Who makes International Tax Policy?

International Tax Policy; an important issue and one critical and close to both the policy-makers and the subjects. The issues which are involved in this policy making exercise also attain importance in view of the fact that not just the tax-efficient structuring of transactions are required to be undertaken by also looked from a macro perspective, it is the might of the sovereigns which are at play and their reputations involved in staking an outcome of this policy making exercise. Thus the control issue attains importance. But then, who makes this policy? The answer is, however, not so easy to find. 

There has been a long debated theory that the Organisation for Economic Co-operation and Development (OECD) i.e. the elite group of developed countries has been the pioneer of international tax policy making exercise working on the lines of the erstwhile League of Nations. It also seems to be true given the fact that the bulk of available international tax policy guidelines and literature originates from the OECD and the only other comparable UN Group of Experts is nowhere close in terms of the role that OECD plays. The test of time has only given strength to this theory, if not proved it beyond doubt.  Another competing theory is that it is actually a small league of large MNCs, having huge exposure to international tax implications, which sponsor and pursuade the international organisations to mould the tax theory to their advantage. This theory, however, even though has persisted with time, find few takers.  

And now we have a paper written exactly on these lines by Diane M. Ring. In the recent paper entitled Who is Making International Tax Policy? International Organizations as Power Players in a High Stakes World, Diane argues that 'international organizations play different and complex roles in shaping tax policy' and particular emphasis has been made on the role of the OECD. An overall look at the paper would reveal that while the expressions used are not with a categorical frame, the underlying intent is clear i.e. international organisations have a huge (if not sole) role in the policy making exercise in the field of international taxation. 

Diane, examining the matter from the perspective of 'International Relations' also poses a number of question the answers of which are not easily forthcoming. The paper ends with a thought-igniting process rather than concluding with a ready-answer. It notes "This inquiry raises an even broader question – What, if anything, do international organizations owe to nonmembers? Is it merely the same duties the members themselves would owe? Is it a higher duty because the organization gains a unique leverage and influence beyond that possessed by its members? Should the answer differ depending on whether the organization is state-based or not? Further research on the real role and operations of international tax organizations in setting international tax policy is essential as we formulate our normative vision for these influential organizations." Perhaps there are no second thoughts on this view. 

In all, the paper provides an interesting insight, replete with thought-provoking illustrations, over the role played by international organisations in international tax policy framing and also the role of other State and non-State actors in this critical exercise. A must read for tax-theory students !!!