Documents: Changing Governance Architecture of International Taxation (TAXGOV)
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Claudio M. Radaelli and Ulrike S. Kraemer
NEWGOV Policy Brief no. 04, Winter 2007/2008
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Claudio M. Radaelli and Ulrike S. Kraemer
This report presents the findings of the project on The Changing Architecture of International Tax Governance. In part 1 we introduce the key research questions that have led us to the choice of a specific theoretical framework, that is, strategic constructivism. Part 1 also shows how this theoretical framework is applied to EU and OECD tax coordination issues, and the substantive findings. Part 2 provides more details on the segment of our research project dedicated to the EU. Instead of looking at tax policy instruments such as tax rates or corporate tax structures, we take a governance approach to the analysis of tax coordination. Our major result is the explanation of why policy makers choose to differentiate among different governance arenas in order to process issues of tax policy that cannot be deal with at the systemic level. Part 3 carries on with our governance approach to tax coordination and introduces the theme of policy learning in order to interpret recent dynamics at the OECD level. Both part 2 and part 3 explore new modes of governance across time and arenas – the main argument being that in order to understand shifting modes of governance, one has to look at the political logic (in turn, both ideational and material-distributive) around which governance arenas are built.
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Claudio M. Radaelli and Ulrike S. Kraemer
This report analyses the major events and developments in international direct taxation. It revolves around four questions. The first question deals with the emergence of the ideational context in international tax policy. Although this is not the only ‘policy idea’ available, there is no doubt that since the mid-1990s harmful tax competition has provided a focal point for tax coordination at the international level. It has also created the pre-conditions for integrating tax issues with other important issues, such as the fight against money laundering. Hence the question arises why have recent international tax initiatives revolved around the notion of harmful tax competition? We answer this question by looking at the major player in international tax coordination, that is, the OECD.
Secondly, we examine the scope of international tax governance. Over the last ten years the OECD has moved towards multilateral, outward reaching and harder modes of governance. We look at the specific modes the OECD has chosen and deal with questions of timing (that is, when) and explanation (that is, why).
Thirdly, we address the question why governance in international taxation has become less technocratic and more political by examining the changing constellation of actors and their preferences.
Finally, we assess what has been achieved in three broad categories, that is, learning, processes, and outcomes.
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Claudio M. Radaelli and Ulrike S. Kraemer
This chronology of tax events provides a description of the main events since the 1960s looking at a wide range of actors and initiatives. On the one hand this will allow other researchers and policy stakeholders to keep track of the policy development in this area. In the context of the research, on the other hand, it is a valuable tool for the description and interpretation process. It is used to formulate initial ideas of how the policy process unfolded, to identify the opportunities open to policy makers, and to describe how new issues reached the policy agenda. Complemented with the information distilled out of the semi-structured interviews, and primary documentation analysed, this chronology enables the researchers to blend objective and subjective information into the analysis of European and international tax policy. This then feeds-back into a framework based on a process-tracing research design.
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Claudio M. Radaelli
This report summarizes the dissemination activities of NEWGOV Project 22 ‘The Changing Governance Architecture of International Taxation” during the duration of the Project from October 2004 to July 2007. A full list of activities can be found in section 2.
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Claudio M. Radaelli
The exploratory workshop (28 January 2005, University of Exeter) gathered some 20 participants engaged in theoretical and empirical research on soft law and new policy instruments in the European Union. The workshop discussed the following intellectual themes: classification of formal and informal governance; interaction between new and old governance; emergence of new governance; quality of new policy instruments; effectiveness of soft law and new governance in general; and type of social theory better suited to understand new governance.
One of the main conclusions of the meeting is that the term ‘soft law’ has limited intellectual mileage, both for lawyers and political scientists. Governance should be studied along a continuum from extremely formal to very informal. The ideal-types of governance which have been identified by the literature should be situated along the continuum.
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Claudio M. Radaelli and Ulrike S. Kraemer
Chronology of the major events in international and European tax governance since 1998.
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Claudio M. Radaelli and Ulrike S. Kraemer
This paper covers the long-term development of governance in international and EU direct taxation. It makes three claims. First, informal governance is ‘old’ governance as far as direct taxation is concerned. Informal modes were institutionalized by the OECD with the model treaty convention and guidelines for transfer pricing between the 1960s and the 1980s. Secondly, overall there is no linear pattern of informal governance. The OECD-promoted international tax order is more formal than in the past, but in the EU there is more interest in informal governance than in the past. Thirdly, the social legitimacy of international tax governance has declined over the last 80 years or so. The wider the scope and the range of actors targeted by informal governance, the larger the contestation of OECD and EU policy. This seems to lead to the paradoxical conclusion that legitimacy has been higher under conditions of close, technocratic governance networks - a point hard to reconcile with democratic theory. We explain this paradox by arguing that the questions about social legitimacy should be posed in terms of switch of logics, from technocratic to political. (Paper Prepared for the International Workshop on "The Transformation of the Territorial State: Changes in and Challenges to National Control over Police and Taxation", International University Bremen, June 17-18, 2005).
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Claudio M. Radaelli
This paper provides a theoretical and empirical assessment of the claim that the open method of coordination is a learning-based mode of governance. (Paper prepared for the ESRC seminar series: Implementing the Lisbon Strategy '- Policy Learning Inside and Outside the Open Method' - European Research Institute - University of Birmingham; November 2004)
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Claudio M. Radaelli and Ulrike S. Kraemer
The international workshop gathered 20 European high-level policy-makers, practitioners and academics engaged in international taxation. It is for the first time that many of these stake-holders sat together at one table and talked to each other. Thus the workshop followed Chatham House rules. The idea was to use the University of Exeter for a balanced discussion between EU institutions (the Commission and the Council), civil society organisations (Tax Justice Network), business representatives (CBI, Ernst & Young), think tanks (Institute of Economic Affairs), academics, lawyers, and policy-makers from the UK, the dependent territories, Ireland, and Estonia. Since the issue is topical and often hotly debated but the basic assumptions, concepts, and frameworks have not been clarified yet one main goal was to forge a common language in area of highly heterogeneous policy preferences.
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Claudio M. Radaelli and Ulrike S. Kraemer
This final report integrates the findings of the previous report on interviews with the recent interviews. We decided not to have a report on EU interviews and a report on OECD interviews because of the tight policy linkages between the tax policies of the two organisations. Accordingly, we have prepared an interim report and a final report in which there is no separation between the OECD level and the EU level. In this final report we integrate and expand on the text of the previous report. In total, we interviewed 35 people between months 7-16.
In terms of findings, we add a fourth finding to the three mentioned in the previous report on interviews. The Sections on methodology have not changed. Finally, interviews and contacts established during our fieldwork enabled us to secure the participation of top tax policy makers from the EU, its member states, the OECD, offshore jurisdictions, and the Tax Justice Network at the workshop on the public interest in international taxation, planned for February 2006 at the University of Exeter.
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Claudio M. Radaelli and Ulrike S. Kraemer
This report contains two major Sections. Section A illustrates our methodology and relates it to the overall aims of the project. Section B presents the substantive findings of our research on experimental governance in EU direct corporate tax policy.
International tax competition attracted a considerable amount of attention, either as dependent variable (i.e., why states compete, and how) or as independent variable (i.e., the impact of international tax competition on domestic policy autonomy). However, the European Union (EU) has experimented with different forms of coordination in direct corporate taxation - thus rekindling academic interest in explaining tax coordination. We draw on process-tracing and within-case analysis to examine the variance in modes of governance used by the EU to coordinate direct corporate tax policy.
In order to explain the choice of different modes of governance, we look at different hypotheses. We find that modes of governance are not chosen because of their properties in terms of efficiency or social legitimacy. Instead, the choice can be explained by political transaction costs. We then draw on actor-centered institutionalism to explain how actors respond to the material and ideational context and choose a mode of governance rather than another. By using a model based on three main actors, that is, the Commission, the Member States, and the business community, we show the emergence of functionally differentiated governance arenas. These arenas are based on different logics. Constellations of actors identify distinct policy problems and define the prevailing mode of governance, mixing formal and informal modes for reasons of political expediency. The conclusions show the implications of our analysis for the assessment of EU tax governance.
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Claudio M. Radaelli and Ulrike S. Kraemer
One of the methodological tools in the project is elite interviews. This report presents the methodological issues faced, how it was dealt with them, and the main results. The team used semi-structured elite interviews - a common methodology in public policy analysis and, more generally, political science. In total, 24 people have been interviewed so far in months 7-10 of the project. The semi-structured interviews were based on different questionnaires developed around a template. The questionnaires consisted of items such as questions about the emergence, efficiency, and legitimacy of classic and experimental governance in EU and OECD tax policy, the implementation of the savings directive, the transfer pricing forum, working groups on a common consolidated tax base and home state taxation pilot projects. Results concern the role of discourse and more generally ideational politics in EU taxation; the decline of political interest in the code of conduct in business taxation; and the cognitive, discursive, and most importantly political separation between initiatives revolving around the tax package and initiatives addressing the tax problems of multinationals.
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