International Tax Reform : Challenges to Multilateral Cooperation

In 2021, the OECD proposed new rules for the cross-border taxation of multinational corporations. The proposed rules set forth the most significant reform to international tax rules in several decades. They follow approximately a decade of multilateral negotiation led by the OECD and drafted by a broader Inclusive Framework of over 140 countries. The goal of this Article is to highlight the importance of multilateral cooperation and illuminate the obstacles to implementing international tax reform. It argues that the new international tax framework requires unprecedented multilateral cooperation to reallocate taxing rights and limit profit shifting. But such ambitious cooperation may be more than countries can accomplish. The new rules are largely an outcome of political compromises rather than a principled approach to tax policy. They infringe on tax sovereignty, limit tax competition, and undermine the economic interests of the world’s developing countries.The Article begins by outlining the OECD’s two-pillar approach for addressing the tax challenges of digitalization and profit shifting. It examines the OECD’s role in designing international tax rules and explores the obstacles to implementing the OECD’s reform. The Article then assesses the anticipated winners and losers from the reform and considers the new approach as a political compromise. It evaluates limitations on tax sovereignty and competition and reflects on the involvement of developing countries in the policymaking process