Brooklyn Journal of International Law


Diane Ring


Over the past two and a half years, the international tax community has focused on the Base Erosion and Profit Shifting Project (BEPS project) undertaken by the Organisation for Economic Co-operation and Development (OECD) at the behest of the G20. According to the OECD, the resulting 2015 agreement involved the direct participation of more than sixty countries. An additional fifty-nine countries indirectly participated through regional dialogues. Furthermore, numerous international organizations are credited with participating in discussions and contributing to the resulting product. But, effective implementation of the BEPS agreement requires domestic action of various types—the domestic side of international agreement. This article makes three points regarding the pivotal domestic side of international tax agreements such as the BEPS project: (1) domestic-level compliance cannot be presumed simply from the existence of some degree of international agreement; (2) international agreements may be stymied on the domestic front for five major reasons; and (3) the BEPS project—which contains multiple issues, types of commitments, and players—presents numerous dimensions on which strategic conduct can be pursued, consistent with a two-level game theory model of international relations. Emphasizing the reality of domestic derailments of international tax agreements, Part I introduces the prominent and recent U.S. domestic failure to secure ratification of U.S. tax treaties to provide a rich sense of the complicated political forces at play on the domestic side when bilateral tax treaties are signed. Part II provides a preliminary review of the international relations literature regarding international cooperation. Part III looks to some of the theoretical work reviewed in Part II to offer preliminary thoughts on a framework for understanding the intersection of international tax and domestic politics. In light of the increasing role that global cooperation and coordination play in the development of successful international tax policy and practice, the article concludes by considering subsequent research steps that could illuminate the domestic side of international agreements.