3.1.1 The meta-juridical approach

3.1.1.1 “Aggressive tax planning” as a unifying term?

Firstly it is necessary to seek for a coherent concept of “undertaxation” in order to analyse the existence of the single tax principle.

Undertaxation is an ambiguous term that may cover every phenomenon of base erosion, profit shifting, double non-taxation, or even harmful tax competition. Therefore, several questions arise: where to set double non-taxation in this ambiguous context? Does the single tax principle embody the goal of avoiding the common undesirable effects of all those undertaxation techniques?

The current Base Erosion and Profit Shifting project (BEPS) by the OECD has been able to cover in a coherent and systematized manner all the previous concerns relating to undertaxation³⁶. The BEPS project is aimed at effectively preventing “double non-taxation, as well as cases of no or low taxation associated with practices that artificially segregate taxable income from the activities that generate it”³⁷.

“ BEPS relates chiefly to instances where the interaction of different tax rules leads to double non-taxation or less than single taxation. It also relates to arrangements that achieve no or low taxation by shifting profits away from the jurisdictions where the activities creating those profits take place. No or low taxation is not per se a cause of concern, but it becomes so when it is associated with practices that artificially segregate taxable income from the activities that generate it. In other words, what creates tax policy concerns is that, due to gaps in the interaction of different tax systems, and in some cases because of the application of bilateral tax treaties, income from cross-border activities may go untaxed anywhere, or be only unduly lowly taxed ”³⁸.

We can see how the OECD supports what I advanced previously: that the quantitative element is not an issue or harmful. Besides, the OECD identifies one of the qualitative elements I talked about before: the misalignment between the tax base and the real activity.

Following the terminology of the OECD and the EU, some authors have used the term “aggressive tax planning” to label all practices covering tax avoidance and “the existence of legal gaps or mismatches exploited in transnational situations”³⁹.

However, I believe that the term “aggressive tax planning” is not the most appropriate term. Firstly, “planning” implies taxpayer’s intentionality. As I stated before, the single tax principle cannot be defined by the taxpayer’s subjective behaviour, but by the objective and material consequences violating some universal principles. In this line, the Partnership Report issued by the OECD (1999) aims at eliminating double taxation and non-taxation resulting from hybrid qualifications, disregarding the taxpayer’s intentionality⁴⁰. Secondly, the existence of “legal gaps or mismatches” does not explain by itself the differentiation between tax avoidance and international tax arbitrage. Legal gaps and mismatches are inherent to every tax avoidance practice. The existence of legal gaps makes easier the manipulation of the tax base in order to shift the profit to other jurisdiction. In other words, the imperfect and formalistic international tax regime leaves multiple legal gaps that are exploited by taxpayers. Besides, mismatches are also inherent to every tax avoidance practice insofar as tax rates are different⁴¹.

Kleinbard has coined the term “stateless income”. In my opinion this term is very appropriate in order to construct the single tax principle. This term disregards the fraudulent behaviour of taxpayer. According to Kleinbard, “stateless income” is “income derived by a multinational group from business activities in a country other than the domicile (however defined) of the group’s ultimate parent company, but which is subject to tax only in a jurisdiction that is not the location of the customers or the factors of production through which the income was derived, and is not the domicile of the group’s parent company”⁴². Therefore, this term is able to encompass tax avoidance practices as well as international tax arbitrage⁴³. The goal pursued by the anti-avoidance measures is to realign the tax base location with the real substance of the activity.

3.1.1.2 The tax justice principles: equity and ability to pay

Some scholars have set out that base erosion and profit shifting may violate some of the traditional tax justice principles, such as equity, ability-to-pay or non-discrimination⁴⁴.

The maintenance of the public expenditure through taxes has two pillars: the equity principle and the solidarity principle. The ability-to-pay principle operates as a measure for the equity principle, whereas at the same time it is the tax corollary of the solidarity principle⁴⁵. Therefore, every taxpayer must contribute to the Treasury according to its ability to pay.

The equity principle requires a comparability element⁴⁶. According to this principle, similar situations must be treated equally, whereas different situations must be treated differently. This idea divides the equity principle in two dimensions: horizontal and vertical equity⁴⁷. The ability-to-pay principle operates as a measure of comparability between two situations in the tax field.

First of all, it is important set that the non-discrimination principle does not work for the single tax principle. Even though the foundation of this principle is the equity principle, the non-discrimination principle operates in a negative manner and only with respect to the horizontal equity.

Nevertheless, the equity and ability-to-pay principles do work to build the single tax principle. Both principles cannot work in isolation. The equity principle needs an appropriate pattern of differentiation, a measure to distinguish equals from unequals⁵². This criterion is the ability-to-pay principle. The ability-to-pay principle justifies that two taxpayers are taxed differently⁵³.

Real mobility does not appear to constitute a violation of equity. Let´s imagine two taxpayers residing in a country with a territorial system (exemption method). Taxpayer A has income of €100 from a foreign source (the foreign source is a low-tax jurisdiction) and taxpayer B earns income of €100 from domestic sources. Even though both taxpayers support different tax burden, this different taxation is justified by internation equity considerations⁵⁴. According to the benefits principle, the source country assumes the primary taxing right on active income and the residence country renounces to tax foreign income because considers that active income has more economic allegiance with the source country⁵⁵. The territorial system just taxes the ability-to-pay arising within its territory. Moreover, a capital import neutrality policy (CIN) may justify this different treatment because of the necessity for resident companies to maintain competitiveness abroad. The bottom line is that the generating-income activities are carried out in different countries, and then both taxpayers are in different situations so that a different treatment might be justified. In the same manner, internation equity might justify a deviation from ability-to-pay in those situations in which the residence country abstains from taxing (through a tax-sparing clause) because the generating-income activities are located in developing countries.

Now let´s modify the previous example and let´s assume that both taxpayers carry out their activities in their residence country. However, A has exploited some legal gaps to shift its tax base to a foreign low-tax country. In this situation it appears to be no justification for a different treatment as both taxpayers carry out their activity in the same country. Therefore, internation equity justification appears to vanish. It is a “stateless income” situation whereby tax location is not aligned with real location. In other words, a same taxable event has two different tax consequences (both taxpayers should be treated equally, according to their ability to pay). Besides, according to the benefits principle it does not seem legitimate that a taxpayer whose activity benefits from public services and infrastructure does not contribute to support public expenditure.

In the previous avoidance situation, two questions arise. The first one is whether this different tax treatment may be justified by investment attracting and competitiveness purposes. In other words, may tax competitiveness justify the granting of certain privileges? If we take a look at the so-called production tax havens⁵⁶, there is no legitimacy concern because they are deliberately aimed at raising investment and welfare. Therefore, equity deviations are justified. Nevertheless, when legal gaps are responsible for facilitating tax privileges there are two potential conclusions. The first conclusion suggests that to the extent that those privileges are not deliberate by the legislator, no justification can be invoked to justify an equity deviation. The second conclusion relates to the hypothetical situation in which legal gaps are deliberate⁵⁷. In this situation, the lack of transparency about the State’s intentions provokes a violation of the principle of legality, which requires transparent laws⁵⁸. Some authors have supported the legitimacy of formal avoidance with economic arguments such as international competitiveness⁵⁹. Nevertheless, I do not believe that economic motivations may be predominant to the democratic principles of legality and transparency. Between the citizens’ “right to mistake” and “obligation to be right”, it should prevail the former. The principle of legality is the last resort and guarantee in hands of the democratic societies.

The second question about tax avoidance is about to what extent every taxpayer has right to access to aggressive tax planning. If every taxpayer could do aggressive tax planning, we might infer that there are no deviations from the equity principle. Nevertheless, the labour factor is much more immobile than capital. Besides, capital income tax bases have more legal resources to artificially shift to other countries. Lastly, aggressive tax planning requires the taxpayer to spend a lot of resources in tax advisors⁶⁰. Therefore, we can conclude that not every taxpayer can access to aggressive tax planning.

3.1.1.3 Internation equity

The previous analysis about equity and ability-to-pay departs from a presumption: that a single State can legitimately claim the taxing right on an income over other countries. Who is that country? According to which criteria taxing rights are allocated among countries? Without a clear response to these questions, the single tax principle is a vacuous principle. If the single tax principle obliges countries to allocate taxing rights in order to avoid double taxation, then the allocation of taxing rights will determine indirectly the level of the single tax principle⁶¹.

Consequently, without a coherent and fair distribution of taxing rights, the equity principle does not tell us anything. Coherent because it is necessary that the taxing rights allocation does not provoke any hybrid outcome. In the hybrid situations, either both countries claim taxing rights on the same income or no country claims taxing right on the same income. The allocation should be fair as well. Allocation criteria should comply with fairness standards in order to avoid artificial distribution of the tax base, giving rise to tax avoidance opportunities. It might happen that developed countries want an allocation that prevents taxpayer from base erosion and profit shifting. On the contrary, developing countries might want an allocation that encourages capital mobility in order to attract investment. Setting a dividing line between what is considered real capital mobility and what is considered artificial tax base mobility is one of the most important dilemmas in international taxation. Depending on the different interests of the countries, the response to this dilemma may vary⁶². At this point, it is important to question which system is fairer, the arm’s length or the formulary apportionment approach?

Whereas interindividual equity and ability-to-pay have to do with equity between taxpayers, internation equity has to do with equity between countries⁶³. We have seen that interindividual equity needs an appropriate pattern of measure: the ability-to-pay. In the same manner, internation equity needs specific criteria to concrete a fair distribution of taxing rights. In this regard, beyond the theory developed by Peggy Musgrave and the benefits principle developed by the four economists⁶⁴, there is no rigorous theory.

The benefits principle⁶⁵ rests on too weak, ethereal and arbitrary assumptions and criteria, such as the “source” concept⁶⁶. The “residence” concept does not have a uniform definition. Some countries locate the residence jurisdiction where company is incorporated, whereas other countries locate it where company is managed. Moreover, residence is becoming expanded through the CFC rules to embrace a less formalistic approach⁶⁷. On the other side the source principle rests on a set of specific rules based on practicability and arbitrariness considerations. Therefore, even though source is a necessary concept, it is somewhat vacuous⁶⁸. For instance, the allocation of the active income rests on the permanent establishment notion and the arm’s length standard. Both the arm’s length standard and the permanent establishment threshold are easy to manipulate by taxpayers and give rise to an artificial allocation of the tax base⁶⁹.

To conclude, there is no general and coherent theory about the “source” concept so that it permits its specification and extrapolation to new situations still not covered. Solving double taxation and double non-taxation from hybrid situations requires reassessing and reallocating the current allocation criteria.

3.1.1.4 Neutrality

Some scholars have assessed the single tax principle from an economic perspective⁷⁰. According to these scholars, tax neutrality pursues taxation to be neutral regarding cross-border investment, in order to maximize the economic resources, increase global welfare and achieve international efficiency. Therefore, neutrality should be a guiding principle in international tax policy. International double taxation discourages cross-border investment, and undertaxation discourages domestic investment, and therefore both phenomena violate tax neutrality⁷¹.

Nevertheless there is to be cautious regarding tax neutrality. First of all, I consider that the fact that taxes are not neutral should not be a bad thing. As I explained previously, taxes are a sort of benefits taxes that represent an equilibrium between taxpayers’ preferences and States’ necessities⁷². The variable taxes/public services should be a valid element for countries and taxpayers in order to fulfil their heterogeneous necessities. Eliminating the States’ ability to compete in the international arena through taxes would put at risk their ability to attract investment and grow in the long term.

Moreover, the traditional distinction between capital export neutrality (CEN) and capital import neutrality (CIN) is blurring little by little because international tax competition is exacerbating. In effect, the confusion of the traditional roles of exporting and importing countries is making useless this distinction⁷³.

Lastly, there is no unanimity regarding which policy is better, CEN or CIN. Some authors suggest that all is about a game with winners and losers, where each country adopts the policy that suits it best. In effect, CEN and CIN have been used by countries as tools to achieve national interests over international efficiency considerations⁷⁴.

3.1.1.5 Conclusion

The infringement of the equity and ability-to-pay principles does not involve a conflict with the taxpayers’ right to do tax planning up to the extent law permits it. The core of this section lies on analysing the legitimacy of laws that, deliberately or not, allow taxpayers to avoid their tax obligations.

Consequently, the interindividual equity and ability-to-pay principles must inform not only the legislating activity, but also the activity of judges in the law interpretation⁷⁵. Designing a fair tax system that favours the alignment between the tax base and the real activity must be a mandate for the public authorities.

In the same way, internation equity must guide the international community in allocating taxing rights according to fairness criteria. The main dilemma is to establish what is fair and what is not.

3.1.2 Limitations from the positivistic approach

The purpose of this paper is to analyse the background, potential existence and effectiveness of the single tax principle from a universal basis. Therefore, tax treaty law is out of the scope of this paper.

3.1.2.1 The existence of a general international law

If we depart from a classical approach of international law (i.e., as a law that governs the relations between countries and delimits the scope of the taxing rights in order them to be able to peacefully coexist), international double taxation is a phenomenon susceptible to be covered by international law⁷⁶. I do not mean that general international law (covering customary law and the general principles of law) prohibits international double taxation, but that international law might potentially cover double taxation since classical international law is intended to govern conflicts between countries exercising overlapping rights over a same object.

In order international law to be able to cover double taxation, it is not enough the existence of an international conflict involving overlapping taxing rights. Besides, it is necessary international law to identify specific distribution criteria in order to allocate the taxing rights. In other words, the single tax principle is an inoperative principle insofar as international law does not concrete specific criteria for allocating taxing rights. Under which premise can international law prohibit double taxation and non-taxation resulting from hybrid qualifications if it does not provide specific criteria to allocate taxing rights? If the benefits principle determines the level of the single tax principle (as Avi-Yonah says)⁷⁷, how could we know what this level is without any allocation criteria? In this regard, the allocation provided by the benefits principle cannot give us coherent guidelines since “source” and “residence” lies on changing and not universal criteria, such as the arm’s length standard and the permanent establishment threshold⁷⁸.

Nevertheless, the previous reasoning does not apply to double non-taxation⁷⁹. We have to take into account that countries are free to abstain from making use of their resources and exercising their sovereign rights. Besides, it not likely that any country might feel offended and takes legal actions against other State just because it had not exercised its taxing rights. This reasoning corroborates the idea that double non-taxation cannot be defined by its quantitative aspect. The mere existence of low tax rates cannot give rise to any violation of international law. Therefore, the main question lies on determining whether customary law may prohibit the qualitative elements that underlie double non-taxation, such as the lack of transparency, violation of equity, or the lack of alignment between the tax base and the real activity.

The existence of a general international law in the tax field takes us to the potential existence of universal principles. The debate has been focused on identification an international customary law⁸⁰. But the mere existence of a customary law does not mean that it is effective. Customary law just can repeal a State’s conduct as long as it is an imperative or ius cogens norm⁸¹. This distinction is important because a first approach to an eventually binding single tax principle requires to know whether it is an imperative norm or it can be repealed by the mere State’s will. Is the single tax principle a ius cogens norm?

The first problem is that the normative corpus of the ius cogens does not have a conventional source. Even, the voluntarism doctrine has denied the existence of ius cogens⁸². Therefore, the responsibility for concreting the ius cogens norms has fallen on the International Court of Justice⁸³. In this regard it is widely accepted that Human Rights and the general principles of law are ius cogens norms.

Qualifying the single tax principle as an ius cogens norm is a hard task because of the uncertainty of its content. In order to achieve legal certainty, the international community has codified, to the extent possible, the corpus of the ius cogens norms through multilateral treaties. Furthermore, the own existence of the ius cogens has been captured by article 53 of the Vienna Convention of the Law of Treaties. Consequently, I believe that the only chance for the single tax principle to qualify as an ius cogens norm is linking it with the Human Rights. Specifically with the social and economic Human Rights (the second generation), from which tax justice principles derive⁸⁴.

Out of the Human Rights scope, it is really hard to talk about an ius cogens in international taxation that might bind States beyond their will. Every country is free to design its tax policy as it suits it best and to pursue its own national interest, permitting either double taxation or non-taxation⁸⁵. Even considering the single tax principle as a customary law norm, countries can sign bilateral treaties with inter partes effects or act unilaterally under the “persistent objector” rule⁸⁶.

Analysing the elements of the customary law, I do not believe that the international tax regime (and its underlying pillars) could qualify as customary law. The customary law requires two concurrent elements: a State practice and an opinio iuris⁸⁷.

Prima facie, it is possible to assert a State practice regarding the avoiding of international double taxation. As Tsilly Dagan evidences, there is no need to look at tax treaties to corroborate that almost every country has implemented any measure to avoid international double taxation, thus turning tax treaties into a superfluous instrument⁸⁸. Vogel considers that there is no customary law prohibiting international double taxation⁸⁹. According to this author, international double taxation can only be prevented by allocating taxing powers between countries, and so far, this allocation is just carried out by bilateral treaties. Nevertheless, I consider that the international tax treaty net is vast enough to evidence the State practice element. Besides, not only tax treaties have implemented a distribution of taxing rights. But also the arm’s length standard, worldwide accepted, implements a method for allocation. Moreover, the arm’s length has a dual function: anti-avoidance measure and allocation method to relieve international double taxation⁹⁰.

However, I do not believe that there is an opinio iuris with regard to the elimination of double taxation. The spiritual element or opinio iuris requires that the customary norm be “accepted as law”⁹¹. The own ICJ has required the conviction that the State practice has become binding because of the existence of a legal norm. Nevertheless, the Dagan’s work evidences that double taxation relief is not motivated by a legal conviction, but by economic reasons such as competitiveness in the international arena⁹². According to Lepard, the fact that the international community has been reluctant to sign multilateral treaties implementing the arm’s length evidences that countries want to protect their freedom to decide if they want to distribute the taxing rights and how to do it⁹³. This is evidence that there is no opinio iuris⁹⁴.

The benefits principle governs the allocation of taxing rights between the residence and the source country. Here it is not possible to support the existence of an opinio iuris either. Out of the tax treaty scope, countries unilaterally tax their taxpayers to the extent possible and according to economic factors. It is not infrequent that source countries tax with high tax rates passive income arising in their jurisdictions, breaking thus the benefits principle (which grants the taxing right on passive income to the residence jurisdiction). Secondly, the continuous “patch-up” of the international tax system through measures to avoid double non-taxation and base erosion is leading to erode the benefits principle⁹⁵. International equity considerations also may alter the benefits principle allocation, for instance through the tax-sparing and matching-credit clauses⁹⁶. Lastly, the benefits principle lies on arbitrary and artificial notions, such as source and residence⁹⁷. Furthermore, the criteria that conforms the source principle, such as the arm’s length and the permanent establishment threshold, are permanently changing in order to fight against aggressive tax planning. It is very hard to conclude that the “source” principle is a customary law norm because it is not universal (neither in time nor in space) and thus, we cannot extrapolate universal solutions to specific situations.

When talking about double non-taxation, it is harder to support the compliance of the two elements of customary law. The material element or State practice is not uniform or universal. It is true that the international community has raised great concerns about base erosion and developed a large set of anti-avoidance measures. This trend is more stressed in the developed countries and the OECD context because these countries are more interested in protecting their tax bases. However, this trend is sometimes incoherent because many countries tacitly consent to maintain legal loopholes⁹⁸. On the contrary, out of the OECD context, developing countries support an allocation of taxing rights that favours the tax base mobility. As I said before, setting a dividing line between what constitutes real capital mobility and what constitutes artificial tax base mobility depends on the perspective adopted⁹⁹.

At first sight, it may seem that there is an opinio iuris against double non-taxation. The recent OECD and EU projects against harmful tax competition and base erosion have evidenced the necessity of building a fairer tax system¹⁰⁰. Therefore the national selfish and competitiveness give in to a fair and cooperation-based tax system. Nevertheless, I find this attitude contradictory since the current international tax law does not prohibits the special tax incentives or preferential tax regimes¹⁰¹. Consequently, I do not believe in an opinio iuris that compels countries to adopt anti-avoidance measures against base erosion. This idea is reinforced, following to Lepard¹⁰², by the fact that the OECD has decided to issue non-binding recommendations instead of binding decisions.

Lastly, it is in the context of the harmful tax competition where it is easier to support the existence of a binding general international law. Departing from the classical theory of international law as a law of coexistence, it is possible to question whether it is lawful that a country hinders, through opacity practices, the other States’ ability to collect the income that legitimately belongs them¹⁰³. Is there a violation of other States’ tax sovereignty?

3.1.2.2 The effectiveness of the general international law in the domestic law

Analysing the single tax principle in the light of the general international law requires assessing not only its existence but also its effectiveness. Nevertheless it is convenient to repeat that analysing the effectiveness of international law is somewhat useless because it is unlikely that any country might feel offended by other States’ tax policy up to the point that it takes legal actions.

Therefore, this section will analyse the practical difficulties that citizens find to enforce international tax law when is violated by domestic law, particularly focusing on the Spanish case.

We find the first obstacle in the internal reception of the general international law (customary law and the general principles of law). In some countries such as the Netherlands, the international customary law is not part of the domestic law, and therefore citizens cannot invoke such norms in domestic courts¹⁰⁴. The Spanish Constitution does not mention the automatic reception of the general international law. Thus we can understand that in Spain, the international customary law does not attribute any subjective rights to its citizens, notwithstanding the potential international liabilities incurred by Spain when not observing such norms. This conclusion is aligned with the necessity of preserving the principle of legality and the rule of law in taxation¹⁰⁵.

On the other hand we cannot forget that Human Rights must inform the tax policy of States. Progressively more voices claim more prominence of Human Rights in the taxation field¹⁰⁶. Human Rights have been fully captured in the Spanish domestic law by international conventions and the Constitution, and therefore they enjoy an efficient protection at domestic level (writ of protection or recurso de amparo) and at international level (European Court of Human Rights). However, in the taxation field, the Human Rights lose all their effectiveness:

The last problem to enforce a potential single tax principle is the principle of legality and the rule of law, so important in taxation. These principles protect taxpayers when doing aggressive tax planning. Furthermore, they are widely captured in domestic laws, and they are regarded as general principles of international law, and therefore countries cannot violate them.

3.1.2.3 The States’ unilateral conduct as source of international liabilities: the estoppel

Beyond the general international law, the unilateral conduct of States may be a source of international liabilities¹⁰⁹. Serrano Antón has suggested applying the estoppel doctrine out of the tax treaties scope¹¹⁰. The estoppel is an institution whereby one State carries out a primary conduct that provokes that a second State, under good faith considerations, carries out a secondary conduct. Thus, the first State is bound by its own primary conduct, not being able to undo it to the detriment of the second State¹¹¹.

In the strictest theory it is possible to support that those countries voting for the BEPS recommendations have created a legitimate expectation on the rest of the international community about their intention to follow the BEPS. If eventually they do not implement the BEPS measures, either in their tax treaties or in their domestic law, those countries having followed the BEPS would be in a worse competitive position to attract foreign investment. Nevertheless, as Serrano Antón has expressed, it is unlikely that the mere vote for a non-binding recommendation could create a legitimate expectation¹¹².

A second manifestation of the estoppel could arise when a State adopts a specific criterion for allocating taxing rights (for instance the arm’s length) under the legitimate expectation created by other countries. In this context two damaging situations may arise. If such a State exercises its taxing right, there is a risk that other State exercises its taxing right on the same income because it applies a different allocation criterion. Therefore double taxation arises. The second situation would happen when such a State, applying the allocation criterion, refrains from taxing and other State, applying a different criterion, also refrains from taxing the same income.

Lastly, It is possible to give some legal value to the matching principle if we apply the estoppel doctrine. The matching principle is a principle whereby a country refuses to exercise its taxing right in favour of the other contracting State under the legitimate expectation that this other State will tax the income at a minimum tax rate or single tax¹¹³. However, when this legitimate expectation is broken and this other State does not tax the income, the matching principle is violated. According to Avi-Yonah, tax treaties are signed under the expectation that the other contracting State will tax the income at a minimum rate. Therefore, tax havens are not “proper treaty partners”¹¹⁴. Hence, the unilateral implementation through domestic law of special tax incentives affecting to income covered by the tax treaty, might violate the legitimate expectation created on the other contracting State¹¹⁵.

Nevertheless, the estoppel is ineffective in those situations where there is no legitimate expectation. For instance, in hybrid situations whereby no country claims taxing right on the same income. These situations are created by the inherent flaws of the international tax regime. Under which legal title can a country feel damaged since it never renounced to a taxing right over which it never had any right?

3.1.3 Historical-sociological approach: international cooperation and soft law in the modern international tax law

This approach analyses international tax law from a dynamic perspective. If international society changes, international tax law changes too, according to the new interests and values¹¹⁶.

Despite the great difficulties to apply a binding international tax law to avoid double non-taxation, we should not forget that international tax law has evolved upon the time. While the classical international law was based on relations of conflict and coexistence, the modern international law moves towards international cooperation in order to better achieve national goals. Friedman described this transformation as the step from an international law of coexistence towards an international law of cooperation¹¹⁷.

As a result of this new dynamic of cooperation, global law has developed. Global law is the consequence of a gradual process of “verticalization” of law¹¹⁸. International organizations have turned into trustees of national interests to encourage the cooperative way. As a result, domestic laws are harmonizing gradually, shaping a true global law. This new global law is not only limited to govern the international relations and to allocate taxing powers, but also it is incorporating common national principles, such as justice tax principles, and making them universal. This globalization of law is consequence of the “sympathy effect”, whereby States tend to copy other States’ solutions, and the recommendations and guidelines issued by international organizations¹¹⁹.

This evolution is appreciable if we look back the historical concerns of international taxation. Until the late 20^th century, international double taxation was the main concern of international taxation. This concern fits perfectly in the classical concept of international law since it requires solving the overlap of taxing powers by allocating them. On the contrary, double non-taxation does not involve an international conflict. Double non-taxation has raised the necessity to cooperate in order to achieve common national goals and to enforce the national tax justice principles. Therefore, tax justice principles are becoming global. The main feature of the modern international taxation is the existence of supranational goals that require international cooperation.

Another of the main features of the modern tax law is the polycentry in the sources¹²⁰. The centres producing tax law have been displaced to international organizations. Currently, the OECD and the European Union have become the most important agents producing international tax law; their recommendations, without having binding force, have influence de facto in law-making by countries.

The soft law is currently the key source in international taxation. Even though it is not binding, it has a lot of influence. The soft law appears to be the most effective tool for the international cooperation. The main virtue of soft law is the flexibility. It offers a “third way between the potentially uncomfortable position of describing the OECD guidance as ‘law’ (…) and the potentially unrealistic position of describing it as not law at all”¹²¹. As a result of this flexibility, the soft law allows to involve new actors in the tax debate, such as private actors, in order to reinforce the legitimacy and compliance of the hard law¹²². We can observe that some processes to adopt soft law norms incorporate public consultation procedures. For instance, the BEPS project has incorporated public consultations during its adoption¹²³.

Once asserted the existence of a global tax law, it is important to analyse its legitimacy. At first sight, international organizations work on purportedly universal principles. But sometimes these law-making processes lack of universal representation. The principle “no taxation without representation” and the rule of law require every tax norm to have democratic legitimacy. That is, every tax rule must be legitimised by the parliament, where citizens are represented. Therefore, we can question if the BEPS project enjoys legitimacy as in the adoption process only 44 countries have participated, which ones mainly represents to developed countries¹²⁴. The same question has been set out with regard to the harmful tax competition project carried out by the OECD in 1998¹²⁵.

Furthermore, the international community is not uniform at all. The economic and demographic structures are different among countries. Besides countries and taxpayers might have heterogeneous preferences with regard to the tax level and public services associated therein.

On the other side, every tax policy suffers to a certain extent from politicization and ideology. And this politicization is present in the soft law production as well¹²⁶. The OECD and the EU support opinions close to liberalism regarding both double taxation and base erosion. In fact, economic principles have prevailed over tax justice principles. In the EU, tax neutrality is the principle governing the fundamental freedoms. This same liberal and anti-protectionist feeling has led the OECD to fight against double taxation in order to create a global market as efficient as possible. Similarly, the OECD and EU efforts to fight against harmful tax competition and base erosion seek to create a level playing field for everybody in order to promote fair competition¹²⁷. Both OECD and UE do not agree with protectionist stances as they have proscribed preferential tax regimes. Nevertheless, it is hard to discern whether these economic principles are genuinely aimed at achieving a global welfare, or by the contrary they are aimed at achieving national goals. As Graetz states, U.S. tax policy has always served to its national interests over neutrality concerns.

Therefore, neither every country is represented in the soft law law-making, nor represented countries may claim representation on the remaining countries. Keeping in mind this circumstance, we can question whether global tax law is truly universal or it is an imposition from the relevant actors in the international community.