Legitimacy and the Making of International Tax Law : The Challenges of Multilateralism

This article aims to analyse the multilateral action and instruments that have been and are being developed by the Organization for Economic Cooperation and Development (“OECD”) to enhance transparency and exchange of information and the Base Erosion Profit Shifting (“BEPS”) Project in light of the principle of legitimacy vis-à-vis non-OECD (developing) countries. The question addressed in this article is under what conditions can the OECD multilateral instruments and the BEPS Project be regarded as legitimate for non-OECD (developing) countries? For this purpose, the definition of Scharpf, including the distinction between input legitimacy i.e. government by the people and output legitimacy i.e. government for the people, will be taken into account. In order to answer this question, this article will provide a description of the legitimacy of international tax law making by international organizations and the role of the OECD in respect of OECD and non-OECD countries. Thereafter, the OECD multilateral instruments to enhance transparency and exchange of information and of the BEPS Project will be assessed in respect of the input and output legitimacy. The assessment of input legitimacy will take into account transparency, participation, and representation of developing (non-OECD) countries in the setting of the agenda and the drafting of the content of the OECD multilateral instruments to exchange information and the BEPS multilateral instrument. The analysis of output legitimacy will address the shared goals i.e. to tackle tax fraud, tax evasion and aggressive tax planning and the solutions presented by the G20 and OECD, adopted by OECD and non-OECD countries. The analysis of output legitimacy will also take into account the differences in objectives and resources between OECD and non-OECD (developing) countries. The first part will address the relationship between legitimacy and international tax law making. The second part will address the role of the OECD vis-à-vis developing countries and the membership of countries to the G20, OECD and the Global Transparency Forum. The third part will address the assessment of the input and output conditions for legitimacy of the OECD multilateral instruments to exchange information and the BEPS Project. Finally, a conclusion and recommendations for further research will be provided