tax law will contribute to achieve this goal.
1487
Compare, UNCTAD. (2015). World Investment Report 2015, Reforming International Investment
Governance. United Nations, at p. 177, on different types of investment and their sensitivity to tax. It is
explained that resource-seeking investments and market-seeking investments could be less susceptible to tax.
However, given the capital-intensive nature and duration of many resource-seeking investments, the tax
component is important, because it makes up a significant part of costs. Crucial are long-term stability and
predictability of tax rules. With market-seeking investments, tax can determine whether the goods and
services that are to be sold are sourced and produced locally or whether these are imported. Finally,
efficiency-seeking investment are highly influenced by tax and, in practice, are not or hardly taxed at all. The
reason for this is that tax competition between developing countries results in that they are often either part
of special economic zones or fall under special regimes. Any remaining tax base is often further diminished
through transfer pricing. From the perspective of building a more sustainable tax base, it could be beneficial to
design collectively coordinated tax regimes and investment policies aimed at resource-seeking investments
and locally sourced market-seeking strategies, while discouraging import-sourced market-seeing investments
and efficiency-seeking investments.
328
(iv) Dynamic and active progress monitoring through peer-reviews and best practice
sharing.
Through such an approach, the self-interests of countries could possibly be harnessed in a

way that incentivises levels of cooperation that could lead to more socially optimal
outcomes.1488 It would build a stronger partnership between advanced and developing
economies based on a shared purpose and stakeholder value. Moreover, it would give more
credence to that all members of the OECD/G20 OECD Inclusive Framework operate on an
equal footing. In addition, a mission-oriented long-term strategy to build a more sustainable
tax base for developing countries also makes it so that policy concerns can be addressed in a
more comprehensive, holistic manner, connecting policy concerns through a common, long-
term purpose. In the longer run, this could decrease the cost in investments in capital-poor
countries, which should be more beneficial for the welfare of both capital-rich and capital-
poor countries combined.
A mission-oriented approach to structurally strengthen the position of developing countries

regarding international tax law should have several positive spin-off effects on the
robustness against tax avoidance in the international tax system. This should also serve to
address some of the other policy concerns with regard to inter-taxpayer equity, which will
be addressed shortly below.
11.3.3 From Effective Tax Rates to Achieving an Actual Level-Playing Field
In 2018, the European Commission stated that “the effective tax rate for digital companies -
such as social media companies, collaborative platforms and online content providers - is
around half that of traditional companies – and often much less.”1489 The problem with this,
according to the European Commission, is that the playing field between digital companies
and traditional companies is not level, and this is unfair. It means that a local company pays
more in tax than a multinational corporation, while the multinational company pushes the
domestic companies out of the market.
First, it is important to note that this is not necessarily caused by tax avoidance, but digital
business models do have characteristics that would make it easier to avoid tax, “while the
digital economy and its business models do not generate unique BEPS issues, some of its key
features exacerbate BEPS risks.”1490 In fact, the research that the Commission is referring to
did not actually show that digital firms lower their ETR by avoiding tax but by applying
intentional policy instruments, which their business models are particularly suitable to.1491
1488
See Section 5.4.4.
1489
European Commission. (2018e). Questions and Answers on a Fair and Efficient Tax System in the EU for the
Digital Single Market, 18 March 2018. Retrieved from
1490
OECD (2015a), at p. 11.
1491
See, Spengel, C., et al. (2017). Steuerliche Standortattraktivität digitaler Geschäftsmodelle: steuerlicher
Digitalisierungsindex 2017. Frankfurt/Mannheim; and Olbert, M., & Spengel, C. (2019). Taxation in the digital
economy–Recent policy developments and the question of value creation. ZEW-Centre for European Economic
Research Discussion Paper, (19-010), at p. 12.
329
Additionally, even though there are examples of digital business models with low global
ETRs,1492 the primary drivers of low ETRs as observed by Spengel et al. are the result of the
fact that (i) the many investments needed for digital business models can typically be
immediately expensed or can be depreciated faster than traditional business assets, and (ii)
digital business models are more favoured by special tax regimes aimed at R&D and IP that
allow for super-deductions or the application of IP or patent box regimes.
As Devereux, et al. argue, whether this is fair or not is, to a large extent, dependent on the
tax incidence.1493 Moreover, the levels of competition in these specific markets are also very
relevant. The transparency and fragmentation of the market as well as the access to
information and data regarding the market and its customers play a major role.1494 The
point is that a disruptive actor entering the market, in and of itself, is not unfair even if there
are specific tax regimes available.1495
The problem of the level playing field and fairness, therefore, might not lie in lower ETRs
because of intentional national tax policies, as long as these policies conform to the
international tax standards and consider the whole global value chain. Outside of preventing
tax avoidance in general, one should therefore consider that tax policy instruments might
not be the right tool for the job of levelling the playing field between disruptive new actors
on a market and its incumbent domestic companies.1496 This means that supporting or
requiring data sharing for certain business models or sectors, restraining the access to
certain categories of user data under privacy legislation, and/or adjusting competition law
to allow economic actors to work together under certain circumstances could be much
more beneficial to promoting fair competition, as such measures are aimed at the root of
the problems.
In short, the discourse regarding a level-playing field could include more relevant factors in
addition to tax and also consider whether other measures outside of the tax area might be
more suitable or effective.
11.3.4 From Tax Mix to Tax Incidence
The policy concern with regard to the tax mix focuses on that mismatch opportunities are
more readily available for income from capital than for income from labour. The effect of
this is that a larger share of the tax burden will fall on labour income. On the one hand, this
refers to horizontal inter-taxpayer equity in which those with comparable levels of income
should experience a comparable tax burden. On the other hand, vertical inter-taxpayer
equity entails that the taxes paid should (progressively) increase with the amount of earned
income. The driving principle behind both horizontal equity and vertical equity is the ability-
1492
Dharmapala, D. (2014). What do we know about base erosion and profit shifting? A review of the empirical
literature. Fiscal Studies, 35(4), 421-448, at p. 448.
1493
1494
Wolfgang Schön (2019), at p. 25; Lammers (2019), at p. 620.
1495
Obviously, these tax regimes would have to ensure that there is sufficient nexus etc., as agreed upon by
the OECD/G20 Inclusive Framework in Action 5 of the BEPS Project in order to ensure that such a preferential
tax regime is not considered harmful and does not promote tax avoidance.
1496
Lammers (2019), at p. 622.
330
to-pay principle. Those who have the ability to pay more taxes should contribute more than
those who cannot.
The policy concern would suggest that the tax-mix has been changing to the detriment of
certain individuals. However, the data on the OECD countries show that—even though the
total average tax levels have been rising over the years—the average tax mix has been
remarkably stable over time.1497 As such, based on these OECD averages, the effect that one
would expect as a result of this policy concern does not seem to materialise.
Figure 12
Average OECD tax structure
1965-2019
Other taxes
Property taxes
Value added taxes
Tax on corporate proﬁts
Social security contribu3ons
Personal income taxes
Data source: OECD.Stat
The data, however, do differ from country to country because of the different make-up of
their economies. For example, new OECD members in the 1990s caused the average share
of personal income taxes in the total tax revenue to drop by about 2% points. The variation
in the share of personal income tax between countries is also considerable. For example, for
Colombia, this share is 6,8%, while, in Australia and the U.S., the share of personal income
taxes is about 42%. Finally, in Denmark, the share of personal income taxes in total revenue
is 52,1%. It should be noted, however, that these differences can be explained in part, as
Denmark, Australia have very low social security contributions.
The better comparison would, therefore, be between tax the burden on capital versus the
tax burden on labour. However, the variation of the cumulative share of personal income
1497
OECD (2021e), at p. 24.
331
taxes and social security contributions—as a more accurate representation of the tax
burden of labour—is still significant, as it ranges from 14,5% in Chile to 65,5% in the U.S.1498
Figure 13
Change in tax burden 2000-2019
toward corporations (-) or towards individuals (+)
Data source: OECD.Stat

Interestingly though, out of the five OECD member countries that have the lowest share of
combined personal income taxes and social security contributions in total tax revenue, four
have decreased this share between 2000 and 2019.1499 from the five OECD member
countries with the highest combined share of personal income taxes and social security
contributions, Belgium and the U.S have lowered their combined share, while the three
remaining countries have increased their combined share in relation to total tax
revenue.1500 Comparing the share of the tax on corporate profits of these same countries
reveals that, of the same bottom five countries as above, all have increased their share of
1498
OECD, OECD.Stat, Global Statistics Revenue Database. Retrieved from
https://stats.oecd.org/Index.aspx?DataSetCode=RS_GBL.
1499
These are Chile (-0,5%-point), Colombia (-4,9%-point), Mexico (no data), Israel (+0,5%-point), and New
Zealand (-3,5%-point). It also must be noted that there was no data on Mexico with regard to 2000, but the
data regarding 2010 suggest Mexico has also lowered their combined share of personal income tax and social
security contributions in relation to the total tax revenue.
1500
Belgium (-4,6%-point), Spain (+7,2%-point), Japan (+3,6%-point), Germany (+0,4%-point) and United States
(-0,2%-point).
332
corporate profit revenue in the total tax revenue.1501 Moreover, from the top five countries,
three have lowered their share of corporate tax revenue in the total tax revenue.1502 Figure
13 gives an overview of all of the OECD member countries. The top half represents the
countries for which, between 2000 and 2019, the tax mix changed so that tax on corporate
profits made up a larger part of the total tax revenue while tax on labour formed a smaller
part1503 The bottom half represents those countries for which the opposite is true. This
graph demonstrates that there have been rather big changes in the tax mix of individual
countries, but one might question whether it conclusively shows a pattern that taxes on
income from capital are being avoided and, as a result, has resulted in the tax burden
shifting towards labour.1504
The question, however, is what these figures, in reality, mean in terms of inter-taxpayer
equity. Whether the tax-mix — and its subsequent changes — is fair also ultimately depends
on the tax incidence. As far as the incidence of taxes on corporate profits in a global
economy really falls on labour, the entire point of the shifting tax burden towards labour is
rather moot. However, if corporate tax avoidance has shielded workers against the
incidence of the corporate tax burden, as several researchers suggest, one might have
expected a more pronounced effect with regard to the tax mix across the OECD member
countries.1505
In any event, similar to what Devereux et al. argue, in reality, the policy concern regarding
the tax-mix is that the international tax system is not resistant enough to corporate tax
avoidance.1506 However, if tax avoidance is the main reason that the tax incidence of
corporate income tax in an open economy does not fall as much on labour as economic
theory might predict, the BEPS measures might have a reversing effect that should be
further investigated.
In short, the discourse on the tax-mix could consider the question of tax incidence more
explicitly also to better reflect the ability-to-pay principle.
11.4 In Closing
I hope that this study and its findings constitute a valuable and constructive contribution to
the debate on designing an international tax system that is economically sound, fair and
1501
Chile (+12,2%-point), Colombia (+7,3%-point), Mexico (no data), Israel (+5,5%-point), and New Zealand
(+0,03%-point). There is no data on Mexico with regard to 2000, but the data regarding 2010 shows that
Mexico has also increased the combined share of personal income tax and social security contributions in
relation to the total tax revenue.
1502
Belgium (+1,5%-point), Spain (-2,9%-point), Japan (-1,7%-point), Germany (+0,3%-point) and United States
(-2,5%-point).
1503
The combined share in tax revenue of personal income taxes and social security contributions.
1504
Moreover, in several cases, for example in Norway, the increase in the share of labour-related tax is
directly attributable to social security contributions, rather than increases in personal income taxes.
1505
Devereux, et al. (2020), at pp. 35-36; Clausing, K. A. (2013). Who pays the corporate tax in a global
economy?. National Tax Journal, 66(1), 151-184, at p. 179; Clausing, K. A. (2011). In search of corporate tax
incidence. Tax L. Rev., 65, 433; Gravelle, J. C. (2011). Corporate tax incidence: a review of empirical estimates
and analysis. Washington, DC: Congressional Budget Office, at p. 29.
1506
333
just, as well as satisfactory in terms of the division of taxing rights, while it is robust enough,
so it can better keep up with the rapidly changing world economy.
Firstly, the study aspires to demystify the concept of the spirit of international tax law in
order to lessen much of the Babylonian confusion in the public debate on international tax
law. The study has taken a wide angle to discuss the unease that many feel with certain tax
behaviour that is within object and purpose of positive law but does not necessarily sync up
with the expectation in society of what is a fair result. For that reason, the study does not
provide just a one-line definition of what the spirit of international law is. Rather, it
highlights the three positions on the spirit of international tax law that are prevalent in the
public debate. These three positions underline the importance to view (international tax)
law as a continuously developing discourse. Moreover, this approach could serve to develop
a three-prong test, that ascertains if a certain argument:
(i) points to the intent or purpose of an existing national or international tax standard
as they exist and are generally interpreted today.
(ii) Refers to the changed political and doctrinal morality with regard to international
tax law that might not have found its way into national and international tax rules
just yet.
(iii) Reflects a non-legal set of norms and/or personal moral preferences.
Such a test could, on the one hand, bring awareness to all actors in the debate what type of
arguments they are making when arguing that the spirit of international tax law has been
violated. On the other hand, it could assign a certain weight to the arguments brought forth.
In this study several suggestions have been made as to how non-legal personal moral
preferences and legal moral arguments could be distinguished. Further research could
develop these suggestions into more practically applicable tools.
Finally, the study suggests a repurposing of the concept of the spirit of international tax law
is necessary in order to break through the focus of the current political narrative on
economic efficiency and tax revenue. Hence, the spirit of international tax law should reflect
concrete and ambitious policy goals rather than an abstract notion of fairness and virtuous
behaviour. In that sense the spirit of international tax law can be useful to work towards an
international tax system that is more robust, fair and just, economically sound, and that can
deal with competing claims of jurisdictions for a fair share of the tax base. The suggestions
in this study on the manner in which this repurposing could take place might also serve as
the basis for further research.
334
335
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Appendix - Selected Newspaper Articles per Year
2001 Prem Sikka, No risk, big rewards, The

Mark Atkinson, Multinationals face clamp Guardian, 10 June 2008.
down, The Guardian, 8 March 2001. Angela Balakrishnan, Treasury performs U
Paul O’Neill, Confronting OECD’s ‘Harmful’ turn on taxing foreign profits, The
tax approach, Commentary, The Guardian, 21 July 2008.
Washington Times, 11 May 2001. Mark Milner & Lizzy Davis, MPs urge
clampdown on firms failing to pay,
2003 The Guardian, 22 October 2008.
Nick Mathiason, Corporate tax avoidance Richard Murphy, Bold? Not bold enough,
is costing us all billions, The Guardian, The Guardian, 8 October 2008.
29 June 2003.
Nick Mathiason, UN Targets tax-avoiding 2009
multinationals, The Guardian, 21 George Monbiot, Politics is broken, so
December 2003. what do we do? We leave it to the
politicians, The Guardian, 2 February
2005 2009.
Prem Sikka, Accountants: a threat to Bild Zeitung, Schweizer vergeleichen
democracy, The Guardian, 5 Steinbrück mt Nazis!, 19 March 2009.
September 2005. Nick Mathiason, Brown does a U-turn on
tax haven blacklist, The Guardian, 8
2006 March 2009.
Ed Vulliamy & Sandra Laville, Ministers, Nicholas Watt, Larry Elliot and Julian
Moguls and Murky deals, The Borger, G20 declares door shut on tax
Guardian, 4 March 2006. havens, The Guardian, 2 April 2009.
Nick Mathiason, Multinational firms face
2007 exposure over their corporation tax
Bild Zeitung, Gibt es bald “steueroasen” in policies, The Guardian , 15 June 2009.
Deutschland?, 18 February 2007. Liam Firth, Tax Exiles’ Cheap Attitude to
Nationality, The Guardian, 12
2008 December 2009.
Ashley Seager & Philip Inman, Tax evasion
costs the lives of 1000 children a day, 2010
The Guardian, 12 May 2008. Jill Treanor, CBI warns again of tougher
David Leigh, Government outlaws tax tax and regulations creating exodus
avoidance schemes, The Guardian, 14 from City, The Guardian, 19 January
June 2008. 2010.
369
Terry Macalister, Diageo warns it may Vanessa Houlder, CBI fears backlash over
leave Britain for a low-tax jurisdiction, tax avoidance row, Financial Times,
The Guardian, 11 February 2010. 13 November 2011.
Jonathan Moules, Threat to basic tax
advice, Financial Times, 7 May 2010. 2012
Erik Larson & Jonathan Browning, Hellen Warrell, Clegg vows to curb ‘Crony
Vodafone to pay 1.25 billion pounds Capitalism’, Financial Times, 5 January
in UK tax case, Bloomberg, 23 July 2012.
2010. Felicity Lawrence, Britain’s tax rules – now
Richard Murphy, Vodafone’s tax case written for and by multinationals, The
leaves a sour taste, The Guardian, 22 Guardian, 19 March 2012.
October 2010. Felicity Lawrence, Britain’s tax rules – now
Felicity Lawrence, Brewer SABMiller written for and by multinationals, The
accused of depriving poor countries Guardian, 19 March 2012.
of millions in revenue, The Guardian, Ian Griffiths, Amazon: 7 bln in sales, no UK
29 Nov 2010. corporation tax, The Guardian, 4 April
George Monbiot, Yes Britain’s open for 2012.
business – the sort of business that Rupert Neate, Tim Waterstone warns
does not pay tax, The Guardian, 8 Amazon tax avoidance could kill off
November 2010. bookshops, The Guardian, 6 April
Sam Baker, Vodafone protest shows 2012.
tweets can get people on the streets, Volkskrant, Apple ontwijkt massaal
The Guardian, 1 November 2010. belastingen, 30 April 2012.
Aditya Chakrabortty, MPs take note: a BBC News, Comedian Jimmy Carr: I’ve
new political youth is brewing, The made terrible error over tax, 21 June
Guardian, 3 December 2010. 2012.
Patrick Wintour & Rajeev Syal, Jimmy Carr
2011 tax arrangements ‘morally wrong’,
Vanessa Houlder & Nikki Tait, Brussels says David Cameron, The Guardian,
attacks rules on tax avoidance, 20 Jun 2012.
Financial Times, 17 February 2011. Heather Stewart, Wealth does not trickle
Alex Hawkes & Graeme Wearden, MPs to down, it just floods offshore, research
investigate corporate tax avoidance, reveals, The Guardian, 21 July 2012.
The Guardian, 28 Mar 2011. Vanessa Houlder & Jim Pickard, Treasury
Andrew Clark, GlaxoSmithKline boss: firms attacks ‘dodgy’ tax advisers, Financial
should not quit Britain for tax Times, 24 July 2012.
reasons, The Guardian, 20 March Center for American Progress, The Failure
2011. of Supply-side Economics, 1 August
Saviour Mwambwa, We need greater 2012.
transparency over tax payments, The Financial Times, Steinbrück chosen to
Guardian, 5 April 2011. challenge popular Merkel, 28
David McNair, The long arm of corporate September 2012.
influence, The Guardian, 31 July 2011. Vanessa Houlder, Business fears powers
Margareta Pagano, Lawyers back UK of tax avoidance rules, Financial
Uncut on taxes, Independent, 23 Times, 16 September 2012.
October 2011.
370
Jennifer Thompson & Vanessa Houlder, 2013
Starbucks faces boycott calls over tax Adam Jones & Vanessa Houlder, MPs grill
affairs, Financial Times, 17 October accountants over tax avoidance,
2012. Financial Times, 31 January 2013.
Jim Pickard, MPs consider tax avoidance Hannah Kuchler, Cameron seeks bold
probe, Financial Times, 24 October steps from G8 leaders, Financial
2012. Times, 2 January 2013.
Stephen Moss, Should we boycott the tax- Larry Elliot & Heather Stewart, David
avoiding companies?, The Guardian, Cameron Davos keynote speech
17 October 2012. targets tax avoiders, The Guardian, 24
The Guardian, Two nations when it comes January 2013.
to tax, 11 October 2012. Merijn Rengers, Xander van Uffelen &
James Shotter & Vanessa Houlder, EU Sybren Kooistra, Fiscale wirwar in
plans action on corporate tax vrijplaats Nederland, de Volkskrant,
avoidance, Financial Times, 18 23 January 2013.
November 2012. Robert Giebels, Allesonthullende
Patrick Wintour & Dan Milmo, UK and onderzoek brievenbusfirma’s
Germany agree crackdown on tax ‘gekleurd’, de Volkskrant, 25 January
loopholes for multinationals, The 2013.
Guardian, 5 November 2012. Robert Giebels, Weekers gaat brievenbus
Simon Neville & Shiv Malik, Starbucks BVs niet aanpakken, de Volkskrant, 24
wakes up and smells the stench of tax January 2013.
avoidance, The Guardian, 12 The Guardian, To stop firms gaming the
November 2012. tax system, make them admit what
Vanessa Houlder, HRMC to face MPs over they are doing, 27 January 2013.
multinationals tax, Financial Times, 4 Xander van Uffelen, Fiscaal sluipverkeer,
November 2012. de Volkskrant, 25 January 2013.
Vanessa Houlder, MPs to grill companies Adam Jones, Accountants say that
over tax strategies, Financial Times, politicians are demonizing them,
11 November 2012. Financial Times, 3 February 2013.
Vanessa Houlder, OECD enters Daniel Boffey, British sugar giant caught in
multinationals’ tax debate, Financial global tax scandal, The Guardian, 9
Times, 4 November 2012. February 2013.Sunday.
BBC News, Starbucks agrees to pay more Frankfurter Allgemeine Zeitung, OECD
corporation tax, 6 December 2012. kritisiert Steuerschlupflöcher für
Rajeev Syal & Patrick Wintour, MPs attack Konzerne, 13 February 2013.
Amazon, Google and Starbucks over Philip Inman, OECD calls for crackdown on
tax avoidance, The Guardian, 3 tax avoidance by MNEs, The
December 2012. Guardian, 12 February 2013.
Rajeev Syal & Patrick Wintour, MPs attack Richard Brooks, Forget Starbucks. What
Amazon, Google and Starbucks over UK companies are doing to avoid tax
tax avoidance, The Guardian, 3 is far worse, The Guardian, 10
December 2012. February 2013.
Roxanne Escobales & Tracy McVeigh, Simon Bowers, Tax avoidance firms will be
Starbucks hit by UK Uncut protests as banned from major government
tax row boils over, The Guardian, 8 contracts, The Guardian, 14 February
December 2012. 2013.
371
Vanessa Houlder, Tax avoiders runs rings tax…yet, The Conversation, 29 May
around HRMC, Financial Times, 18 2013.
February 2013. Charles Arthur, How to stop using Google,
Jonathan Ford, All carrot and no stick, The Guardian, 2 May 2013.
Financial Times, 22 March 2013. Chris Giles, Tax avoidance dominates G8
Vanessa Houlder, Britons shun companies meeting, Financial Times, 11 May
over tax avoidance, Financial Times, 1 2013.
March 2013. Daniel Gross, Erich Schmidt and Tim Cook
Bild Zeitung, «Focus»: Mindestens 100 Face the Music, Newsweek Magazine,
000 Nutzer von Steueroasen in 23 May 2013.
Deutschland, 6 April 2013. James Fontanella-Khan & Jamie Smyth,
Der Spiegel, Steinbrück fordert härtere Ireland pledges cooperation on global
strafen für banken, 4 April 2013. tax avoidance plan, Financial Times,
Financial Times, Zambia’s tax losses, 30 22 May 2013.
April 2013. Jamie Smyth & James Fontanella-Khan,
Martin van Geest, Als Starbucks geen Dublin cut tax burden on MNEs after
belasting betaalt, draait Jan Modaal US lobbying, Financial Times, 21 May
daarvoor op, de Volkskrant, 22 April 2013.
2013. Larry Elliot, Tax lost offshore could end
Matt Steinglass, Great Tax Race: Dutch world poverty, says Oxfam, The
focus Reforms on Letterbox Guardian, 22 May 2013..
Companies, Financial Times, 28 April Patrick van IJzendoorn, Britse
2013. belastingbaas naar multinational, de
Matt Steinglass, Great Tax Race: Dutch Volkskrant, 31 May 2013.
reforms focus on letterbox Richard Waters, Apple denies using ‘tax
companies, Financial Times, 28 April gimmicks’ to lower US tax payments,
2013. Financial Times, 20 May 2013.
Vanessa Houlder & George Parker, UK Robert Reich, Why should Apple have
premier David Cameron presses EU access to consumers if it refuses to
on tax evaders, Financial Times, 24 pay its fair share of taxes?, The
April 2013. Guardian, 26 May 2013.
Vanessa Houlder, Big Four accountants Vanessa Houlder, CBI warns: tax reporting
wield undue influence over UK tax rules put busines in straitjacket,
system, Financial Times, 25 April Financial Times, 7 May 2013.
2013. Vanessa Houlder, Elizabeth Rigby, Bede
Vanessa Houlder, Nations on the McCarthy & Andrea Felsted, Tougher
defensive as anger grows over tax tax rules would cost jobs, minster
avoidance, Financial Times, 28 April warns, Financial Times, 20 May 2013.
2013. Wilco Dekker & Merijn Rengers, Zorgen
Xander van Uffelen, Als je geen belasting werkgevers om ophef
betaalt, roof je een land leeg, de belastingparadijs Nederland, de
Volkskrant, 27 April 2013. Volkskrant, 22 May 2013.
Brian Groom, An Inquisitor of our Times, George Parker & Vanessa Houlder, G8
Financial Times, 20 May 2013. seeks to rewrite global tax rules,
Caroline Moraes, Consumers won’t Financial Times, 18 June 2013.
boycott Apple and Google over
372
Jurjen van der Garde, Wantrouw het Matt Steinglass & Jamie Smyth, Dutch
moreel vertoon van bedrijven, de crackdown on avoidance is being
Volkskrant, 10 June 2013. fiercely resisted by business
Peter de Waard, Is slavenhandel ook community, Financial Times, 12
verdedigbaar?, de Volkskrant, 14 June September 2013.
2013. Matt Steinglass, Netherlands decides to
Robert Giebels, Weekers ziet in onderzoek review tax treaties with developing
bewijs dat Nederland geen countries, Financial Times, 6
belastingparadijs is, de Volkskrant, 12 September 2013.
Jun 2013. Matt Steinglass, Netherlands to review tax
Robert Giebels, Weekers ziet in onderzoek treaties with developing countries,
bewijs dat Nederland geen Financial Times, September 6 2013.
belastingparadijs is, de Volkskrant, 12 Merijn Rengers & Xander van Uffelen,
June 2013. Multinationals weigeren Kamer uitleg
Simon Bowers, Catholic bishops urge G8 over belastingontwijking, de
to tackle tax avoidance, The Guardian, Volkskrant, 5 September 2013.
6 June 2013. Robert Giebels, Sjoemelen? We doen
Vanessa Houlder & Quentin Peel, UK niets verkeerd, de Volkskrant, 13 Sept
under pressure Berlin over tax 2013.
competition, Financial Times, 13 June Telegraaf, Multinationals toch niet bij
2013. hoorzitting Kamer, 5 September 2013.
Vanessa Houlder, G8 leaders braced for Vanessa Houlder & Matt Steinglass, G20
battle on evasion, Financial Times, leaders ratchet up pressure on tax
June 10 2013. avoidance, Financial Times, 6
Wilco Dekker & Sybren Kooistra, Verdrag September 2013.
met Nederland kost arme landen een Clive Cookson, Technology sector says,
fortuin, de Volkskrant, 11 June 2013. government risks stifling bright ideas,
Vanessa Houlder, Business calls for Financial Times, 16 October 2013.
business tax concession to stimulate Brian Groom Tax avoidance replaces
growth, Financial Times, 17 July 2013. bosses’ pay at top of concerns over
Vanessa Houlder, G20 backs new tax ethics, Financial Times, 28 November
transparency plan, Financial Times, 20 2013.
July 2013. Simon Bowers, Britain rules the world of
Vanessa Houlder, G20 sharpens attack on tax havens, Queen is warned, The
corporate tax avoidance, Financial Guardian, 7 November 2013.
Times, 14 July 2013. Vanessa Houlder & Alex Barker, Brussels
Vanessa Houlder, OECD unveils global aims to level the playing field for EU’s
crackdown on tax arbitrage by ‘honest businesses’, Financial Times,
corporates, Financial Times, 19 July 25 November 2013.
2013. Vanessa Houlder, Hybrid tax schemes face
Wilco Dekker & Sybren Kooistra, Nóg een day of reckoning, Financial Times, 25
studie naar belastingontwijking, de November 2013.
Volkskrant, 4 July 2013. Vanessa Houlder, Hybrid tax schemes face
Merijn Rengers & Xander van Uffelen, day of reckoning, Financial Times, 25
CPB: Nederland is een doorsluisland, November 2013.
de Volkskrant, 31 August 2013.
373
Robert Shrimsley, Lunch with the FT: Stephen Burgen, Almost all Spanish stock
Margaret Hodge, Financial Times, 6 market firms use tax havens, report
December 2013. finds, The Guardian, 30 May 2014.
Vanessa Houlder, Brussels calls for reform
2014 of EU digital tax rules, Financial Times,
Vanessa Houlder & Jim Pickard, More 28 May 2014.
evidence of low tax payments by US Vanessa Houlder, UK UNCUT stages anti-
tech groups, Financial Times, 3 tax avoidance protests, Financial
January 2014. Times, 14 May 2014.
Vanessa Houlder, OECD: Special tax rules Christian Oliver, Vincent Boland &
for internet companies ‘not viable’, Vanessa Houlder, EC opens tax probe
Financial Times, 20 January 2014. against Starbucks, Fiat and Apple,
Alex Barker, EU steps up probe into tax Financial Times, 11 June 2014.
sweeteners for multinationals, Christian Oliver, Vincent Boland &
Financial Times, 21 March 2014. Vanessa Houlder, EC opens tax probe
David Jolly, Critized on Taxes, Starbucks into Starbucks, Fiat and Apple,
will move European Offices to Financial Times, 11 June 2014.
London, The New York Times, 16 April Sarah Butler, Business leaders must take
2014. blame for losing popularity, says
Vanessa Houlder, Business attacks Sainsbury’s boss, The Guardian, 25
international tax swoop against tech June 2014.
groups, Financial Times, 23 April Vanessa Houlder, Government contract
2014. bidders responds to tax outcry, survey
Vanessa Houlder, OECD denies rules are finds, Financial Times, 8 June 2014.
biased against low-tax countries, Harriet Agnew, Tax advice has a moral
Financial Times, 2 April 2014. aspect, says PwC chairman, Financial
Vanessa Houlder, Vincent Boland & James Times, 6 October 2014.
Politi, Tax avoidance: The Irish John Gapper, Technology’s tax defence is
Inversion, Financial Times, 29 April washing away, Financial Times, 1
2014. October 2014.
Juliette Garside, Amazon UK boycott The Guardian, Tough talk on tax means
urged after retailer pays just 4.2 mln nothing if every country does
in tax, The Guardian, 9 May 2014. different things, 5 October 2014.
George Parker, Public trust in big business Alastair Macdonald & Julia Fioretti,
falls away among Britons, Financial Luxembourg tax storm hits new EU
Times, 6 May 2014. chief Juncker, Reuters, 6 Nov 2014.
Hans van den Hurk, Demagogie en Alex Barker & Vanessa Houlder, Brussels
onkunde regeren het fiscale debat, slams Netherlands over Starbucks Tax
Financieele Dagblad, 26 May 2014. Deal, Financial Times, 14 November
James Politi, US bill would thwart 2014.
corporate tax moves, Financial Times, Alex Barker & Vanessa Houlder, Brussels
20 May 2014. slams Netherlands over Starbucks Tax
Simon Bowers, Google investors press for Deal, Financial Times, 14 November
code of conduct on tax, The Guardian, 2014.
14 May 2014. Daniel Hurst, Multinational tax avoidance
risks losing citizens’ trust, The
Guardian, 14 November 2014.
374
Financial Times, Pension funds urged to Duncan Robinson, EC probes Belgium for
act over tax, 12 November 2014. tax deals for multinationals, Financial
Jamie Smyth, Five things to look out for at Times, 3 February 2015.
G20, Financial Times, 13 November Duncan Robinson, EC probes Belgium for
2014. tax deals for multinationals, Financial
Jamie Smyth, George Parker & Vanessa Times, 3 February 2015.
Houlder, G20 back drive to unmask Erica Buist, London’s tax dodge tour: visit
shell companies, Financial Times, 16 the companies who don’t pay their
November 2014. dues, The Guardian, 15 February
Madison Marriage, Aggressive tax 2015.
avoidance troubles large investors, Simon Bowers, PwC chief misled us over
Financial Times, 2 November 2014. Lux tax avoidance schemes, claim
Simon Bowers, Luxembourg tax files: how MPs, The Guardian, 6 February 2015.
tiny state rubber-stamped tax Stefan Fern, Save tax penny, pay
avoidance on an industrial scale, The reputation pound, Financial Times, 18
Guardian, 5 November 2014. February 2015.
Guy Verhofstadt, The tax scandal is not Vanessa Houlder, Companies discuss value
Luxembourg’s alone, The Guardian,10 of ‘fair tax’ kitemark, Financial Times,
December 2014. 2 February 2015.
Jamie Smyth, Australia targets UK-style Vanessa Houlder, US multinationals fight
Google Tax, Financial Times, 9 UK Google Tax, Financial Times, 9
December 2014. February 2015.
Vanessa Houlder & Murad Ahmed, Robert Giebels, Ik hoop dat multinationals
Autumn Statement 2014: UK plans to na vandaag geen nacht meer rustig
raise £1bn with ‘Google tax’, Financial slapen, de Volkskrant, 3 March 2015.
Times, 3 December 2014. Vanessa Houlder, Treasury rejects
Vanessa Houlder, Business leaders attack regulation clamp on UK tax advisers,
UK ‘Google Tax’, Financial Times, 10 Financial Times, 19 March 2015.
December 2014. Jamie Smyth, Google warns Australia that
Google Tax cuts both ways, Financial
Times, 8 April 2015.
2015 Vanessa Houlder, Voters in marginals seek
Margrethe Vestager & Pierre Moscovici, clampdown on corporate tax
This is the year for Europe to put its avoidance, Financial Times, 30 April
tax house in order, The Guardian, 17 2015.
January 2015. Aliya Ram, Today in the Election, Financial
Simon Bowers, MPs urge parliamentary Times, 7 May 2015.
inquiry into tax deal in wake of Christian Oliver, Brussel demands details
LuxLeaks, The Guardian, 14 January of tax rulings from 15 more countries,
2015. Financial Times, 8 June 2015.
Simon Bowers, Tech giants launch fierce Christian Oliver, Brussel demands tax
fightback against global tax avoidance deals from 15 more countries,
crackdown, The Guardian, 21 January Financial Times, June 8 2015.
2015. Simon Bowers, UK tax policy is dictated by
Clear Barret, Archbishop of Canterbury companies not ministers, says leading
says companies should pay more tax, treasury expert, The Guardian, 28
Financial Times, 4 February 2015. June 2015.
375
The Guardian, Tax laws for big business Chris Newlands & Madison Marriage,
are broken. Britain wants them to Fund managers urged to insist on
stay that way, 21 June 2015. greater tax transparency, Financial
The Guardian, Tax laws for big business Times, 22 November 2015.
are broken. Britain wants them to Judith Evans, Pension funds criticised for
stay that way, 21 June 2015. investing in companies accused of tax
The Guardian, Tax laws for big business avoidance, Financial Times, 1
are broken. Britain wants them to November 2015.
stay that way, 21 June 2015. Sam Thielamn, World’s biggest tech
Carlijne Vos, Geen VN orgaan tegen companies get failing grade on data-
belastingontwijking, de Volkskrant, 16 privacy rights, The Guardian, 3
July 2015. November 2015.
Vanessa Houlder, CBI attacks lack of Vanessa Houlder, Activists to protest over
consultation over UK Budget tax multinationals’ tax bills, Financial
changes, Financial Times, 7 Times, 3 November 2015.
September 2015. Christian Oliver, Jim Brunsden & Lindsay
Vanessa Houlder, CBI urges restraint in Whipp, Brussels poised to launch
crackdown on tax dodging by investigation into McDonalds, 2
multinationals, Financial Times, 24 December 2015.
September 2015. Christian Oliver, Jim Brunsden & Lindsay
Chris Flood, Fund investors face ‘collateral Whipp, Brussels poised to launch
damage’ in tax reform, 31 October investigation into McDonalds,
2015, Financial Times. Financial Times, 2 December 2015.
Mark Sweney, I paid 684 times more tax Kiran Stacey, Greenpeace links frackers to
than Facebook, The Guardian, 15 tax havens, Financial Times, 16 Dec
October 2015. 2015.
Robert Giebels, Europese Commissie: Vanessa Houlder, Starbucks tries to draw
Nederland moet zich ‘schamen’ voor a line under tax controversy, Financial
Starbucks deal, de Volkskrant, 21 Times, 16 December 2015.
October 2015.
Vanessa Houlder, Book review: “The 2016
Hidden Wealth of Nations: The Financial Times, Google’s tax deal is a
Scourge of Tax Havens” by Gabriel welcome sign of political winds
Zucman, Financial Times, 2 October shifting, Financial Times, 24 January
2015. 2016.
Vanessa Houlder, Call to reform Christian Oliver & Jim Brunsden, US blasts
‘outdated’ global corporate tax Brussels over tax probe bias, Financial
regime, Financial Times, 5 October Times,29 January 2016.
2015. George Parker & Vanessa Houlder,
Vanessa Houlder, Companies face investor Backlash builds against Google’s tax
push to cut tax burden despite the deal, Financial Times, 24 January
focus on tax avoidance, Financial 2016.
Times, 26 October 2015. Jim Brunsden & Josh Noble, European
Vanessa Houlder, Plans unveiled to crack Commission to investigate Google tax
down on corporate tax avoidance, deal, Financial Times, 28 January
Financial Times, 5 October 2015. 2016.
376
Jim Brunsden & Vanessa Houlder, EU to details, Financial Times, 21 March
clamp down on corporate tax 2016.
avoidance schemes, Financial Times, Murad Ahmed, Vanessa Houlder & Jim
22 January 2016. Pickard, Facebook faces profits hit
John Gapper, Alphabet and Apple spell after tax shake up, Financial Times, 4
global tax war, Financial Times, 27 March 2016.
January 2016. Simon Marks, EU tax transparency plans
John Gapper, Google strikes 130 mln won’t work, say campaigners, The
pound back tax deal, Financial Times, Guardian, 23 March 2016.
23 January 2016. Vanessa Houlder, Britain narrows gap in
John Gapper, The stateless company plays league of favourite tax regimes,
a risky game, Financial Times, 6 Financial Times, 11 March 2016.
January 2016. Aditya Chakrabortty, The 1% hide their
Lenore Taylor, Big Business accused of money offshore – then use it to
using strawman argument against tax corrupt politics, The Guardian, 10
avoidance crackdown, The Guardian, April 2016.
25 January 2016. Christian Oliver, Tim Bradshaw & Barney
Robert Cookson, MPs question Google’s Jopson, Apple tax affairs spark a
tax deal, Financial Times, 24 January transatlantic face-off, Financial Times,
2016. 4 April 2016.
Rowena Mason & Jennifer Rankin, EU Financial Times, Washington slams shut
could force Google to pay more UK Pfizer tax loophole, Financial Times, 5
tax, The Guardian, 28 January 2016. April 2016.
Sarah Butler & Jennifer Rankin, Cheap Geoff Dyer, Max Seddon & Richard Milne,
Google deal sets bad precedent, says Panama Leaks highlights global elite’s
tax expert, The Guardian, 24 January use of tax havens, Financial Times, 4
2016. April 2016.
Vanessa Houlder, Tax specialists criticise Heather Brooke, Transparency thwarts the
Google tax deal as opaque, Financial abuse of power to enrich the
Times, 25 January 2016. powerful, Financial Times, 13 April
Jonathan Ford, Why tax morale is 2016.
crumbling in UK, Financial Times, Why Jeroen Segenhout, Panama Papers
tax morale is crumbling in UK, 21 werpen licht op dubbele moraal,
February 2016. Financieele Dagblad, 9 April 2016.
Vanessa Houlder, IKEA avoided 1 billion Jim Brunsden, Brussels plans to force
euro in tax, claim MEPs, Financial multinationals to open up on profits,
Times, 12 February 2016. Financial Times, 12 April 2016.
Vanessa Houlder, Ministers urged to be Jim Brunsden, Brussels to get tough on tax
transparent on tax deals, Financial avoidance, Financial Times, 21 April
Times, 8 February 2016. 2016.
Vanessa Houlder, UK public angered by Jim Brunsden, German finance minister
tax avoidance and believes it is objects to tax transparency proposals
widespread, Financial Times, 22 EC, Financial Times, 23 April 2016.
February 2016. John Kay, Transparency over tax is not the
Jim Brunsden, Brussels to force big answer to evasion, Financial Times, 19
companies to disclose more tax April 2016.
377
Juliette Garside, Fund run by David Alex Barker & Arthur Beesley, Apple hit
Cameron’s father avoided tax in with €13bln EU tax penalty over
Britain, The Guardian, 4 April 2016. illegal Irish aid, 30 August 2016.
Matthew Weaver, How the truth about Vanessa Houlder, Public opinion brings
Cameron’s family finances slowly shift in business attitude to tax
emerged, The Guardian, 8 April 2016. planning, Financial Times, 29 August
Richard Brooks, Tax havens don’t need to 2016.
be reformed. They should be Barney Jopson, Corporate America rallies
outlawed, the Guardian, 4 April 2016. to Apple’s cause, Financial Times, 16
Rob Davies, US corporations have 1.4tn September 2016.
dollar hidden in tax havens, claims Jim Brunsden, Ceci n’est pas une blacklist,
Oxfam report, The Guardian, 14 April Financial Times, 15 September 2016.
2016. John Murray Brown, May promises ‘bold
Robert Booth, Holly Watt & David Pegg, action’ on corporate governance,
David Cameron admits he profited Financial Times, 5 September 2016.
from father’s Panama offshore trust, Julia Kollewe, “Political Crap” Tim Cook
The Guardian, 7 April 2016. condemns Apple tax ruling, The
Stefan Wagstyl & Anne-Sylvain Chassany, Guardian, 1 September 2016.
Paris and Berlin call for a global tax Luke Harding, Panama Papers: Denmark
haven blacklist, Financial Times, 11 buys leaked data to use in tax evasion
April 2016. inquiries, The Guardian, 7 September
Tom Burgis, How fury over tax havens 2016.
moved from the margins to the Vincent Boland, Ireland will struggle
mainstream, Financial Times, 6 April serving both the EU and corporate
2016. America, Financial Times, 1
Financial Times, Australia to implement September 2016.
diverted profit tax, Financial times, 3 Barney Jopson, US modifies plan to crack
May 2016. down on tax inversions, Financial
Henry Mance, Economists call for an end Times, October 13 2016.
of tax havens, Financial Times, 8 May Jim Brunsden, Brussels proposes EU-wide
2016. corporate income tax, Financial
Jamie Smyth, Rio Tinto cuts exposure to Times, 25 October 2016.
tax havens, Financial Times, 29 June Merryn Somerset Webb, Tax crackdown
2016. shows nobody dares to defend the
Jim Brunsden, EU hails breakthrough deal wealthy, Financial Times, 4 November
to curb tax avoidance, Financial 2016.
Times, 17 June 2016. Vanessa Houlder, Business wary over
Rachel Banning-Lover, The missing further cuts to UK corporation tax, 21
development trillions: how you would November 2016.
fund the SDGs, the Guardian, 3 June
2016. 2017
Sarah Gordon, One in three FTSE 100 Andrew Hill, CEOs take long-term view
companies worries about tax, over short-term profit, Financial
Financial Times, 13 June 2016. Times, 17 January 2017.
John Aglionby, Misinvoicing of George Parker, Labour steps up attack on
commodities costs billions, Financial irresponsible big business, Financial
Times, 18 July 2016. Times, 14 April 2017.
378
Roman Lanis, Brett Govendir & Ross Robert Giebels, Belastingwetten zijn lang
McClure, Counting the missing niet streng genoeg, zegt commissie,
billions: how Australia is losing out to de Volkskrant, 5 July 2017.
oil and gas giants, The Guardian, 25 Harriet Agnew & Jim Brunsden, France
April 2017. urges new momentum over US tech
Barney Jopson, Companies urge Trump to group tax, Financial Times, 10 August
dump anti-inversion rules, Financial 2017.
Times, 3 May 2017. Jim Brunsden & Mehreen Khan, France
James Politi & Vanessa Houlder, Google drives EU tax blitz on revenues of US
agrees to EUR 306 million Italian tax tech giants, Financial Times, 8
settlement, Financial Times, 4 May September 2017.
2017. Madison Marriage, Tax disputes costs soar
Jim Pickard, Andy Bounds & Henry Mance, at UK’s biggest companies, Financial
Corbyn pledges reckoning for those Times, 17 September 2017.
‘ripping off’ Britain, Financial Times, 9 Mehreen Khan & Jim Brunsden, Macron
May 2017. launches attack on “Anglo Saxon”
Aime Williams, Wealthy turn their backs tech giants, Financial Times , 29
on offshore tax havens, Financial September 2017.
Times, 15 June 2017. Rochelle Toplensky & Madison Marriage,
Kara Scannel, US intensifies fight against European Parliament to bar
tax evasion by using data mining, Monsanto lobbyist, Financial Times,
Financial Times, 19 June 2017. 28 September 2017.
Tom Kreling, Trustkantoor hoeft niet bang Vanessa Houlder, Google Tax’ take swells
te zijn voor ingrijpen, de Volkskrant, to 281 million pounds as levy starts to
17 June 2017. bite, Financial Times, 13 September
Vanessa Houlder, Nations agree to 2017.
corporate tax avoidance crackdown, Vanessa Houlder, HRMC ‘shoot first’
Financial Times, 6 June 2017. policy brings in 1.3 billion pounds
Daniel Boffey, The Netherlands and UK disputed tax from SMEs and
are biggest channels for corporate tax individuals, Financial Times, 15
avoidance, The Guardian, 25 July September 2017.
2017. Financial Times, Business must help fix the
Emma Agyemang, UK targets big business failures of capitalism, Financial Times,
in latest move on tax avoidance, 22 October 2017.
Financial Times, 15 November 2020. Financial Times, Tax affairs American tech
Harriet Agnew, Google wins challenge to groups come under fire, 3 October
1.1 bln EUR tax bill, Financial Times, 2017.
12 July 2017. Rochelle Toplensky, EU proposes tax
Laurens Berentsen, Trust- en adviessector reform to crack down on 50 billion
misleiden fiscus met papieren EUR VAT fraud, Financial Times, 4
werkelijkheid, Financieele Dagblad, 5 October 2017.
July 2017. Rochelle Toplensky, EU to hit Amazon
Rebecca Gowland, Let’s act now on with bill for Luxembourg back taxes,
country-by-country reporting, Financial Times, 3 October 2017.
Financial Times, 19 July 2017. Rochelle Toplensky, European
Commission probes tax schemes
379
favoured by multinationals, Financial Gareth Hutchens, Paradise Papers reveals
Times, 26 October 2017. ‘commoditisation’ of tax avoidance,
Barney Jopson, US tax reform targets The Guardian, 15 January 2018.
avoidance by multinationals, Financial Madison Marriage, Business slams HRMC
Times, 3 November 2017. over long tax investigations, Financial
David Pegg, Tax avoidance by big firms is Times, 15 January 2018.
morally wrong, say 9 out of 10 in UK, Richard Waters, Who gets a serving of
The Guardian, 27 November 2017. Apple’s tax pie?, Financial Times, 18
David Pegg, Tax avoidance is morally January 2018.
wrong, say nine out of ten in UK, The Vanessa Houlder, UK squeezes extra 136
Guardian, 27 November 2017. million pounds tax payment from
Financial Times, Stranger than paradise: Apple, Financial Times, 9 January
The truth about tax, Financial Times, 2018.
10 November 2017. Vanessa Houlder, UK Treasury accused of
Juliette Garside, The heat is on: inaction taking soft line on Amazon, Financial
on tax havens will make May appear Times, 24 January 2018.
complicit, The Guardian, 14 Financial Times. Taxing revenues is a poor
November 2017. fix for tech’s tax avoidance, Financial
Madison Marriage, Vanessa Houlder & Times, 27 February 2018.
Aliya Ram, UK Budget 2017: Tech Mehreen Khan, Dutch government set out
groups targeted over tax avoidance, plan to counter tax haven reputation,
Financial Times, 22 November 2017. Financial Times, 17 February 2018.
Mehreen Khan, Netherlands to investigate Barney Jopson & Rochelle Toplensky, Tech
4,000 corporate tax deals, Financial Tax deepens EU-US trade rift,
Times, 8 November 2017. Financial Times, 16 March 2018.
Merryn Somerset Webb, Paradise Papers Barney Jopson, Trump administration
reveal turning tide on tax avoidance, lashes out at tax proposals targeting
Financial Times, 17 November 2017. tech companies, Financial Times, 16
Owen Jones, Tax avoidance may be legal March 2018.
but it’s bankrupting our social order, Rana Foroohar, Why the world richest
The Guardian, 7 November 2017. firms are facing a ‘tech lash’, Financial
Tomas van Dijk, Acht miljoen doden Times, 21 March 2018.
minder door stoppen Rochelle Toplensky, EU finance ministers
belastingontwijking – klopt dit wel?, approve rules on ‘aggressive’ tax
de Volkskrant, 13 November 2017. schemes, Financial Times, 13 March
Vanessa Houlder, The Queen’s offshore 2018.
investments revealed in leak, Dan Sabbagh, Dirty Money: U-turn as
Financial Times, 6 November 2017. Tories plan to make tax havens
Rochelle Toplensky, EU launches probe transparent, The Guardian, 1 May
into IKEA tax arrangements, Financial 2018.
Times, 17 December 2017. Philip Stephens, Populism is the true
legacy of the 2008 crisis, Financial
2018 Times 29 August 2018.
David Pegg, Paradise Papers: Davos panel Tim Adams, Moneyland: Why thieves and
calls for global corporate tax reform, crooks now rule the world and how to
The Guardian, 25 January 201. take it back - review, The Guardian, 9
September 2018.
380
Henry Mance, LibDems want Nicholas Shaxson, No, corporate tax
multinationals to publish tax returns, avoidance is not legal, Financial
Financial Times, 17 October 2018. Times, 16 May 2019.
LePoint, « CumEx Files » : la fraude fiscale Emma Agyemang, HRMC revenue soars
à 55 milliards d'euros, 18 October from hunt for hidden offshore wealth,
2018. Financial Times, 25 June 2019.
New York Times, Where in the World Is Kiran Stacey, Rochelle Toplensky &
Denmark’s $2 Billion?, 5 October Demetri Sevastopulo, Donald Trump
2018. attacks EU Action against US tech
Joseph Stiglitz, The American Economy is groups, Financial Times, 26 June
Rigged: And what we can do about it, 2019.
Scientific American, 1 November Tom Cardamone, Big Four’s stranglehold
2018. on corporate tax planning must end,
Alexis Spire, The Anger of the ‘Gilets Financial Times, 25 July 2019.
Jaunes’: France’s unfair taxes have Kate Beioley, FTSE 100 groups cut back on
driven the Yellow Vest protest cash pots for tax disputes, Financial
movement, The Nation, 11 December Times, 5 August 2019.
2018. Philip Stephens, Europe must set its own
Ben Hall, Harriet Agnew & David Keohane, digital rules, Financial Times, 8 August
Macron cancels fuel tax increase after 2019.
‘gilets jaunes’ protests, Financial Martin Sandbu, More than a third of
Times, December 5 2018. foreign investment is multinational
David Keohane & Harriet Agnew, Macron tax dodging, Financial Times, 8
enlists French business to quell ‘gilets September 2019.
jaunes’, Financial Times, December 14 Martin Wolf. Martin Wolf: Why rigged
2018. capitalism is damaging democracy,
Financial Times, 18 September 2019.
2019 Chris Giles, OECD takes aim at tech giants
Delphine Strauss, HRMC announces new with plans to shake up global tax,
clampdown on diverted profits, Financial Times, 9 October 2019.
Financial Times, 10 January 2019. Chris Giles, OECD proposes global
Tim Harford, Super-rich are an easy target minimum corporate tax rate,
for tax, Financial Times, 1 February Financial Times, 8 November 2019.
2019. John Gapper, Do global businesses have
Josh Noble & Harriet Agnew, French plan too much power?, Financial Times, 24
to tax big tech stirs controversy, November 2019.
Financial Times, 6 March 2019. John Gapper, Do global businesses have
Martin Wolf, The world needs to change too much power?, Financial Times, 24
the way its taxes companies, Financial November 2019.
Times, 7 March 2019. Jennifer Thompson, Investment groups
Martin Wolf, The world needs to change want companies to disclose global
the way its taxes companies, Financial taxes, 4 December 2019.
Times, 7 March 2019.
Philip Inman, IMF Chief joins calls for big 2020
tech firms to pay more tax, The Kate Beioley, UK growing more financially
Guardian, 25 March 2019. secretive, campaign group says,
Financial Times, 18 February 2020.
381
Ben King, Budget 2021: How much will it admit defeat after Apple tax setback,
costs the UK and how will we pay?, Financial Times, 16 July 2020.
BBC News, 3 March 2020. Paolo Gentiloni, An EU crackdown is
Laurens Berentsen, Rechters beslissen essential for sustainable growth,
heel verschillend in belastingzaken, Financial Times, 14 July 2020.
Financieele Dagblad, 5 March 2020. Sam Fleming & Javier Espinoza, Taxing
Stefan Wagstyl, HRMC targets hidden times for Europe as pandemic cripples
foreign income individuals, Financial government revenue, Financial Times,
Times, 6 March 2020. 15 July 2020.
Business Insider, Denmark and Poland are Tabby Kinder & Emma Agyemang, It’s a
refusing to bail out companies matter of fairness: squeezing more
registered in offshore tax havens, 20 tax from multinationals, Financial
April 2020. Times, 8 July 2020.
Emma Agyemang, Tax tribunal struggling Mehreen Khan & Judith Evans, Dutch plan
to cope with remote hearings, to tax departing multinationals gains
lawyers say, Financial Times, 28 April momentum, Financial Times, 16
2020. August 2020.
Lucy Warwick-Ching, HRMC suspends New York Times, The President’s tax files:
some tax investigations due to Long-concealed records show
pandemic, Financial Times, 15 April Trump’s chronic losses and years of
2020. tax avoidance, 27 September 2020.
Elisabeth Braw, Companies should start Sam Fleming & Mehreen Khan, Brussels
showing more national loyalty, ready to clamp down on sweetheart
Financial Times, 31 May 2020. corporate tax deals, Financial Times,
Financial Times, Seize the opportunity of 24 September 2020.
Covid-19 to restructure taxes, 10 May Emma Agyemang, Advisers warn of
2020. coming wave of tax probes of
Marietje Schaake, There has never been a stockpiled cases, Financial Times 8
better time to make Big Tech pay its October 2020.
way, Financial Times, 20 May 2020. Julia Kollewe, Facebook to close Irish
Allan Rappeport, Ana Swanson, Jim holding companies at centre of tax
Tankersley & Liz Alderman, US dispute, The Guardian, 27 December
withdraws from global digital tax 2020.
talks, New York Times, 17 June 2020 Maximillian Heath, Argentine congress
Emma Agyemang, Wealthy pay less tax approves wealth tax as Covid-19 hits
than official headline rates, study state coffers, Reuters, 5 December
finds, Financial Times, June 14 2020. 2020.
Sam Fleming, Jim Brunsden, Chris Giles &
James Politi, US upends global digital 2021
tax plans after pulling out of talks Philip Inman, UK overseas territories top
with Europe, Financial Times, 17 June list of world’s leading tax havens, The
2020 Guardian, 9 March 2021.
Financial Times, Apple ruling strengthens Ria Cats, Brussel voert strijd tegen
case for tax crackdown, 15 July 2020. belastingontwijking bedrijven verder
Javier Espinoza, Sam Fleming, Mehreen op, Financieele Dagblad, 18 May
Khan & Jim Brunsden, EU refuses to 2021.
382
Rupert Neate, ‘Silicon Six’ tech giants corporate tax deal, Quartz Africa, 2
accused of inflating tax payments by November 2021.
almost $100bn, The Guardian, 31 May Larry Elliot, Almost $500bn ‘lost to tax
2021. abuse by firms and super-rich in
Marc Peeperkorn, Akkoord van G7 over 2021’, The Guardian, 16 November
minimum winstbelasting is 2021.
‘historisch’, maar multinationals Wilco Dekker, Brussel pakt
zullen er niet van schrikken, de brievenbusfirma’s aan,
Volkskrant, 5 June 2021. belastingparadijs Nederland onder
Marc Peeperkorn, G7 bereikt ‘historisch vuur, de Volkskrant, 22 December
akkoord’ tegen belastingontwijking 2021.
multinationals, , de Volkskrant, 5 June
2021.
Paul Tang, 15 procent? Echt tevreden
kunnen we pas zijn met een nog
hogere winstbelasting, de Volkskrant.
8 June 2021.
Philip Inman & Michael Savage, Rishi
Sunak announces ‘historic agreement’
by G7 on tax reform, The Guardian, 5
June 2021.
Richard Waters, Emma Agyemand, Aziza
Kasumov & Tim Bradshaw,
Multinationals shrug off G7 tax
assault, Financial Times, 11 June
2021.
Ben van Raaij, OESO: wereldwijd akkoord
bereikt dat paal en perk moet stellen
aan belastingontwijking, de
Volkskrant, 8 October 2021.
David Conn, Almost all Tory voters agree
company tax avoidance morally
wrong, poll finds, the Guardian, 22
October 2021.
Laurens Berentsen, Definitief akkoord
minimumtaks multinationals binnen
handbereik, Financieele Dagblad, 8
October 2021.
Michael Persson, Wopke Hoekstra maakte
gebruik van brievenbusfirma op Britse
Maagdeneilanden, de Volkskrant, 3
October 2021.
Richard Partington, OECD deal imposes
global minimum corporate tax of
15%, The Guardian, 8 October 2021.
Carlos Mureihti, Why Kenya and Nigeria
haven’t agreed to a historic global
383
384
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The spirit of international tax law

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ter verkrijging van de graad van doctor

door Johannes Martinus Lammers

Promotor: prof. dr. S. van Weeghel Universiteit van Amsterdam

Copromotor: prof. dr. A. Christians McGill University

Overige leden: prof. dr. O.C.R. Marres Universiteit van Amsterdam

Faculteit der Rechtsgeleerdheid

The Spirit of International Tax Law

The Spirit of International Tax Law

De studie suggereert verder dat economische efficiency en effecten op belastinginkomsten

Part I Defining the Spirit of International Tax Law 27

2 Morality in the Concept of Law 28

3 Perspectives on Morality in Political Philosophy 54

4 Morality in Legal Interpretation 66

5 Morality in International Tax Law 121

6 Defining the Spirit of International Tax Law 172

Part II Discourse Analysis 183

8 Analysis of Official OECD and EU Publications 186

9 Media Analysis 248

10 Conclusions from the Discourse Analysis 308

Part III Conclusions and Recommendations 315

11 Conclusions and Recommendations 316

Appendix - Selected Newspaper Articles per Year 369

1.1 Research Questions

1. How should the spirit of international tax law be defined?

1.3 Overview of the Study

Chapter 3 gives a brief overview of several perspectives on morality in political philosophy in

Discourse analysis is a methodological framework that allows for a multitude of ways to

Defining the Spirit of International

The laws, given by the legislator, ought to be relative to the principle of

(i) There is no paradox

(ii) There is no vagueness

(iii) There is no boundary

To illustrate, in an empirical study of individuals’ perception and the multi-range

(iv) The paradox is not a paradox

Therefore, it is logically impossible to embrace the negative and positive versions of

2.2 The Concept of Law

2.2.1 Legal Theories in Legal Philosophy

(i) Natural law theories

(ii) Legal positivism

(iii) Dworkin’s Theory of Law

2.2.1.1 Natural Law Theories

The principles of legality are as follows:

2.2.1.2 Legal Positivism

Hart’s Rule of Recognition

One rule to rule them all

Morality and legal positivism

Mitrophanous rejects both soft positivistic approaches based on four arguments:94

2.2.1.3 Dworkin’s Theory of Law

2.3 Intermediate Conclusions

Another perspective to consider in determining possible commonalities between the

3.2 John Rawls’ Theory of Justice

3.3 Robert Nozick’s Anarchy, State and Utopia

3.4 Closing Remarks

These different approaches also materialise in several methods in legal interpretation,

4.1 The Interpreter’s Moral Values

According to Dworkin, “constructive interpretation is a matter of imposing purpose on an

In short, ideally there would be a commonly accepted, understandable and knowable

4.1.1 Understanding Moral Language Through Metaethics