A Response to Professors Brooks and Christians

by Diane Ring

Both Professor Brooks and Professor Christians have identified important strands and tensions in the consideration of international tax, sovereignty, global relations among states, and universal commitments to humanity.  Just reading their comments inspires me to continue researching these questions.  Their observations tap into two significant unresolved issues of international tax and international relations: (1) How should the reality of politics, power, and decision making affect our interpretation of political system design?  For example, if decisions depend on the accommodation, interaction, and power dynamics of a variety of interest groups and epistemic groups, and rely less on democratic debate – do we have a democracy?  Is it relevant?  What is the meaning of the state and its democratic structures in that world?  And (2) How do we assess and determine the nature and source of our duties and commitments to each other, whether between states, or among individuals generally?

Both of these questions implicate the meaning of sovereignty and the role of the state in establishing duties, relationships, and boundaries.  Any assessment of sovereignty here is impeded by sovereignty’s own overreaching.  Neither today nor in the past have states operated free of outside forces or influences.  But to the degree that sovereignty has been characterized as absolute, the fact that today we can identify many examples of real limits on sovereign states and many examples of power situated outside the state structure seems to “weaken” the role of the sovereign state.  In reality, however, we are simply seeing a more accurate portrayal of the interconnectedness of all political, economic and social decisions.  The degree and pace of interactions may be increasing, but the change is one of degree.  The state was never a solitary beacon of power and control.

This paper argues that if you value democratic states, then there is a role for tax sovereignty.  As with considerations of general sovereignty described above, this role is not all encompassing nor without limits. But even acknowledging these constraints, a state’s ability to exercise some control over tax policy remains vital. Yes, cooperation and coordination bring a variety of advantages, but there can be losses for the state as well.  Thus, the decision to cooperate reflects of combination of negotiating power and calculation of benefits and risks.  The continuing significance of sovereignty both as a normative and a positive matter is demonstrated by the counterfactual case of moving the international community toward either a single global state or a single tax system operated by a global body.  Such a move would generate serious questions of plausibility, efficacy and accountability.  The fact that our current system includes elements of a more global system, by virtue of the coordination, cooperation and norm development that we witness, it remains nonetheless distinct from these more extreme systems.  Countries today still retain their own individual perspective on taxation and expenditure which shapes both their domestic tax policy and expenditures choices, and the positions they advocate internationally.  As Professor Brooks notes, when nations act in accordance with their duties to protect and promote citizen interests, they rely on their tax systems as part of a broader package of tools to shape behavior according to national goals and welfare.  But the vision of what is good policy varies among states.  The dichotomy between the United Kingdom/Ireland and the Nordic states of Sweden, Denmark and Finland provide an illustration of the different tax visions that states develop.

Certainly though, even these states are not monoliths in their views of tax policy. Operating within each state are a variety of forces, often in conjunction with like-minded actors in other states (whether it be multinationals, trade groups, or tax administrators).  The recognition that sovereign states do matter is insufficient to explain and capture the process of iterative decision making in international tax.  Following upon Professor Christians’ observations, the trail from tax policy decisions leads in many directions and not necessarily to the ballot box.  If we want to understand the dynamics underlying decisions we must follow those paths and evaluate the degree to which they reflect the democratic process.  Moreover, we may ultimately discover that these interactions regarding tax (and other international policy areas) ultimately transform, either incrementally or more significantly, the role and influence of the sovereign state.


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