Brooklyn Journal of International Law


Tsilly Dagan


The copiousness of tax treaties is often presented as proof, not only of their success but also of their desirability. In focusing on alleviating double taxation by allocating tax revenues, however, the treaties project is a missed opportunity. This article explains that an international tax standard is a network product and uses network theory to explore the potential advantages and drawbacks of the tax treaty network in entrenching such a standard. Networks facilitate stability and self-enforcement. By joining (and remaining in) a network, users benefit from the compatibility with other users; this, in turn, incentivizes new users to join and current users to remain, even in the absence of an enforcement mechanism. These advantages are not, however, without costs. Similar to other types of networks, the tax treaties network is locked into a suboptimal standard, which leaves unattended points of friction between jurisdictions as well as allows the network initiators (i.e., developed countries) to disproportionately benefit from the network at the expense of other users (i.e., developing countries) and, potentially, of taxpayers.