“This paper argues that global corporate tax policies have long been dominated by a political consensus among governments of countries at all levels of economic development, to the effect that forces of tax competition render taxation of the cross-border income of multinational companies both infeasible and unwise. Current tax laws around the world, which permit widespread tax avoidance through shifting corporate profits to tax havens,
reflect the implementation of this political consensus. The global political consensus against effective corporate tax rules seems likely to survive the current efforts of the OECD, in its studies of base erosion and profit shifting (BEPS), to devise legislation that would revitalise corporate income tax. Countries around the world, therefore, are unlikely to implement more than symbolic and minimally incremental BEPS reforms. This paper warns that the current high level of attention being paid to BEPS in the media and by international organisations might lead developing country governments to expect unrealistic returns from efforts to implement BEPS-related reforms. The paper therefore advises governments of developing countries to be selective in allocating resources to implementation of BEPS reforms, generally focusing only on those reforms that will clearly generate increased revenue in light of the very limited administrative resources typically
available to developing country revenue agencies. In general, developing countries will be well advised to devote the bulk of their enforcement resources to the development of fiscal instruments that do not encounter the political obstacles facing taxation of cross-border corporate income. These include excise and general consumption taxation, income taxation
of large and medium-sized domestic businesses, natural resource royalties (as opposed to income-based taxes on mineral producers), real property taxation and payroll taxation.”
