The International Tax Regime : A Centennial Reconsideration

The international tax regime is almost a hundred years old. The two principles it is based on (the benefits principle and the single tax principle) were developed in the 1920s and 1930s. The regime functioned reasonable well until the 1980s, where globalization led to tax competition that undermined its principles. As the OECD is reconsidering the regime in the context of the BEPS and MAATM projects, now is a good time to rethink the fundamentals. Upon reconsideration, it is clear that the regime cannot function without multilateral consensus, and that such consensus is easier to achieve among source countries in the case of passive income and residence countries in the case of active income. This, in turn, suggests that the priorities underlying the benefits principle need to be reversed