IDEAS home Printed from https://ideas.repec.org/a/cup/intorg/v71y2017i02p349-371_00.html
   My bibliography  Save this article

The Unintended Consequences of Bilateralism: Treaty Shopping and International Tax Policy

Author

Listed:
  • Arel-Bundock, Vincent

Abstract

The international tax system is a complex regime composed of thousands of bilateral tax treaties. These agreements coordinate policies between countries to avoid double taxation and encourage international investment. I argue that by solving this coordination problem on a bilateral basis, states have inadvertently created opportunities for treaty shopping by multinationals. These opportunities, in turn, reduce the potency of fiscal policy, put pressure on governments to change their domestic tax laws, and ultimately constrain state autonomy. This constraint is theoretically distinct from the usual race-to-the-bottom story and it generates different testable implications. I use a motivating case study to show how multinationals leverage the structure of the treaty network to reduce their tax burden. Then, I develop a new measure of treaty-shopping opportunities for firms in 164 countries. Where the proliferation of tax treaties allows multinationals to engage in treaty shopping, states’ fiscal autonomy is limited, and governments tend to maintain lower tax rates.

Suggested Citation

  • Arel-Bundock, Vincent, 2017. "The Unintended Consequences of Bilateralism: Treaty Shopping and International Tax Policy," International Organization, Cambridge University Press, vol. 71(2), pages 349-371, April.
  • Handle: RePEc:cup:intorg:v:71:y:2017:i:02:p:349-371_00
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S0020818317000108/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. James G. S. Yang & Victor N. A. Metallo, 2018. "The Emerging International Taxation Problems," IJFS, MDPI, vol. 6(1), pages 1-10, January.
    2. Damgaard, Jannick & Elkjaer, Thomas & Johannesen, Niels, 2024. "What is real and what is not in the global FDI network?," Journal of International Money and Finance, Elsevier, vol. 140(C).
    3. Hamanaka, Shintaro, 2022. "The World of overlapping regions," IDE Discussion Papers 835, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    4. Hearson, Martin, 2018. "Transnational expertise and the expansion of the international tax regime: imposing ‘acceptable’ standards," LSE Research Online Documents on Economics 88351, London School of Economics and Political Science, LSE Library.
    5. Yoram Z. Haftel & Stephanie C. Hofmann, 2019. "Rivalry and Overlap: Why Regional Economic Organizations Encroach on Security Organizations," Journal of Conflict Resolution, Peace Science Society (International), vol. 63(9), pages 2180-2206, October.
    6. Garcia-Bernardo, Javier & Reurink, Arjan, 2019. "Competing with whom? European tax competition, the "great fragmentation of the firm," and varieties of FDI attraction profiles," MPIfG Discussion Paper 19/9, Max Planck Institute for the Study of Societies.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:intorg:v:71:y:2017:i:02:p:349-371_00. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/ino .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.