IDEAS home Printed from https://ideas.repec.org/a/spr/revepe/v1y2020i2d10.1007_s43253-020-00017-0.html
   My bibliography  Save this article

An evolutionary approach to international political economy: the case of corporate tax avoidance

Author

Listed:
  • Ronen Peter Palan

    (University of London)

Abstract

Corporate tax avoidance is both widespread and diverse in its practical mechanics. The scope of the phenomenon often leads economists to conclude that in the jungle of economic competition, tax planning (or optimisation) is among the necessary tools to ensure the survival of the fittest. This theory is increasingly associated with a Darwinian theory of economic evolution. In this paper, I develop a contrasting framework of the evolutionary political economy of corporate tax avoidance. Analysing core concepts of Old Institutionalist Economics (OIE), I examine the core drivers of corporate tax avoidance in a globalised system of states. The major contrast, I find, is between that of the corporate and legal personality and the institutional environment in which it operates. Historically, each corporate entity has been considered a separate legal person, yet a series of ‘mutations’ of incorporations laws created a widening gap between theory and reality, and these, in turn, give rise to tax arbitrage. Narrowing this gap, however, impinges on another venerable historical institution, the institution of sovereignty and sovereign inequality.

Suggested Citation

  • Ronen Peter Palan, 2020. "An evolutionary approach to international political economy: the case of corporate tax avoidance," Review of Evolutionary Political Economy, Springer, vol. 1(2), pages 161-182, August.
    • Handle: RePEc:spr:revepe:v:1:y:2020:i:2:d:10.1007_s43253-020-00017-0
    DOI: 10.1007/s43253-020-00017-0
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s43253-020-00017-0
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s43253-020-00017-0?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Steven Tadelis & Oliver E.Williamson, 2012. "Transaction Cost Economics [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
    2. Roger Congleton, 2007. "Elinor Ostrom, Understanding Institutional Diversity," Public Choice, Springer, vol. 132(3), pages 509-511, September.
    3. Giovanni Dosi, 2000. "Innovation, Organization and Economic Dynamics," Books, Edward Elgar Publishing, number 1248.
    4. Oliver E. Williamson, 2000. "The New Institutional Economics: Taking Stock, Looking Ahead," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 595-613, September.
    5. Photis Lysandrou, 2016. "The colonization of the future: An alternative view of financialization and its portents," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 39(4), pages 444-472, October.
    6. Geoffrey M. Hodgson, 2007. "The Revival of Veblenian Institutional Economics," Journal of Economic Issues, Taylor & Francis Journals, vol. 41(2), pages 324-340, June.
    7. Ronald H. Coase, 2000. "The new institutional economics," Chapters, in: Claude Ménard (ed.), Institutions, Contracts and Organizations, chapter 1, Edward Elgar Publishing.
    8. Bernard Chavance, 2012. "John Commons's organizational theory of institutions: a discussion," Post-Print halshs-00733955, HAL.
    9. Rutherford, Malcolm, 2000. "Understanding Institutional Economics: 1918–1929," Journal of the History of Economic Thought, Cambridge University Press, vol. 22(3), pages 277-308, September.
    10. Robert Kudrle, 2017. "The Limited Prospects for International Tax Cooperation," Global Policy, London School of Economics and Political Science, vol. 8(4), pages 455-463, November.
    11. Glen Atkinson, 2009. "Going Concerns, Futurity and Reasonable Value," Journal of Economic Issues, Taylor & Francis Journals, vol. 43(2), pages 433-440.
    12. Thorstein Veblen, 1908. "On the Nature of Capital," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 22(4), pages 517-542.
    13. Milner, Helen V., 1998. "Rationalizing Politics: The Emerging Synthesis of International, American, and Comparative Politics," International Organization, Cambridge University Press, vol. 52(4), pages 759-786, October.
    14. Rita Barrera & Jessica Bustamante, 2018. "The Rotten Apple: Tax Avoidance in Ireland," The International Trade Journal, Taylor & Francis Journals, vol. 32(1), pages 150-161, January.
    15. Claude Ménard, 2008. "A New Institutional Approach to Organization," Springer Books, in: Claude Ménard & Mary M. Shirley (ed.), Handbook of New Institutional Economics, chapter 12, pages 281-318, Springer.
    16. Commons, John R., 1931. "Institutional Economics," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 21, pages 648-657.
    17. Robé Jean-Philippe, 2011. "The Legal Structure of the Firm," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 1(1), pages 1-88, January.
    18. Mihir A. Desai, 2009. "The Decentering of the Global Firm," The World Economy, Wiley Blackwell, vol. 32(9), pages 1271-1290, September.
    19. Blaug,Mark, 1997. "Economic Theory in Retrospect," Cambridge Books, Cambridge University Press, number 9780521577014, October.
    20. Williamson, Oliver E., 1999. "The Mechanisms of Governance," OUP Catalogue, Oxford University Press, number 9780195132601.
    21. Crawford, Sue E. S. & Ostrom, Elinor, 1995. "A Grammar of Institutions," American Political Science Review, Cambridge University Press, vol. 89(3), pages 582-600, September.
    22. Chavance, Bernard, 2012. "John Commons's organizational theory of institutions: a discussion," Journal of Institutional Economics, Cambridge University Press, vol. 8(1), pages 27-47, March.
    23. Grandy, Christopher, 1989. "New Jersey Corporate Chartermongering, 1875–1929," The Journal of Economic History, Cambridge University Press, vol. 49(3), pages 677-692, September.
    24. Pearson,Heath, 2005. "Origins of Law and Economics," Cambridge Books, Cambridge University Press, number 9780521023863, October.
    25. Allan G. Gruchy, 1990. "Three Different Approaches to Institutional Economics: An Evaluation," Journal of Economic Issues, Taylor & Francis Journals, vol. 24(2), pages 361-369, June.
    26. Claude Menard & Mary M. Shirley (ed.), 2005. "Handbook of New Institutional Economics," Springer Books, Springer, number 978-0-387-25092-2, June.
    27. Arrow, Kenneth J, 1994. "Methodological Individualism and Social Knowledge," American Economic Review, American Economic Association, vol. 84(2), pages 1-9, May.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    Cited by:

    1. Pier Luigi Sacco & Alex Arenas & Manlio De Domenico, 2022. "The resilience of the multirelational structure of geopolitical treaties is critically linked to past colonial world order and offshore fiscal havens," Papers 2203.00618, arXiv.org.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michiel A. Heldeweg, 2017. "Normative Alignment, Institutional Resilience and Shifts in Legal Governance of the Energy Transition," Sustainability, MDPI, vol. 9(7), pages 1-34, July.
    2. Richard Phillips & Hannah Petersen & Ronen Palan, 2021. "Group subsidiaries, tax minimization and offshore financial centres: Mapping organizational structures to establish the ‘in-betweener’ advantage," Journal of International Business Policy, Palgrave Macmillan, vol. 4(2), pages 286-307, June.
    3. Charis Vlados & Nikolaos Deniozos & Demosthenes Chatzinikolaou & Michail Demertzis, 2018. "Perceiving Competitiveness under the Restructuring Process of Globalization," International Journal of Business and Management, Canadian Center of Science and Education, vol. 13(8), pages 135-135, June.
    4. Prévost, Benoît & Rivaud, Audrey, 2018. "The World Bank’s environmental strategies: Assessing the influence of a biased use of New Institutional Economics on legal issues," Ecosystem Services, Elsevier, vol. 29(PB), pages 370-380.
    5. Shahab, Sina & Clinch, J. Peter & O’Neill, Eoin, 2018. "Accounting for transaction costs in planning policy evaluation," Land Use Policy, Elsevier, vol. 70(C), pages 263-272.
    6. Idris Adjerid & Julia Adler-Milstein & Corey Angst, 2018. "Reducing Medicare Spending Through Electronic Health Information Exchange: The Role of Incentives and Exchange Maturity," Information Systems Research, INFORMS, vol. 29(2), pages 341-361, June.
    7. Fernando Toboso, 2006. "Old organizational issues from a new institutional economics perspective. Some introductory remarks," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 21(2), pages 3-11, December.
    8. Gagliardi, Francesca, 2008. "Institutions and economic change: A critical survey of the new institutional approaches and empirical evidence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(1), pages 416-443, February.
    9. Ouma, Emily & Ochieng, Justus & Dione, Michel & Pezo, Danilo, 2017. "Governance structures in smallholder pig value chains in Uganda: constraints and opportunities for upgrading," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 20(3), January.
    10. Sylvain Rossiaud & Catherine Locatelli, 2009. "The obstacles in the way of stabilizing the russian oil model," Post-Print halshs-00321227, HAL.
    11. Ronen Palan & Hannah Petersen & Richard Phillips, 2023. "Arbitrage spaces in the offshore world: Layering, ‘fuses’ and partitioning of the legal structure of modern firms," Environment and Planning A, , vol. 55(4), pages 1041-1061, June.
    12. Aric Rindfleisch & Kersi Antia & Janet Bercovitz & James Brown & Joseph Cannon & Stephen Carson & Mrinal Ghosh & Susan Helper & Diana Robertson & Kenneth Wathne, 2010. "Transaction costs, opportunism, and governance: Contextual considerations and future research opportunities," Marketing Letters, Springer, vol. 21(3), pages 211-222, September.
    13. Francesco Pasimeni & Paolo Pasimeni, 2016. "An Institutional Analysis of the Europe 2020 Strategy," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 127(3), pages 1021-1038, July.
    14. Antonio Estache, 2016. "Institutions for Infrastructure in Developing Countries: What We Know and the Lot We still Need to Know," Working Papers ECARES ECARES 2016-27, ULB -- Universite Libre de Bruxelles.
    15. Raghothama, Jayanth & Meijer, Sebastiaan & King, Robin, 2012. "Disentangling The Complexity Of India’S Agricultural Sector," APSTRACT: Applied Studies in Agribusiness and Commerce, AGRIMBA, vol. 6(1-2), pages 1-8, September.
    16. Golovics, József, 2021. "Intézmények, tökéletlen racionalitás és tranzakciós költség. Egységes terminológia az új intézményi Nobel-díjasok körében? [Institutions, imperfect rationality and transaction cost. A unified termi," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(1), pages 32-46.
    17. Schmid, Andreas, 2007. "Incentive Compatibility and Efficiency in the contractual Insurer-Provider Relationship: Economic Theory and practical Implications: The Case of North Carolina," MPRA Paper 23311, University Library of Munich, Germany, revised 2008.
    18. Paskalev, Zdravko & Yildirim, Huseyin, 2017. "A theory of outsourced fundraising: Why dollars turn into “Pennies for Charity”," Journal of Economic Behavior & Organization, Elsevier, vol. 137(C), pages 1-18.
    19. Adam Martin & Matias Petersen, 2019. "Poverty Alleviation as an Economic Problem," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 43(1), pages 205-221.
    20. Masahiko Aoki, 2013. "Institutions as cognitive media between strategic interactions and individual beliefs," Chapters, in: Comparative Institutional Analysis, chapter 17, pages 298-312, Edward Elgar Publishing.

    More about this item

    Keywords

    Old institutional economics; Tax avoidance; Multionational enterprise; Evolutionary theory; Sovereignty;
    All these keywords.

    JEL classification:

    • B15 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Historical; Institutional; Evolutionary
    • B25 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Historical; Institutional; Evolutionary; Austrian; Stockholm School
    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • F5 - International Economics - - International Relations, National Security, and International Political Economy
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

    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:spr:revepe:v:1:y:2020:i:2:d:10.1007_s43253-020-00017-0. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.