The International Tax Ping Pong: From Competition to Coordination and Back

There is something new brewing on the international tax landscape. Historically, countries competed with one another by offering lower corporate tax rates and other incentives in the hope of attracting companies to locate investment, reported profits, and jobs within their borders. Now, an attempt is being made to restrain this tax competition via regulations that would allow countries to extract a growing share of companies’ worldwide profits. With this shift, a central question of international taxation appears to be how big each jurisdiction’s slice of the pie of profits should be. And relatedly, how do we set up rules to ensure that there is international consensus on how this pie is divided? These are tough questions, and ones that I suspect countries will be debating for the next decade.