¹ Avi-Yonah, Reuven S. & Xu, Haiyan, Evaluating BEPS: A Reconsideration of the Benefits Principle and Proposal for UN Oversight, 6 Harv. Bus. L. Rev. 185, 208 (2016)Google Scholar (describing BEPS as a “patch-up of existing rules and principles”); Graeme S. Cooper, Implementing BEPS, or Maybe Not—The Australian Experience One Year on, 2017 N.Z. L. Rev. 145, 150 (“it is not hard for a country to commit to implement reports which skirt danger, are vague and ultimately anemic”); Herzfeld, Mindy, The Case Against BEPS: Lessons for Tax Coordination, 21 Fla. Tax Rev. 1, 59 (2017)Google Scholar (“the final BEPS reports were so watered down as to be meaningless”); Allison Christians, BEPS and the New International Tax Order, 2016 BYU L. Rev. 1603, 1604 (2016) (conceiving of BEPS chiefly as a move by the OECD to secure control of international tax policy against “rival international tax policy-making institutions”); Azam, Rifat, Ruling the World: Generating International Tax Norms in the Era of Globalization and BEPS, 50 Suffolk U. L. Rev. 517, 523 (2017)Google Scholar (“I do not expect the BEPS project to substantially impact the international tax regime”). For more charitable views, see Yariv Brauner, Treaties in the Aftermath of BEPS, 41 Brook. J. Int'l L. 973, 1023, 1041 (2016) (observing that the BEPS recommendations were “the best that the OECD could politically achieve” but that “at best, the project will likely result in minimal reform of the international tax regime and its institutions”); Arthur J. Cockfield, Shaping International Tax Law and Policy in Challenging Times, 54 Stan. J. Int'l L. 223, 224, 231 (2018) (the “emphasis on multilateralism is a positive step” although BEPS “mainly contemplates modest reforms”). Others view the current environment as at least potentially transformative. See, e.g., Steven A. Dean, A Constitutional Moment in Cross-Border Taxation (forthcoming); Christensen, Rasmus Corlin & Hearson, Martin, The New Politics of Global Tax Governance: Taking Stock a Decade After the Financial Crisis, 26 Rev. Int'l Pol. Econ. 1068 (2019)Google Scholar.

² Full taxation is one of two elements of “single taxation,” the other is the norm against double taxation. See discussion in Part II.C infra.

³ Lee Sheppard, The Twilight of the International Consensus, 141 Tax Notes 7 (2013).

⁴ See also Dean, Steven, Closing Remarks, 24 Fordham J. Corp. & Fin. L. 317, 317 (2019)Google Scholar (describing a “constitutional moment” in international tax).

⁵ For first-hand accounts, see Pascal Saint-Amans, 20th Annual David R. Tillinghast Lecture on International Taxation (NYU School of Law), YouTube (Oct. 19, 2015), at https://www.youtube.com/watch?v=K8V_6j1gx-k (speech, by the OECD's tax head, reflecting on developments); Manal Corwin, 19th Annual David R. Tillinghast Lecture on International Taxation (NYU School of Law), YouTube (Oct. 7, 2014), at https://www.youtube.com/watch?v=tXmsT4NvnI8 (speech, by former Treasury official, reflecting on developments).

⁶ Model Tax Convention on Income and on Capital, Art. 4 (OECD Comm. on Fiscal Affairs 2017) [hereinafter OECD Model] (defining residence by reference to domestic law). See generally Omri Marian, Jurisdiction to Tax Corporations, 54 B.C. L. Rev. 1613 (2013) (discussing domestic definitions of corporate tax residence).

⁷ Mitchell A. Kane, A Defense of Source, 32 Yale J. Reg. 311, 326–31 (2015) (source rules serve a distributive function and reflect geographic location of income); Stephen E. Shay, J. Clifton Fleming, Jr. & Robert J. Peroni, “What's Source Got to Do with It?” Source Rules and U.S. International Taxation, 56 Tax L. Rev. 81 (2002) (source reflects legal jurisdiction to tax).

⁸ OECD Model, supra note 6, Art. 7.

⁹ See, e.g., id. Art. 23.

¹⁰ Tsilly Dagan, The Tax Treaties Myth, 32 N.Y.U. J. Int'l L. & Pol. 939 (2000).

¹¹ See generally Pasquale Pistone, General Report, in The Impact of the OECD and UN Model Conventions on Bilateral Tax Treaties (2012) (Michael Lang, Pasquale Pistone, Josef Schuch & Claus Staringer eds., 2012).

¹² For historical background, see Graetz, Michael J. & O'Hear, Michael M., The “Original Intent” of U.S. International Taxation, 46 Duke L.J. 1021 (1997)CrossRefGoogle Scholar; Sunita Jogarajan, Double Taxation and the League of Nations (2018).

¹³ OECD Model, supra note 6, Art. 5.

¹⁴ Id. Art. 7.

¹⁵ See, e.g., OECD, Report on the Attribution of Profits to Permanent Establishments (2010); OECD, Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (2017) [hereinafter Transfer Pricing Guidelines].

¹⁶ Although the OECD standard-setting process is multilateral, the legal instruments it generates—tax treaties—are bilateral. Most countries use the OECD Commentary and the Transfer Pricing Guidelines to help interpret their tax treaties. See Pistone, supra note 11. States also have developed multilateral agreements at the OECD in the areas of tax information exchange and administrative assistance. See Azam, supra note 1, at 543–46.

¹⁷ For more on the influence of the OECD Model and guidance, see Pistone, supra note 11.

¹⁸ OECD, Harmful Tax Competition: An Emerging Global Issue (1998) [hereinafter 1998 OECD Report].

¹⁹ Some of international tax's sharpest legal critics have chronicled these strategies. See, e.g., Edward D. Kleinbard, Stateless Income, 11 Fla. Tax Rev. 699 (2011), Bret Wells & Cym Lowell, Tax Base Erosion and Homeless Income: Collection at Source Is the Linchpin, 65 Tax L. Rev. 535 (2012); J. Clifton Fleming, Jr., Robert J. Peroni & Stephen E. Shay., Getting Serious About Cross-Border Earnings Stripping: Establishing an Analytical Framework, 93 N.C. L. Rev. 673 (2015). Prominent economists have contributed crucial insights. See, e.g., Rosanne Altshuler & Harry Grubert, The Three Parties in the Race to the Bottom: Host Governments, Home Governments and Multinational Companies, 7 Fla. Tax Rev. 137 (2005); Kimberly A. Clausing, Multinational Firm Tax Avoidance and Tax Policy, 62 Nat'l Tax J.703 (2009); Jane G. Gravelle, Tax Havens: International Tax Avoidance and Evasion, Cong. Res. Serv. (Jan. 15, 2015), available at http://fas.org/sgp/crs/misc/R40623.pdf.

²⁰ Ruth Mason, Special Report on State Aid — Part 3: Apple, 154 Tax Notes 735, 736 (2017).

²¹ S. Subcomm. on Investigations, Hearings on Offshore Profit Shifting and the U.S. Tax Code- Part 2 (Apple Inc.), at 45 (Comm. Print 2013) (testimony of Apple chief executive officer Tim Cook) [hereinafter Senate Apple Hearings].

²² See id. at 20.

²³ See generally Kleinbard, supra note 19.

²⁴ Domestic laws, such as exemption provisions, may prevent tax at residence automatically, regardless of whether income was taxed at source. That residence states did not fix these gaps can be explained several ways: policymakers may have assumed—without verifying—that income would be taxed abroad; they may have exempted foreign income to compete with other states for corporate residents, and they may have believed that nontaxation provided resident companies a competitive advantage abroad. To avoid triggering residual residence-state taxation, companies also employed creative ways to appear as if they had no foreign income subject to current taxation by the residence state.

²⁵ OECD, Addressing Base Erosion and Profit Shifting 15–16 (2013) [hereinafter Addressing BEPS] (“statutory corporate income tax rates in OECD member countries dropped on average 7.2 percentage points between 2000 and 2011, from 32.6% to 25.4%”).

²⁶ 1998 OECD Report, supra note 18, at 19–37 (detailing such regimes).

²⁷ Addressing BEPS,supra note 25, at 15–23 (reviewing empirical studies).

²⁸ IRC §§ 951–65 (deeming certain kinds of passive or shifted foreign profits of foreign subsidiaries of U.S. shareholders to be earned directly by their U.S. shareholders).

²⁹ Before 2017, the U.S. corporate tax rate was 35%, one of the highest in the world. Since 2017, it has been 21%, a rate more aligned with that of major U.S. trading partners.

³⁰ Notice 95-14, 1995-1 CB 297.

³¹ Treas. Reg. § 301.7701-1 to -2.

³² Treas. Reg. § 301.7701-1 to -3 (providing elections); IRS Form 8832 (entity classification form).

³³ As a simple example, the receipt by a second-tier foreign subsidiary in a low-tax jurisdiction (HavenCo) of interest from a first-tier operating company in a high-tax jurisdiction (OpCo) could be taxable to OpCo's U.S. parent (USCo) under U.S. CFC rules. Checking the box to disregard HavenCo as a separate entity from its parent (OpCo), however, would make the interest disappear from the perspective of the U.S. tax system; the United States would ignore both the payment and receipt of the interest. But OpCo's residence state would still see the interest payment, and would still allow OpCo to deduct it. The payment of deductible interest therefore shifts profits from high-taxed OpCo to low-taxed HavenCo, without triggering the U.S. CFC rules.

³⁴ IRC § 482. For the history of the standard since 1935 and the role of the United States in disseminating it, see Reuven S. Avi-Yonah, The Rise and Fall of Arm's-Length: A Study in the Evolution of U.S. International Taxation, 15 Va. Tax Rev. 89 (1995); Stanley I. Langbein & Max R. Fuss, The OECD/G20-BEPS-Project and the Value Creation Paradigm: Economic Reality Disemboguing into the Interpretation of the “Arm's Length” Standard, 51 Int'l L. 259 (2018).

³⁵ See Transfer Pricing Guidelines, supra note 15, at 33 (elucidating the OECD standard). See also Treas. Reg. §§ 482-1 to 482-9.

³⁶ Transfer Pricing Guidelines, supra note 15, at 101–17.

³⁷ Id.

³⁸ There is no shortage of criticism of the arm's-length standard. See, e.g., Avi-Yonah, supra note 34; Wells & Lowell, supra note 19.

³⁹ See generally IRS Notice 88-123, 1988-2 CB 458, at S-6 (noting the government's judicial losses).

⁴⁰ Transfer Pricing Guidelines, supra note 15, at 23 (defining “arm's-length range”).

⁴¹ See Reuven S. Avi-Yonah, The Structure of International Taxation: A Proposal for Simplification, 74 Tex. L. Rev. 1301, 1344–46 (1996) (providing examples).

⁴² The flexibility of the standard also leads to double taxation when two different jurisdictions disagree on the treatment of a single, cross-border transaction or interaction, and each seeks to tax in full, or one jurisdiction seeks an upward price adjustment, but the other refuses to make a corresponding downward adjustment.

⁴³ Sebastian Dueñas, CFC Rules Around the World, Tax Found. Fisc. Fact (June 2019) (giving history).

⁴⁴ Langbein & Fuss, supra note 34.

⁴⁵ Offshore Profit Shifting and the U.S. Tax Code – Part 2 (Apple Inc.), 113th Cong. 2 (May 21, 2013) (memorandum to the members of the Permanent Subcommittee on Investigations from Senators Levin and McCain), at 3 (noting that when Treasury tried to close the check-the-box loophole, “the proposal was met with such opposition from Congress and industry groups that it was never adopted”).

⁴⁶ See Michael Keen & Kai A. Konrad, The Theory of International Tax Competition and Coordination, in 5 Handbook of Public Economics 257, 310 (Alan J. Auerbach, Raj Chetty, Martin Feldstein & Emmanuel Saez eds., 2013) (acknowledging that defining tax havens involves “hazy” line-drawing, but that “three features seem to capture the essence: low taxation that is not a reflection of high revenue, relative to needs, from other sources; the attraction of profit-shifting and other tax arbitrage activities more than real activity; and imperfect sharing of information”); Adam H. Rosenzweig, Why Are There Tax Havens?, 52 Wm. & Mary L. Rev. 923 (2010).

⁴⁷ Omri Marian, The State Administration of International Tax Avoidance, 7 Harv. Bus. L. Rev. 1, 30 (2017) (concluding that Luxembourg created bespoke tax shelters for foreign multinationals). Some of these deals may have violated EU law. See Ruth Mason, Identifying Illegal Subsidies, 69 Amer. U. L. Rev. 479 (2019) (critically evaluating the Commission's recent state-aid investigations involving transfer-pricing rulings).

⁴⁸ See e.g., Commission Communication, Towards a More Efficient and Democratic Decision Making in EU Tax Policy, COM(2019) 8 of Jan. 15, 2009, at 1. See id. (observing that “taxation has been closely linked to national sovereignty, due to its role in national revenues, budgets and policy choices. Member States have defended this sovereignty”).

⁴⁹ Indeed, there are reasons to think it would be worse, including that it would shift the target of the rent-seeking behavior from national politicians, who are subject to electoral discipline, to unelected tax administrators who represent their countries at the OECD.

⁵⁰ See Ronen Palan, Tax Havens and the Commercialization of State Sovereignty, 56 Int'l Org. 151 (2002). Even wealthy states commercialize aspects of their sovereignty, including by offering tax-free zones and other ring-fenced regimes. See, e.g., OECD, Progress in Identifying and Eliminating Harmful Tax Practices (2001) 12–14 (listing “preferential” tax regimes in OECD states).

⁵¹ For resources discussing the poor-to-rich revenue shift caused by tax treaties, see notes 269 to 270 infra. Rich states typically are net residence states when they negotiate treaties with poor states. Given how well understood these effects are, there is no reason to think that they are not deliberate.

⁵² Cf. H. David Rosenbloom, The David R. Tillinghast Lecture International Tax Arbitrage and the “International Tax System,” 53 Tax L. Rev 137 (2000).

⁵³ Much has been written on corporate tax arbitrage. See, e.g. id.; Diane M. Ring, One Nation Among Many: Policy Implications of Cross-Border Tax Arbitrage, 44 B.C. L. Rev. 79, 85 (2002); Mitchell A. Kane, Strategy and Cooperation in National Responses to International Tax Arbitrage, 53 Emory L.J. 89 (2004); Adam H. Rosenzweig, Harnessing the Costs of International Tax Arbitrage, 26 Va. Tax Rev. 555 (2007).

⁵⁴ See Rosenbloom, supra note 52, at 144 (arguing that nothing “should or can be done about [international tax arbitrage]”).

⁵⁵ Id. at 143.

⁵⁶ See, e.g., Brauner, supra note 1, at 980 (“the international tax regime has also been dominated by the perceived binary choice between competition and harmonization”).

⁵⁷ Addressing BEPS,supra note 25, at 15–25, 61–73 (2013) (reviewing recent empirical work).

⁵⁸ Edward D. Kleinbard, Through a Latte, Darkly: Starbucks's Stateless Income Planning, 139 Tax Notes 1515 (2013) (highlighting information gaps between taxpayers and tax administrations).

⁵⁹ Addressing BEPSsupra note 25 at 17 (there is “abundant circumstantial evidence that BEPS behaviors are widespread”). As one example, the OECD noted that in 2010, Barbados, Bermuda, and the British Virgin Islands received more foreign direct investment than did Germany, and the British Virgin Islands was the world's largest investor in China, well ahead of the United States. Id.

⁶⁰ Economists have closely studied profit shifting, but they disagree over its extent. See id. at 61–71 (literature review).

⁶¹ Cf. Peter D. Enrich, Saving the States from Themselves: Commerce Clause Constraints on State Tax Incentives for Business, 110 Harv. L. Rev. 377 (1996) (examining subnational tax in the United States).

⁶² Reuven S. Avi-Yonah, Globalization, Tax Competition, and the Fiscal Crisis of the Welfare State, 113 Harv. L. Rev. 1573 (2000).

⁶³ The literature on tax competition is voluminous. For literature reviews, see, for example, Keen & Konrad, supra note 46; Tsilly Dagan, International Tax Policy: Between Competition and Cooperation 120–41 (2018); for contemporary arguments in favor of tax competition, see, for example, Julie Roin, Competition and Evasion: Another Perspective on International Tax Competition, 89 Geo. L.J. 543 (2000); David C. Elkins, The Merits of Tax Competition in A Globalized Economy, 91 Ind. L.J. 905 (2016).

⁶⁴ See Martin Hearson, The OECD and the Lost Battle to Impose Sanctions on Tax Havens, LSE Bus. Rev. (2016). Among the accomplishments of the OECD Harmful Tax Practices Project were an increase in transparency and peer review that continue to this day, an approach to identifying harmful tax competition that persists and was used in BEPS, and the establishment of the Global Forum on Tax Transparency. See Hugh J. Ault, Reflections on the Role of the OECD in Developing International Tax Norms, 34 Brook. J. Int'l L. 757, 763–72 (2009).

⁶⁵ See Lilian V. Faulhaber, The Trouble with Tax Competition: From Practice to Theory, 71 Tax L. Rev. 311, 327–32 (2018) (describing OECD and EU Code of Conduct initiatives); Ruth Mason, Special Report on State Aid—Part 1: State Aid FAQ, 154 Tax Notes 451 (2017) (explaining early use and quiet abandonment of state-aid investigations to enforce EU conceptions of harmful tax competition).

⁶⁶ See Faulhaber, supra note 65 (arguing that countries support definitions of tax competition that will help them win inbound investment). For game-theory accounts of tax cooperation, especially in tax treaties, see, for example, Tsilly Dagan, The Tax Treaties Myth, 32 N.Y.U. J. Int'l L. & Pol. 939 (2000); Thomas Rixen, The Political Economy of International Tax Governance (2008); Adam H. Rosenzweig, Thinking Outside the (Tax) Treaty, 2012 Wis. L. Rev. 717, 728–47 (2012).

⁶⁷ Marian, supra note 47.

⁶⁸ Rosenzweig, supra note 53, at 618–20 (recounting heated controversy over attempts to repeal check-the-box).

⁶⁹ At the same time that corporate tax dodging drew negative attention during this period, tax authorities in the United States adopted extraordinary (and some say illegal) interpretations of existing law to cut taxes for financial institutions. See Albert H. Choi, Quinn Curtis & Andrew T. Hayashi, Crisis-Driven Tax Law: The Case of Section 382, 23 Fla. Tax. Rev. 1 (2019).

⁷⁰ Offshore Profit Shifting and the U.S. Tax Code – Part 1 (Microsoft & Hewlett Packard): Hearing Before the Permanent Subcomm. on Investigations of the S. Comm. on Homeland Sec. & Governmental Affairs, 112th Cong. 2 (2012).

⁷¹ House of Commons, Comm. of Public Accounts, HM Revenue & Customs: Annual Report and Accounts 2011–12 (19th Rep. Sess. 2012–13). An Amazon executive fared no better in his attempt to defend Amazon's £1 million tax bill on £4 billion in sales to the country in the prior year. Id.

⁷² Id. at 26 (testimony of Troy Alstead, Starbucks’ chief financial officer).

⁷³ Id.

⁷⁴ Anthony Faiola, For Starbucks in Britain, a Skinny Tax Bill?, Wash. Post (Dec. 6, 2012) (describing “rising British wrath” in the “highly public boycott” of Starbucks motivated by revelation that since 1998, Starbucks had paid “only $13.76 million in British corporate taxes on nearly $5 billion in British sales”).

⁷⁵ Senate Apple Hearings, supra note 21, at 6.

⁷⁶ Id. (testimony of Phillip Bullock, Tax Operations Head of Apple, Inc.). But see id. at 20 (testimony of Tim Cook, chief executive officer of Apple) (denying that Apple negotiated taxes with Ireland). See also Apple CEO Tim Cook Grilled on Irish Tax Scandal, Assoc. Press (May 21, 2013) (describing the Irish Prime Minster as denying that Ireland negotiated taxes with Apple).

⁷⁷ See, e.g., Faiola, supra note 74.

⁷⁸ See, e.g., Charles Duhigg & David Kocieniewske, How Apple Sidesteps Billions in Taxes, N.Y. Times, at A1 (Apr. 28, 2012). The strategy derived its name because the structure typically employed, beneath the U.S. parent, second- and fourth-tier Irish subsidiaries with a third-tier Dutch subsidiary between them. The structure allowed U.S. multinationals to take advantage of tax benefits available under both Dutch and Irish law.

⁷⁹ See Shu-Yi Oei & Diane M. Ring, Leak-Driven Law, 65 UCLA L. Rev. 532 (2018) (detailing the disclosure and media attention). See also Arthur J. Cockfield, Big Data and Tax Haven Secrecy, 18 Fla. Tax Rev. 483 (2016) (discussing information gleaned from tax haven data leaks).

⁸⁰ Such ordinary rulings included confirmation of requesting entities’ status as Luxembourg tax residents. See Marian, supra note 47.

⁸¹ Id. at 31 (claiming that Luxembourg would accede to the “whim” of taxpayers as to debt or equity classifications).

⁸² See, e.g., Eur. Parliament News, Tax Avoidance: MEPs Accuse Council of Undermining EU's Credibility (Feb. 1, 2018) at http://www.europarl.europa.eu/news/en/headlines/priorities/taxes/20180126STO94140/tax-avoidance-meps-accuse-council-of-undermining-eu-s-credibility (quoting Member of European Parliament Ana Gomes as stating that corporate tax avoidance “fuels populism and discredits our governments, political parties and public institutions”).

⁸³ See Manal S. Corwin, Sense and Sensibility: The Policy and Politics of BEPS, 145 Tax Notes 133, 143 (Oct. 6, 2014) (using the term to describe increased scrutiny of international tax by the public and politicians).

⁸⁴ G20, Leaders’ Declaration, Los Cabos, Mexico, para. 48 (2012). (“we reiterate the need to prevent base erosion and profit shifting”).

⁸⁵ OECD, Action Plan on Base Erosion and Profit Shifting 11 (2013) [hereinafter BEPS Action Plan]. This phenomenon is part of a larger trend. See Jan Wouters & Sven Van Kerckhoven, The OECD and the G20: An Ever Closer Relationship?, 43 Geo. Wash. Int'l L. Rev. 345, 346 (2011); Allison Christians, Taxation in a Time of Crisis: Policy Leadership from the OECD to the G20, 5 Nw. J. L. & Soc. Pol. 19 (2010).

⁸⁶ BEPS Action Plan,supra note 85.

⁸⁷ Id. at 20.

⁸⁸ Id. at 24–25.

⁸⁹ See, e.g., Amanda Athanasiou & Margaret Burow, William Morris and Carol Doran Klein-BEPS and Business, 76 Tax Notes Int'l 1058 (Dec. 22, 2014) (quoting Will Morris of the OECD's Business and Industry Advisory Committee as stating that “a lot of people thought” that “a disparate group of countries” could not hold together).

⁹⁰ See Itai Grinberg, The New International Tax Diplomacy, 104 Geo. L.J. 1137, 1146–52 (2016) (discussing involvement of G20).

⁹¹ See, e.g., Camille Prigent, Interview with Pascal Saint-Amans (Aug. 29, 2017), available at https://www.leadersleague.com/en/news/pascal-saint-amans-oecd-project-beps-was-a-political-necessity (quoting the head of tax for the OECD as stating “We started to consider the idea of such a project in 2012, then obtained a mandate from the G20 in 2013.”).

⁹² For more on information-sharing and curbing tax avoidance and competition, see Ault, supra note 64; Avi-Yonah, supra note 62.

⁹³ For more on EU-U.S. tax relations, see Part III.F.2 infra.

⁹⁴ Implementation at the EU level means that EU sanctions would be available for use against defectors. It also means that any taxpayer-favorable measures adopted as EU directives would have direct effect, even without national enabling legislation.

⁹⁵ For the Commission's misadventures in transfer-pricing administration, see Ruth Mason, State Aid Special Report—Part 4: Whose Arm's Length Standard?, 155 Tax Notes 947 (2017).

⁹⁶ See discussion in note 125 infra.

⁹⁷ OECD/G20, BEPS Project Explanatory Statement (2016) [hereinafter 2016 BEPS Explanatory Statement] (briefly explaining the project and its recommendations).

⁹⁸ Id.

⁹⁹ For criticism of BEPS, see references in note 1 supra.

¹⁰⁰ 2016 BEPS Explanatory Statement, supra note 97, at 4.

¹⁰¹ OECD, Global Reach, at https://www.oecd.org/about/members-and-partners.

¹⁰² See, e.g., Christians, supra note 1, at 1604; Tarcísio Diniz Magalhães, What Is Really Wrong with Global Tax Governance and How to Properly Fix It, 10 World Tax J. 4 (2018) (criticizing the OECD's closed-club model of decision making).

¹⁰³ G20, G20 Participants, at https://g20.org/en/about/Pages/Participants.aspx. The remainder of the G20—Australia, Canada, France, Germany, Italy, Japan, Republic of Korea, Mexico, Turkey, the United Kingdom, and the United States—were already OECD members. Compare id. with OECD, Member Countries, at http://www.oecd.org/about/members-and-partners. The European Union is a nonvoting participant at the OECD and a full member of the G20.

¹⁰⁴ See United Nations, World Economic Situation and Prospects, at 1 (2019) (labeling as developing economies Argentina, Brazil, China, India, Indonesia, Saudi Arabia, and South Africa. It labeled Russia as an economy in transition.). Because the G20 consists of high-GDP countries, however, even with the G20, the OECD still lacks important perspectives. See also UN Population Dashboard, at https://www.unfpa.org/data/world-population-dashboard (providing populations of each country in 2019).

¹⁰⁵ OECD,Members of the OECD/G20 Inclusive Framework on BEPS, available at https://www.oecd.org/tax/beps/inclusive-framework-on-beps-composition.pdf.

¹⁰⁶ OECD, Background Brief: Inclusive Framework on BEPS 11 (2017) [hereinafter Inclusive Framework Brief]. For more on the BEPS minimum standards, see Part III.C infra.

¹⁰⁷ See Oei & Ring, supra note 79 (in part criticizing this development).

¹⁰⁸ On participation by NGOs, see Christians, supra note 1, at 1603.

¹⁰⁹ Oei & Ring, supra note 79.

¹¹⁰ See H. David Rosenbloom & Stanley I. Langbein, United States Tax Treaty Policy: An Overview, 19 Colum. J. Transnat'l l. 359, 367–69 (1981) (giving history of OECD standards).

¹¹¹ See, e.g., Richard Collier, Stef van Weeghel, Phil Greenfield, Pam Olson, John Steveni & Matthew Chen, OECD Recommendations on BEPS 2014 Deliverables: Few Surprises But No Let Up, 25 J. Int'l Tax'n 25, 25 (2014) (“To the extent that the changes relate to the OECD's Model Tax Convention and Transfer Pricing Guidelines, their implementation is assured and should follow fairly quickly.”).

¹¹² See Inclusive Framework, Progress Report 19 (2018) [hereinafter 2018 BEPS Progress Report].

¹¹³ Id. at 25.

¹¹⁴ See discussion in Part III.F infra.

¹¹⁵ Perhaps no example better highlights the dramatic elevation of the OECD than its release, expressly under its own authorship, of a proposed “unified approach” to dividing tax entitlements among states. OECD, Secretariat Proposal for a “Unified Approach” Under Pillar One (2019) [hereinafter Secretariat Proposal]. Part IV discusses this initiative.

¹¹⁶ The OECD budget for tax rose from about €12 million in 2013 to nearly €20 million in 2018. Compare OECD, Financial Statements of the OECD as of 31 December 2018, at 52 (listing budget for the “taxation” “output group”) with OECD, Financial Statements of the OECD as of 31 December 2013 (same). The 2018 budget did not separately state costs associated with BEPS. In 2018, over €12 million of the tax-output-group budget consisted of “voluntary contributions,” made outside the “assessed contribution” framework that constitutes the OECD's regular budget. Assessed contributions include a flat contribution from each state and a contribution that increases with GDP. In 2019, the U.S. share of the assessed part of the budget was 20.5% of the total €202.5 million assessed contribution. Also in 2019, the voluntary contributions across all areas totaled €105 million. See OECD, Member Countries’ Budget Contributions for 2019, at http://www.oecd.org/about/budget/member-countries-budget-contributions.htm. The public document does not reveal the U.S. share of the voluntary contributions. Id. Voluntary contributions fund particular programs of work, but the financial statement does not indicate which countries made the voluntary contributions or for which projects, although the budget for the Global Forum on Transparency was listed at over €8 million.

¹¹⁷ See BEPS Action Plan, supra note 85, at 9 (prior to BEPS “sovereign states have co-operated to ensure coherence in a narrow field, namely, to prevent double taxation”).

¹¹⁸ Cf. Philipp Genschel & Thomas Rixen, Settling and Unsettling the Transnational Legal Order of International Taxation, in Transnational Legal Orders 154, 157 (Terence C. Halliday & Gregory Shaffer eds., 2015) (“double tax relief endogenously breeds tax competition”).

¹¹⁹ “Full taxation” can be understood as an element of Reuven Avi-Yonah's “single-tax principle,” which implies two sub-rules: (1) full taxation and (2) prevention of double taxation. See discussion in text accompanying notes 136–138 infra.

¹²⁰ Such terms frequently appear in the BEPS materials and elsewhere without being defined. See, e.g., BEPS Action Plan, supra note 85, at 13 (“prevent double non-taxation”); id. (“cases of no or low taxation associated with practices that artificially segregate taxable income from the activities that generate it.”); id. at 8 (“MNEs that have the ability to shift their profits across borders to avoid or reduce tax”); id. at 22 (“aggressive or abusive transactions”). Commentators likewise frequently use these terms, often acknowledging lack of satisfying definitions for them. See, e.g., Brauner, supra note 1, at 1036 (critically analyzing “double non-taxation” and the puzzles it raises). See, e.g., Leopoldo Parada, Hybrid Entity Mismatches and the International Trend of Matching Tax Outcomes: A Critical Approach, 46 Intertax 971, 971 (2018) (critical of the “assumption that income should be taxed somewhere—no matter where”); cf. Ruth Mason & Michael S. Knoll, What Is Tax Discrimination?, 121 Yale L.J. 1014 (2012) (criticizing the concepts of “once, somewhere,” “double benefit,” and “double burden”).

¹²¹ OECD, BEPS Executive Summaries (2015) (summarizing outcomes) [hereinafter BEPS Executive Summaries]. This discussion of the BEPS outcomes draws extensively on OECD reports on BEPS, which amount to thousands of pages. See, e.g., 2016 BEPS Explanatory Statement, supra note 97, Inclusive Framework, Progress Report (2019); 2018 BEPS Progress Report, supra note 112; Inclusive Framework, Progress Report (2017). The OECD also issued multiple reports on each of fifteen action items. See, e.g., Inclusive Framework, Neutralising the Effects of Branch Mismatch Arrangements, Action 2 (2017) [hereinafter BEPS Hybrid Mismatch Report]

¹²² See, e.g., BEPS Action Plan, supra note 85, at 10 (“BEPS relates chiefly to instances where the interaction of different tax rules leads to double non-taxation or less than single taxation.”).

¹²³ Country-by-country reporting applies to multinationals with €750 million in annual consolidated revenue. Transfer Pricing Guidelines, supra note 15, at 242.

¹²⁴ See G20/OECD, Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance: BEPS Action 5 Report (2015) [hereinafter BEPS Action 5 Report]. Countries receiving summaries can request the full ruling in a second step. Id. at 54.

¹²⁵ Transparency does not, by itself, ensure tax, although it supplies much-needed information to states interested in closing tax gaps. Leandra Lederman & Joseph C. Dugan, Information Matters in Tax Enforcement, 2020 B.Y.U. L. Rev., at 14–18, available at http://ssrn.com/abstract=3325598 (forthcoming 2020). BEPS rulings exchange served an additional strategic purpose: to put the Commission out of the business of reviewing rulings granted by EU member states. Aware of the potential problems with confidential tax rulings, the Commission launched an investigation of member state ruling practices; it exposed cozy deals between states and taxpayers. See Mason, supra note 47. To cure what it saw as illegal subsidies, however, the Commission sought to impose its own arm's-length standard that would compete with the OECD arm's-length standard. The rulings-exchange regime negotiated as part of BEPS and ultimately implemented by the EU—a regime which the Commission was denied access—can be understood as an effort to ward off further intrusive state-aid investigations of member state ruling practices. The BEPS rulings-exchange regime also supplied the Commission a face-saving exit strategy from its bruising state-aid battle with the United States. For more on that controversy, see id. and Part IV infra.

¹²⁶ The Model preamble now states that the contracting states intend “to conclude a Convention for the elimination of double taxation … without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance.” OECD Model, supra note 6 (emphasis added to denote changes).

¹²⁷ OECD, 2016 BEPS Explanatory Statement, supra note 97, at 14–15.

¹²⁸ See generally BEPS Action 5 Report, supra note 124.

¹²⁹ “Patent box” is a term used to describe any of a wide range of tax benefits awarded to income from intellectual property. 2016 BEPS Explanatory Statement, supra note 97, at 14.

¹³⁰ See generally OECD, Making Dispute Resolution Mechanisms More Effective, Action 14 Final Report (2015).

¹³¹ 2016 BEPS Explanatory Statement, supra note 97, at 15–16 (taking a more substantive approach to allocating income among group members). Although changes to the transfer-pricing rules are not minimum standards, because many states dynamically incorporate the OECD Transfer-Pricing Guidelines, those changes will filter into to domestic law. See generally Richard Collier & Joseph Andrus: Transfer Pricing and the Arm's Length Principle After BEPS (2017).

¹³² For an explanation of CFC rules, see text accompanying note 33 supra.

¹³³ BEPS Explanatory Statement, supra note 97, at 13–14.

¹³⁴ See Danny Hakim, Europe Takes Aim at Deals Created to Escape Taxes, N.Y. Times (Nov. 14, 2014).

¹³⁵ See, e.g., Brauner, supra note 1, at 996 (arguing that the OECD should have clearly articulated that “the whole BEPS project is about double non-taxation”).

¹³⁶ Under Avi-Yonah's formulation of the “Single Tax Principle,” “income from cross-border transactions should be subject to tax once … at the rate of tax … determined by [the Benefits Principle].” Reuven S. Avi-Yonah, International Taxation of Electronic Commerce, 52 Tax L. Rev. 507, 517 (1997). The “benefits principle” is the idea that states derive entitlement to tax based on benefits they provide to taxpayers.

¹³⁷ To fully specify single taxation, including both its full-tax and no-double-tax elements, requires specifying a distributive rule for determining which state or states will tax a multinational's income. Avi-Yonah adopts as the distributive rule for his single-tax principle the “benefits principle,” as instantiated in the tax-treaty bargain negotiated in the 1920s, which “assigns the right to tax active (business) income primarily to the source jurisdictions, while the right to tax passive (investment) income is assigned primarily to the residence jurisdictions.” Id. at 509. Although the benefits principle generally would lead to taxation by states in which multinationals have productive factors, as Avi-Yonah acknowledges, the benefits principle does not indicate precisely how multiple states providing benefits to the same taxpayer should share entitlement to tax a multinational's income. Id. at 522.

¹³⁸ See Part III.E infra.

¹³⁹ See, e.g., Commission Communication,supra note 48, at 1 (“a purely national approach to taxation no longer works”); José Antonio Alonso, United Nations Department of Economic and Social Affairs, Committee for Development Policy, International Tax Cooperation and Sovereign Debt Crisis Resolution: Reforming Global Governance to Ensure No One Is Left Behind, at 10 (May 2018), available at https://www.un.org/development/desa/dpad/wp-content/uploads/sites/45/publication/CDP-bp-2018-41.pdf (“Stopping international tax evasion and abusive tax avoidance practices requires a cooperative response at a global level.”).

¹⁴⁰ Sam Schechner & Paul Hannon, France Presses on with Digital Tax Despite U.S. Probe, Wall St. J. (July 11, 2019).

¹⁴¹ Liz Alderman, France Moves to Tax Tech Giants, Stoking Fight with White House, N.Y. Times, (July 11, 2019) (quoting Le Maire at the same press conference).

¹⁴² Avi-Yonah, supra note 41, at 1349.

¹⁴³ See OECD, Explanatory Statement to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting 1 (2018) [hereinafter MLI Explanatory Statement] (“the sheer number of bilateral treaties (more than 3000) would make bilateral updates to the treaty network burdensome and time-consuming, limiting the effectiveness of multilateral efforts”).

¹⁴⁴ Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS, available at http://www.oecd.org/tax/treaties/multilateral-convention-to-implement-tax-treaty-related-measures-to-prevent-beps.htm [hereinafter MLI].

¹⁴⁵ To determine the content of a bilateral tax treaty between two countries, both of which are parties to the MLI, one must look to the MLI to see which of its provisions, if any, the two countries agreed should supersede or augment the provisions of their preexisting bilateral tax treaty.

¹⁴⁶ OECD, OECD Secretary-General Tax Report to G20 Leaders, Osaka, Japan, at 16 (2019).

¹⁴⁷ Namely, the recommendations for modifications to bilateral tax treaties. See, e.g., MLI, supra note 144, Art. 7 (anti-abuse provisions).

¹⁴⁸ MLI Explanatory Statement, supra note 143, at 4 (“Where a substantive provision does not reflect a minimum standard, a Party is generally given the flexibility to opt out of that provision entirely.”); see, e.g., MLI, supra note 144, Art. 3 (rules to combat hybrid mismatches); Art. 4 (anti-abuse rule for corporate dual residents).

¹⁴⁹ The MLI accommodates sovereignty concerns through optionality, which is available for both substantive provisions and covered bilateral relationships.

¹⁵⁰ Azam, supra note 1, at 584 (“[I] do not see [the MLI] as a revolutionary moment”); Avi-Yonah & Xu, supra note 1, at 234 (observing that “many countries will be not interested in participation” and that the UN would be a better forum than the OECD for such cooperation).

¹⁵¹ The failure of the United States to sign is not as bad as it sounds because the minimum standards in the MLI were already in the U.S. Model and its treaties, and therefore the United States did not need the MLI to make its treaties BEPS-compliant.

¹⁵² Christians, supra note 1, at 1641.

¹⁵³ Use of the term coordinated unilateralism is intended to sidestep academic debates on the meaning and meaningfulness of “soft law” as a form of law. See, e.g., Kal Raustiala, Form and Substance in International Agreements, 99 AJIL 581, 596 (2005) (“soft law is not a coherent concept”). Cooperation among the OECD countries long has generated widely accepted guidelines for bilateral tax treaties and for interpretations of tax standards developed cooperatively at the OECD. The OECD and Council of Europe also developed a multilateral treaty on tax administrative matters, the Convention on Mutual Administrative Assistance in Tax Matters, that has 136 participants. The United States signed, but did not ratify, the Convention. See generally Azam, supra note 1, at 543–46.

¹⁵⁴ See BEPS Executive Summaries, supra note 121. In other cases, such as modifications to the transfer-pricing rules or Commentary to the OECD Model, BEPS reforms were implemented in domestic law either by legislation that dynamically incorporates OECD standards or by administrative or judicial adoption of those standards.

¹⁵⁵ Transfer Pricing Guidelines, supra note 15, 501–65.

¹⁵⁶ See generally Kenneth W. Abbott & Duncan Snidal, Hard and Soft Law in International Governance, 54 Int'l Org. 421 (2000).

¹⁵⁷ Unlike withdrawing from a treaty, changes in domestic law typically do not jeopardize a state's credibility on the world stage.

¹⁵⁸ The BEPS recommendations themselves reflect acknowledgement of states’ different tax capacities. For example, that only companies with €750 million in annual revenue must file country-by-country reports reflects a desire to minimize both compliance costs for smaller companies and enforcement costs for states with less tax capacity. 2016 BEPS Explanatory Statement, supra note 97, at 7.

¹⁵⁹ See Treas. Reg. 1.6038-4 (2019) (claiming authority to implement country-by-country reporting). When Treasury implements reforms on its own, it averts domestic opposition that may arise if a different political party controls Congress.

¹⁶⁰ See Eduardo A. Baistrocchi, The International Tax Regime and the BRIC World: Elements for a Theory, 33 Oxford J. Legal Stud. 733 (2013); Tsilly Dagan, Tax Treaties as a Network Product, 41 Brook. J. Int'l L. 1081 (2016).

¹⁶¹ For example, the benefits accruing to mandatory arbitration of tax disputes between tax administrations are more than linear. If two states commit to arbitration, then only bilateral disputes between those two states can be resolved through arbitration. If only one more state signs up, the number of covered bilateral relationships increases to three. Four participants cover six relationships, and so on.

¹⁶² Like amending preexisting tax treaties to implement anti-abuse rules, use of fiscal fail-safes comports with political economy predictions that incremental change to stable international institutions will take the form of “layering” or “conversion,” rather than outright reform. Such layering reduces the risks to institutions compared to outright reform, and it may be easier to achieve than reform. Thomas Rixen, From Double Tax Avoidance to Tax Competition: Explaining the Institutional Trajectory of International Tax Governance, 18 Rev. Int'l Pol. Econ. 197, 204 (2011) (discussing work of Kathleen Thelen).

¹⁶³ For more on arbitrage, Kane, supra note 53.

¹⁶⁴ Some instruments are clearly debt, others clearly equity. But some instruments contain elements of both debt and equity, for example, “interest” payments may be tied to corporate performance, or “principal” may be repayable in stock.

¹⁶⁵ The dividends would be excluded under many states’ participation-exemption regimes for intercompany dividends.

¹⁶⁶ See BEPS Hybrid Mismatch Report, supra note 121, at 23–44.

¹⁶⁷ The notion that states would adopt tax laws or administrative practices to enable taxpayers to avoid foreign tax is realistic. See Kane, supra note 53 (exploring states’ motives in creating arbitrage opportunities); Marian, supra note 47 (concluding from leaked evidence that Luxembourg used its tax administrative ruling process to “manufacture” bespoke mismatches for taxpayers).

¹⁶⁸ That is, the recipient state includes the payment, even if that state otherwise would regard the payment as exempt dividends.

¹⁶⁹ But see Leopoldo Parada, Double Non-taxation and the Use of Hybrid Entities: An Alternative Approach in the New Era of BEPS 312–319, 343–352 (2018) (stressing the complexity of the rules and raisinge tax policy concerns, such as circularity, dependency on foreign laws, and economic double taxation).

¹⁷⁰ See BEPS Hybrid Mismatch Report, supra note 121, at 23–66.

¹⁷¹ See, e.g., Marian, supra note 47 (describing in detail Luxembourg's debt-equity rulings practice).

¹⁷² States also apply fiscal fail-safes to close domestic gaps, in which case the link might be between, for example, two different domestic taxpayers.

¹⁷³ As noted, the concept of full-taxation is incomplete without a distributive rule to supply the tax base or bases and rate or rates. See discussion in Part III.E infra.

¹⁷⁴ See BEPS Action 5 Report, supra note 12 (laying out the rulings-exchange regime).

¹⁷⁵ Fractional allocation methods, including two-sided transfer-pricing methods (such as profit splits) and formulary apportionment, are not fiscal fail-safes. Although they link tax treatment across states and aim at full tax, they involve no deviation from a state's normal rule.

¹⁷⁶ Even formulary apportionment might require fiscal fail-safes. For example, a revenue share could be allocated to a state that has productive factors, but that lacks jurisdiction to tax the income. In such cases, fiscal fail-safes could provide rules for reallocating the untaxed share to the other taxing states, as in the “throw-around rules” found at the U.S.-state level.

¹⁷⁷ The United States resisted country-by-country reporting because U.S. officials feared the information in the reports would be used to allocate income according to factor presence, rather than arm's-length transfer pricing.

¹⁷⁸ See, e.g., Nat'l For. Trade Council, Letter to Mark J. Mazur, Asst. Sec. Treas. for Tax Policy, at 2–3 (Mar. 9, 2016) (explaining that U.S. companies did not want to be obliged to file their reports outside the United States).

¹⁷⁹ See, e.g., Richard Resch, The New German Unilateral Switch-Over and Subject-to-Tax Rule, 47 Eur. Tax'n 480 (2007) (describing switch-over and subject-to tax rules, which both function as what I would call unilateral fiscal fail-safes; they trigger special tax by the residence state when a source state has not sufficiently taxed).

¹⁸⁰ See Allison Christians & Alexander Ezenagu, Kill Switches in the New US Model Tax Treaty, 41 Brook. J. Int'l L. 1043 (2016) (discussing U.S. model treaty provisions that deny certain treaty benefits to income tax benefits from special tax regimes available in the partner state or when the partner state changes its tax law in certain specified ways after conclusion of the treaty).

¹⁸¹ U.S. Department of the Treasury, Office of Tax Policy, The Deferral of Income Earned Through U.S. Controlled Foreign Corporations: A Policy Study, at 1–11 (2000) (describing history of U.S. regime from the 1960s).

¹⁸² Kimberly A. Clausing, Does Tax Drive the Headquarters Locations of the World's Biggest Companies?, 25 Transnat'l Corp. 37, 44 (2018) (noting that the “United States has, by far, the most companies from the Global 2000,” a list of the top 2,000 companies).

¹⁸³ Bob Stack, the chief BEPS negotiator for the United States during the Obama administration, ruefully observed that every other country sought to gain revenue at the expense of the United States. He quipped, “it seemed like the question for consensus was, ‘Should Bob pay for everyone's lunch?’ And you'd all say, ‘Well, of course.’” Conversations: Jeffrey Owens and Robert Stack, 87 Tax Notes Int'l 715, 717 (2017) [hereinafter Interview with Stack].

¹⁸⁴ States adopt tax sparing to ensure that their residents keep the benefits of tax holidays and other preferential regimes granted by source states. The sparing state pretends that its resident taxpayer paid tax at the source state's normal rate, and the sparing state grants the taxpayer credit accordingly. The United States has long opposed (and consistently refused to adopt) the practice of tax sparing. Kim Brooks, Tax Sparing: A Needed Incentive for Foreign Investment in Low-Income Countries or an Unnecessary Revenue Sacrifice?, 34 Queen's L.J. 537, 538–46 (2009) (surveying arguments for and against tax sparing).

¹⁸⁵ See, e.g., id.

¹⁸⁶ Resulting revenue could be retained in full by either state or shared between them.

¹⁸⁷ Fiscal fail-safes accomplish this as worldwide taxation does, by clawing back the tax advantages of moving.

¹⁸⁸ The arguments against fiscal fail-safes therefore parallel the arguments for tax sparing. Cf. Brooks, supra note 184, at 546–53 (surveying arguments and explanations for persistence of tax sparing)

¹⁸⁹ In addition to enabling states` to cooperate to reduce tax competition, fiscal fail-safes can be seen as a two-stage game in which a subset of states (usually high-tax residence states) agrees on a fail-safe in stage 1, and then all states respond in stage 2 by aligning their systems with triggering threshold. For strategic analysis of recent reforms of the U.S. fiscal fail-safe known as GILTI, see Susan C. Morse, GILTI: The Co-operative Potential of a Unilateral Minimum Tax, 2019 Brit. Tax Rev. 512; G. Charles Beller, GILTI: “Made in America” for European Tax: Unilateral Measures and Cooperative Surplus in the International Tax Competition Game, 38 VA. Tax Rev. 271 (2019).

¹⁹⁰ See, e.g., Council Directive 2016/1164 of 12 July 2016 laying down rules against tax avoidance practices that directly affect the functioning of the internal market, 2016 OJ (L 193) 1 [hereinafter ATAD I] (requiring states to adopt: (1) one of two versions of a CFC rule; (2) hybrids rules; (3) exit taxation; (4) interest deductibility limits; and (5) a general tax anti-abuse rule); Council Directive 2017/952 of 29 May 2017 Amending Directive 2016/1164 as Regards Hybrid Mismatches with Third Countries, 2017 OJ (L 144) 1 [hereinafter ATAD II] (expanding anti-hybrids rule to cover cases between the EU and non-EU member states).

¹⁹¹ See generally Christians, supra note 1 (describing procedure and noting long history of this practice in tax); Grinberg, supra note 90 (explaining that BEPS borrowed techniques from international financial law).

¹⁹² See generally Inclusive Framework Brief,supra note 106.

¹⁹³ See, e.g., OECD/G20, MAP Peer Review Report, United States: Stage 1, at 9 (2017) [hereinafter MAP Peer Review of United States] (rating the United States “compliant” in some areas and “not fully compliant” in others).

¹⁹⁴ See Transfer Pricing Guidelines, supra note 15, at 422 (touting peer reviews of transfer-pricing practices as an opportunity to learn and disseminate best practices).

¹⁹⁵ See, e.g., MAP Peer Review of United States,supra note 193.

¹⁹⁶ For example, the OECD has not yet released empirical findings to the public.

¹⁹⁷ See, e.g., Addressing BEPS,supra note 25, at 61–71 (discussing data problems); Kim Clausing, The Effect of Profit Shifting on the Corporate Tax Base in the United States and Beyond, 69 Nat'l Tax J. 905 (2016) (estimating that profit shifting reduced U.S. corporate tax revenues by between a quarter and a third in 2012).

¹⁹⁸ Jennifer Blouin & Leslie Robinson, Double Counting Accounting: How Much Profit of Multinational Enterprises Is Really in Tax Havens? (forthcoming).

¹⁹⁹ Kim Clausing, Profit Shifting Before and After TCJA (forthcoming) (in part correcting estimates for the effect Blouin and Robinson identified).

²⁰⁰ See OECD, Measuring and Monitoring BEPS, Action 11 Final Report (2015) (calling for collection and sharing of data).

²⁰¹ Oei & Ring, supra note 79, 589 (warning that “agendas of various actors may inadvertently influence or consciously manipulate broader government priorities”).

²⁰² Cf. Avi-Yonah & Xu, supra note 1, at 211 (“[a]lthough over sixty countries were directly involved in the process of the BEPS project, they account for less than one-third of the 193 UN members”).

²⁰³ Christians, supra note 1, at 1602

²⁰⁴ Inclusive Framework Brief,supra note 106, at 10.

²⁰⁵ The G20 accounts for the vast majority of all international commerce. See, e.g., G20, G20 Participants, supra note 103 (“G20 members account for 85 per cent of the world economy, 75 per cent of global trade, and two-thirds of the world's population, including more than half of the world's poor.”).

²⁰⁶ Paul B. Stephan, Accountability and International Lawmaking: Rules, Rents and Legitimacy, 17 Nw. J. Int'l L. & Bus. 681 (1997) (exploring accountability and how to increase it in international law); Pierre-Hugues Verdier, Transnational Regulatory Networks and Their Limits, 34 Yale J. Int'l L. 113, 170 (2009) (identifying a tension between the effectiveness and accountability of transnational networks).

²⁰⁷ Implementation of OECD recommendations via EU legislation raises new accountability concerns because the EU tax legislative process does not involve meaningful democratic participation; it thereby further reduces democratic checks on international tax policymaking.

²⁰⁸ Contrarily, some may argue that because tax policy is so complicated, it likely always will be made by technocrats in processes that lack robust democratic accountability. On this account, we might conclude that it does not matter whether domestic technocrats or international groups of technocrats make tax policy.

The text asserts only that the OECD lacks democratic accountability compared to typical domestic tax lawmaking procedures. But the OECD derives legitimacy in other ways, including through member-state voting and budget control, limited public notice-and-comment practices, and bureaucrats’ concerns about their own reputations with their peers, which may lead them to assert reasoned arguments, rather than arguments grounded solely in the relative power of the state they represent. Public protests over Starbucks revealed that international tax policy can also at least occasionally spark significant discipline from voters.

²⁰⁹ Lilian V. Faulhaber, The Luxembourg Effect: Patent Boxes and the Limits of International Cooperation, 101 Minn. L. Rev. 1641 (2017) (referencing the work of Anu Bradford). See, e.g., Anu Bradford, The Brussels Effect, 107 Nw. U. L. Rev. 1 (2015) (arguing that the EU influences world standards and regulations).

²¹⁰ See generally Eur. Comm'n, Proposal for a Council Directive Laying Down Rules Against Tax Avoidance Practices that Directly Affect the Functioning of the Internal Market, COM(2016) 26 final, at 5 (Jan. 28, 2016) (describing efforts to keep EU law consistent with BEPS outcomes).

²¹¹ See Parada, supra note 169, at 178 (arguing that the rule ultimately adopted in the EU “represents a surrender to the political pressure at the OECD”).

²¹² See, e.g., Case C-279/93, Finanzamt Köln-Altstadt v. Schumacker, ECLI:EU:C:1995:31, Judgment, para. 32 (Eur. Ct. Just. Feb. 14, 1995) (deferring to OECD standards).

²¹³ Most of the twenty-seven EU member states are also OECD members, but Bulgaria, Croatia, Cyprus, Malta, and Romania are not.

²¹⁴ Mason, Subsidies, supra note 47, at 519, n. 179.

²¹⁵ Mary Bennett, Head of the Tax Treaty, Transfer Pricing & Financial Transactions Division at the OECD, Panel Statements, Made at the International Tax Conference on the Common Consolidated Corporate Tax Base, Berlin (May 15–16, 2007), in A Common Consolidated Corporate Tax Base for Europe 139 (Wolfgang Schön, Ulrich Schreiber & Christoph Spengel eds., 2008) (noting that due to the “widespread acceptance across the globe” of the arm's-length principle, “[a] move away from [that] principle in an important and sophisticated region … may have unpredictable consequences”).

²¹⁶ See Mason, supra note 95 (discussing the controversy).

²¹⁷ See, e.g., Rosenzweig, supra note 66 (discussing failed efforts to repeal check the box). The revolving door between government and practice also entrenches such standards by allowing former government officials to cash in on their knowledge of government's interpretations and enforcement practices.

²¹⁸ In EU law, the acquis or acquis communautaire refers to “the body of common rights and obligations that are binding on all EU countries, as EU Members.” EU, Acquis, at https://eur-lex.europa.eu/summary/glossary/acquis.html. EU candidate countries must reform domestic law to bring it in line with the EU acquis before acceding to membership in the EU. Id. The “OECD acquis” would include the large set of tax standards formulated by the OECD, including the OECD Model Treaty and Commentary, and the Transfer Pricing Guidelines.

²¹⁹ Inclusive Framework Brief,supra note 106, at 11. The BEPS package includes the four minimum standards that all the Inclusive Framework states commit to implement. Id.

²²⁰ See Rebecca Kysar, Unraveling the Tax Treaty, 104 Minn. L. Rev. 1755 (2020) (arguing that the new U.S. base-erosion anti-abuse tax (BEAT) may violate U.S. tax treaties).

²²¹ The distributive rule of full taxation is vague; it says only that taxes should be allocated to where companies have real factors of production (or, in recent parlance, where value is created). As conceived by Avi-Yonah, however, the single-tax principle includes: (1) a distributive rule based on the 1920s bargain that instantiated the benefits principle and fully assigns income—active to source, passive to residence, and any untaxed income effectively to residence; (2) a tax base, defined by the source state for active income and by the residence state for passive and residual income; and (3) upper and lower tax-rate bounds set by the residence and source states. Avi-Yonah, supra note 136, 517–23. That Avi-Yonah's single-tax principle includes a distributive rule lends it false precision. As Avi-Yonah readily recognizes, the benefits principle does not “provide a clear answer to the question of how to divide the corporate income tax base among the various jurisdictions providing benefits.” Id. at 522. Thus, the single-tax principle is also indeterminate.

²²² Without a clear distributive rule, if they both follow a non-double-tax norm, two states with claims to tax an item of income could both forebear under the assumption that the other is more suited to tax, resulting in nontaxation. Likewise, without a clear distributive rule, multiple states following a full-tax norm could seek to tax the same item of income, resulting in double tax.

²²³ BEPS Action Plan, supra note 85, at 14–15 (noting companies could “have a significant digital presence in the economy of another country without being liable to taxation due to the lack of nexus under current international rules”).

²²⁴ 2016 BEPS Explanatory Statement, supra note 97, at 13.

²²⁵ BEPS Action Plan, supra note 85, at 11 (“While actions to address BEPS will restore both source and residence taxation in a number of cases where cross-border income would otherwise go untaxed or would be taxed at very low rates, these actions are not directly aimed at changing the existing international standards on the allocation of taxing rights on cross-border income.”).

²²⁶ See Brauner, supra note 1, at 997 (“The OECD decided, without any explanation or analysis, the consequences of these choices. . . . The solutions … are merely technical.”)

²²⁷ CFC regimes include an implicit distributive rule that lodges residual income with the residence state. Thus, in this case, “enough” would be evaluated from the residence state's perspective. In some versions, CFC rules provide for additional residence tax when the source tax rate was not high enough as a percentage of the residence-state's rate. CFC rules therefore go beyond full taxation (all income taxed in states where there are factors, according to the factor states’ income-calculation rules and tax rates) to also achieving worldwide taxation (all income, defined according to the residence state's income-calculation rules, taxed at a minimum of the residence state's rate). A worldwide tax system is fully specified, under it, there would be a clear answer to whether the taxpayer had been subject to full tax or double tax. A formula apportionment system with a common base and formula is likewise fully specified when combined with each state's rate.

The minimum tax proposed as part of BEPS 2.0 pairs a residence-based inclusion rule with an undertaxed payment rule that triggers source tax when residence taxation will be insufficient. This approach closely resembles the primary and defensive rules in the anti-hybrid rules and can be similarly criticized for prizing full taxation ungrounded by a distributive theory.

²²⁸ OECD, Designing Effective Controlled Foreign Company Rules: Action 3 (2015).

²²⁹ See H. David Rosenbloom & Joseph P. Brothers, Reflections on the Intersection of U.S. Tax Treaty Policy, U.S. Tax Reform, and BEPS, 78 Tax Notes Int'l 759, 764 (May 25, 2015) (arguing that many of the BEPS reforms, including “actions addressed to the digital economy, base erosion, neutralizing the effects of hybrid mismatch arrangements, preventing the artificial avoidance of PE status,” transfer-pricing reforms, and disclosure rules all point to greater source taxation as compared to before BEPS).

²³⁰ Cooper, supra note 1, at 147 (“everyone could read into it whatever they wanted it to mean”).

²³¹ Parada traces these problems to what this Article refers to as the full-taxation approach. See Parada, supra note 120, at 972, 981 (criticizing the anti-hybrid rules’ “consequentialist approach” that demands tax “no matter where”); Parada, supra note 169, at 51 (arguing that “double nontaxation” is not necessarily cause for concern). See also Brauner, supra note 1, at 1035 (criticizing the anti-hybrid rules because “[t]here is no principle-based reason, except for perceived administrative convenience, to choose these and not other countries” to tax). Graeme Cooper aims his criticism more broadly, arguing that the BEPS goal to combat “double non-taxation” is “largely value-free. It laments an outcome but does not apportion blame.” Cooper, supra note 1, at 148.

²³² See Brauner, supra note 1, at 1032 (noting concerns that states might use the reports to assess tax according to formulary apportionment, rather than the consensus arm's-length standard).

²³³ See, e.g., Mason, supra note 95 (detailing the Apple state-aid investigation). Public comments by then-Commissioner of Competition Margrethe Vestager suggested that the Commission was guided by a full-taxation norm in its investigations. See Speech by Vestager, TAXE 2 Committee, at 2 (Apr. 4, 2016) (noting about transfer-pricing rulings that some “look at just one side of a transaction. They decide on an appropriate profit for the activities of just one company of a group. As for the profit that remains, it might be taxed somewhere else—or it might not be taxed at all. This creates a potential for loopholes.”).

²³⁴ See, e.g., id. (critically analyzing the Commission's state-aid cases).

²³⁵ As a result of the Commission's ruling, Ireland ends up with a large share of Apple's profit from all of Europe, the Middle East, India, and Africa, and Asia-Pacific regions. See id. Interestingly, perhaps uncomfortable with the result of its own investigation—that a very large portion of Apple's income should be taxed by Ireland—the Commission suggested that not only other EU member states, but also the United States, should make back-tax claims against Apple, and that doing so would reduce the tax Apple owed to Ireland. See id. When not grounded by a clear allocation rule, notions of “full taxation” lend themselves to this kind of indeterminism about which state should tax.

²³⁶ See generally Herzfeld, supra note 1, at 7; Brauner, supra note 1, at 1021; Cooper, supra note 1, at 174.

²³⁷ OECD, Programme of Work to Develop a Consensus Solution to the Tax Challenges Arising from the Digitalisation of the Economy 7 (2019) [hereinafter OECD Work Program] (describing the timeline as “extremely ambitious”).

²³⁸ See generally id. This proposal is based loosely on the 2017 reforms to U.S. law, but is more comprehensive. For more on U.S. law, see references cited in note 189 supra. Although the OECD minimum-tax proposal is very interesting and represents the most ambitious attempt by states so far to adopt coordinated fiscal fail-safes, it is beyond the scope of this Article.

²³⁹ But see Allison Christians, Sovereignty, Taxation and Social Contract, 18 Minn. J. Int'l L. 99 (2009) (other-regarding views ought to inform international tax under an implied global social welfare contract).

²⁴⁰ 2018 BEPS Progress Report, supra note 112, at 5 (“value creation”); BEPS Action Plan, supra note 85, at 11 (BEPS aims to “better align rights to tax with economic activity”).

²⁴¹ Many have written about the history of tax treaties. See, e.g., Graetz & O'Hear, supra note 12, Reuven S. Avi-Yonah, The Structure of International Taxation: A Proposal for Simplification, 74 Tex. L. Rev. 1301 (1996); Jogarajan,supra note 12.

²⁴² See Hugh J. Ault & David F. Bradford, Taxing International Income: An Analysis of the U.S. System and Its Economic Premises, in Taxation in the Global Economy 11, at 31 (Assaf Razin & Joel Slemrod eds., 1990) (remarking that, from an economics perspective, income has “no natural locational aspect”).

²⁴³ See generally Michael J. Graetz, Taxing International Income: Inadequate Principles, Outdated Concepts, and Unsatisfactory Policies, 54 Tax L. Rev. 261 (2001) (arguing that although policymakers assume and act as if the goal of U.S. international tax policy were global efficiency, the United States should pursue national welfare); Daniel Shaviro, Why Worldwide Welfare as a Normative Standard in U.S. Tax Policy?, 60 Tax L. Rev. 155 (2007) (arguing that worldwide welfare as a global norm enhances national welfare by promoting cooperation).

²⁴⁴ See Harry Grubert & Rosanne Altshuler, Corporate Taxes in the World Economy: Reforming the Taxation of Cross-Border Income, in Fundamental Tax Reform: Issues, Choices and Implications 319 (John W. Diamond & George R. Zodrow eds., 2008) (arguing that the welfare effects of the leading neutrality benchmarks are presently indeterminate and theoretical discussions of such welfare effects rely on very simple models); Mitchell A. Kane, Considering “Reconsidering the Taxation of Foreign Income,” 62 Tax L. Rev. 299, 310 (2009) (“nobody has yet undertaken any type of empirical work that could offer some indication of the relative magnitude of efficiency losses from ownership versus locations distortions produced by suboptimal international tax policy”).

²⁴⁵ Ault & Bradford, supra note 242, at 27 (“the tax treatment of international income flows reflects a variety of policy objectives, so it is difficult to … state the optimizing problem to which the rules are the solution”); Harry Grubert, Tax Credits, Source Rules, Trade, and Electronic Commerce: Behavioral Margins and the Design of International Tax Systems, 58 Tax L. Rev. 149, 153–54 (2005) (listing twelve different margins that international tax rules may distort). Id. (advocating that each policy should be evaluated according the relevant margin, rather than regarding any single policy choice “as a complex, second-best problem in which distortions along all margins must be considered”); Rosanne Altshuler, Recent Developments in the Debate on Deferral, 20 Tax Notes Int'l 1579 (2000) (explaining the different prescriptions of the three leading international tax efficiency benchmarks, locational neutrality, savings neutrality, and competitive neutrality). See also Mason & Knoll, supra note 120, at 1033–72 (discussing the leading benchmarks in terms of taxes on income from labor, and noting that the benchmarks have different implications for international tax rules); Ruth Mason, Tax Discrimination and Capital Neutrality, 2 World Tax J. 126 (2010) (discussing incompatibilities in the policy prescriptions of the various benchmarks).

²⁴⁶ Although policymakers have come to question both the welfare costs of free trade and the precise content of trade agreements, the underlying theory of comparative advantage enjoys widespread support. For a nuanced, rather than celebratory, account of free-trade agreements, see Dani Rodrik, Straight Talk on Trade: Ideas for a Sane World Economy (2017).

²⁴⁷ IFA/OECD Plenary Session, Int'l Fiscal Org. Annual Congress, London (Sept. 11, 2019) (remarks of Wolfgang Schön).

²⁴⁸ For example, the current digital tax debate involves a dispute between users’ states and technology companies’ headquarters states about whether the presence in a jurisdiction of users themselves (or their data) generates a cognizable tax claim by the user's state. Even if states agreed it that it does, resolving the revenue division according to the benefits theory presumably would require estimating the benefits conferred to the multinationals by the users’ states in comparison to the benefits conferred to the multinationals by the other states. The benefits theory therefore performs better at identifying the set of states that ought to be entitled to tax than it does at identifying the proportions that each state's entitlement should bear to the others’ or which “classifications” of income should be taxed by which countries. Allocation based on factor apportionment would face the identical problem of indeterminacy.

²⁴⁹ As Tsilly Dagan has observed, “cooperative efforts in the international tax arena rarely consider global justice.” Dagan, supra note 63, at 185–89 (discussing divergent philosophical views). See also Irene Burgers & Irma Mosquera, Corporate Taxation and BEPS: A Fair Slice For Developing Countries?, 10 Erasmus L. Rev. 29 (2017) (giving reasons why conceptions of fairness may differ between developed and developing countries). Arguments about interpersonal equity may take the form of discussions as to which rules would best facilitate the resident state's application of domestic conceptions of ability to pay. For example, in the 1920s, some argued that residence states should tax worldwide income to effectuate ability-to-pay principles. See Graetz & O'Hear, supra note 12, at 1035. This argument still holds sway, although ability-to-pay values also can be effectuated at source, as long as source states have access to reliable information concerning worldwide income.

²⁵⁰ See Nancy H. Kaufman, Fairness and the Taxation of International Income, 29 Law & Pol'y Int'l Bus. 145 (1998) (distinguishing inter-individual equity from inter-nation equity); Ilan Benshalom, How to Redistribute? A Critical Examination of Mechanisms to Promote Global Wealth Redistribution, 64 U. Toronto L.J. 317 (2014) (arguing that tax allocation rules can be used to redistribute global wealth).

²⁵¹ But see Dagan, supra note 63, at 203–06 (arguing that to make cooperation itself just, cooperation must improve the welfare of the least-well-off constituents of the cooperating states. Thus if cooperation will, for example, drive productive factors out of developing countries or increase the tax capacity of corrupt governments that do not use the revenue increase for redistribution, the cooperation may be unjust).

²⁵² For several categories of income, the OECD Model provides a maximum source-state withholding rate. See, e.g., OECD Model, supra note 6, Art. 11 (providing 10% withholding on interest).

²⁵³ See generally Avi-Yonah, supra note 62 (advocating source tax).

²⁵⁴ Graetz & O'Hear, supra note 12, at 1035 (describing Edwin Seligman's advocacy for residence tax on the “economic allegiance” theory); See e.g., Robert A. Green, The Future of Source-Based Taxation of the Income of Multinational Enterprises, 79 Cornell L. Rev. 18 (1993) (advocating residence tax on ability-to-pay grounds).

²⁵⁵ Eric Toder & Alan D. Viard, A Proposal to Reform the Taxation of Corporate Income, Tax Pol'y Ctr.

²⁵⁶ See, e.g., Alan Auerbach, Michael P. Devereux, Michael Keen & John Vella, Destination-Based Cash Flow Taxation (Oxford Univ. Centre for Bus. Tax'n WP 17/01, 2017).

²⁵⁷ Wei Cui, The Digital Services Tax: A Conceptual Defense (forthcoming) (recommending taxation of digital companies in their users’ states).

²⁵⁸ Reuven S. Avi-Yonah, Kimberly A. Clausing & Michael C. Durst, Allocating Business Profits for Tax Purposes: A Proposal to Adopt a Formulary Profit Split, 9 Fla. Tax Rev. 497 (2009) (proposing formulary apportionment); Orly Mazur, Transfer Pricing Challenges in the Cloud, 57 B.C. L. Rev. 643 (2016) (same). See also Proposal for a Council Directive on a Common Consolidated Corporate Tax Base (CCCTB), COM(2011) 121/4 (Mar. 15, 2011) (legislative proposal for formulary apportionment for the EU); Sol Picciotto, Taxing Multinational Enterprises as Unitary Entities, 82 Tax Notes 895 (2016).

²⁵⁹ Graetz & O'Hear, supra note 12, at 1093–94. Modern economists share these views. See references in note 255 supra. Interestingly, in her history of the 1928 League of Nations discussions that led to the first model tax treaty, Sunita Jogarajan recounts an intervention from a Bulgarian delegate, who objected that under the proposed permanent establishment threshold, “tobacco purchasing firms in Bulgaria would not be taxable in Bulgaria.” Jogarajan, supra note 12, at 246. The Bulgarian delegate's complaint about the failure to capture input values is similar to modern complaints that states cannot tax companies that take advantage of contributions made by users of social media websites.

²⁶⁰ Container Corp. of America v. Franchise Tax Bd., 463 U.S. 159, 192 (1983) (comparing the arm's-length method to formulary apportionment). See also Ault & Bradford, supra note 242, at 31 (“[a]ttaching locations” to certain “changes in wealth,” for example, those due to “discovery of a new drug formula or new consumer good” “involves arbitrary line drawing, with attendant controversy”).

²⁶¹ See, e.g., Kane, supra note 7, at 332–39 (providing a positive account of current source rules that draws on the benefits principle and enforceability concerns).

²⁶² See, e.g., Galya Savir, Regulation and Tax in Space (on file with author) (recounting ability of Maltese ambassador Arvid Pardo, by appealing to notions of fairness in negotiations for a regime to govern deep seabed mining, to persuade policymakers from other states to set aside national self-interest).

²⁶³ For the history, see Graetz & O'Hear, supra note 12.

²⁶⁴ For detailed history of arm's-length, contrasting the U.S. and OECD approaches from the 1930s to today, see Langbein & Fuss, supra note 34.

²⁶⁵ For example, Wei Cui now offers a convincing—albeit post hoc—theoretical basis for digital taxes, namely, that they tax a location-specific rent. Cui, supra note 257. No one knows the fate of digital services taxes, but if they survive, Cui's post-hoc justification could well become part of the standard explanation for a tax whose original motivation was blatantly political and protectionist.

²⁶⁶ See, e.g., Interview with Stack, supra note 183, at 723 (“the politics in Europe are driving bad policy”); Alex Parker, OECD Shouldn't Rush Digital Tax Rules, Ex-Treasury Official Says, Law360 (July 18, 2019) (attributing to former Treasury official Mike McDonald concerns that politics, rather than principle, would drive BEPS 2.0). McDonald said, “Instead of it being the organic process of economic analysis identifying the problem, it is, ‘let us come up with economic justifications to support the solutions.’” Id. (quoting McDonald).

²⁶⁷ See Hugh Ault, Tax Competition and Tax Cooperation: A Survey and Reassessment, in International Taxation in a Changing Landscape: Liber Amicorum in Honour of Bertil Wiman (2019). The other types are competition for (1) business and investment and (2) paper profits to tax.

²⁶⁸ For more on politics, see Christensen & Hearson, supra note 1.

²⁶⁹ See, e.g., Jinyan Li, China and BEPS: From Norm-Taker to Norm-Shaker, 69 Bull. Int'l Tax'n (2015); Baistrocchi, supra note 160. Holding bilateral investment constant, tax treaties shift revenue from source states to residence states as compared with the no-treaty situation. If negotiated between states whose bilateral investment is symmetrical, tax treaties should have little revenue impact—what a state loses in a source capacity, it gains in a residence capacity. But states’ bilateral investment is rarely symmetrical, and the more asymmetrical, the more the net-source state loses revenue to the net-residence state. This revenue impact of tax treaties has long been recognized. Dagan, supra note 10. The OECD Model is therefore described as a poor fit for negotiation between rich and poor countries whose bilateral investment flows are very asymmetrical, and the UN Model has provisions that reduce the revenue shift. Despite the potential revenue shift, developing countries would give up source entitlements (which they do under both the UN and OECD Models) because they expect to receive more inbound investment when treaties enter into force, or to gain nonrevenue benefits from treaties, such as closer diplomatic relations with their tax treaty partners.

²⁷⁰ U.N. Dep't Of Econ. & Soc. Affairs, United Nations Model Double Taxation Convention Between Developed and Developing Countries (2011),available at https://www.un.org/esa/ffd/wp-content/uploads/2014/09/UN_Model_2011_Update.pdf [hereinafter UN Model]. See also Michael Lennard, The Purpose and Current Status of the United Nations Tax Work, Asia-Pacific Tax Bull. 23 (2008).

²⁷¹ Yariv Brauner, An International Tax Regime in Crystallization, 56 Tax L. Rev. 259, 307 (2003).

²⁷² See also Ryan Finley, EU Unilateralism Calls for Aggressive U.S. Approach, Stack Says, 84 Tax Notes Int'l 988 (2016) (quoting Stack as saying, “The committee [on fiscal affairs of the OECD] is a European-dominated institution. They have 22 of the 35 members, [and] they are the largest bloc in this new inclusive framework that we have to implement BEPS.”). Stack also related that when it became clear that country-by-country reporting would be adopted over U.S. objections, the United States agreed to the measure, negotiating to keep the reports from being publicly released. But the EU Commission announced that it would proceed with EU legislation to make the reports available to the public anyway. Although the EU did not follow through on this proposal, it eroded trust with U.S. negotiators. Id. at 1046 (quoting Stack as saying the action “bordered on bad faith”).

²⁷³ Bob Stack acknowledged this. Interview with Stack, supra note 183, at 726 ( “the only reason you get the wrong answers is because of U.S. cost share rules and because of check-the-box in the United States”).

²⁷⁴ Ed Kleinbard's discussion of how Starbucks uses transfer prices to shift profits on that most local provision of services—selling hot coffee—shows that we have an economy-wide problem. The Starbucks example shows that profit shifting is not limited to technology companies or to companies with unique intellectual property. See Kleinbard, supra note 58.

²⁷⁵ That the shift was away from source did not necessarily mean than it was toward residence. As discussed in Part I, the international tax regime provides ample opportunity for taxpayers to shift their profits to tax havens or make them disappear completely.

²⁷⁶ Matt Thomson, Int'l Income Allocation Rules Outdated, OECD Tax Chief Says, Law360 (Feb. 4, 2020).

²⁷⁷ Procedurally, the Commission's case is against the EU member state, but the penalty falls on the company, which has to repay the illegal subsidy. For more on state aid, especially the cases against U.S. multinationals, see Mason, supra note 65.

²⁷⁸ Instead, the Commission had previously taken issue with entire regimes, such as tax holidays. See id. at 457.

²⁷⁹ Senate Finance Committee Letter to Treasury Secretary Jacob Lew, Bipartisan Concern Over Targeting of American Firms (May 23, 2016) (noting that “the United States has a stake in these cases and has serious concerns about their fairness and potential impact on the U.S. fisc”). Id. (“EC officials generally have dismissed our concerns”). Id. (noting that four of the five investigations involved U.S. multinationals).

²⁸⁰ Letter from EU Commissioner of Competition Margrethe Vestager to Treasury Secretary Jacob J. Lew, at 2–3 (Feb. 29, 2016) (asserting that the state-aid investigations did not discriminate against U.S. companies or violate tax treaties).

²⁸¹ See discussion in Part I.B.1 supra.

²⁸² The reasons the Commission located the income in Ireland are complex, and they highlight the limits of state aid as an enforcement mechanism for aggressive tax avoidance. For more, see Mason, supra note 20.

²⁸³ Sean Farrell & Henry McDonald, Apple Ordered to Pay €13bn After EU Rules Ireland Broke State Aid Laws, Guardian (Aug. 30, 2016) (noting that the Apple recovery order was “40 times the previous record for such a case and the equivalent of the annual budget for Ireland's health service”).

²⁸⁴ Editorial Bd., The EU's Tax Attack on U.S. Business, Wall St. J. (Aug. 26, 2016).

²⁸⁵ U.S. Dep't Treasury, The European Commission's Recent State Aid Investigations of Transfer Pricing Rulings (Aug. 24, 2016).

²⁸⁶ Case T-892/16, Apple v. Commission, ECLI:EU:T:2017:925, Order of the General Court (Dec. 15, 2017).

²⁸⁷ Michael Graetz, Behind the European Raid on McDonald's, Wall St. J. (Dec. 3, 2015) (concluding that “[a]ttacking multinational corporations—especially U.S. multinationals—for paying too little taxes is a political winner. But at what cost to the rule of law?”).

²⁸⁸ Interview with Stack, supra note 183, at 727 (“if the European institutions are going to say, well, now we're going to take this [state aid] law and say it really always applied and do something again outside the area of multinational cooperation, it undermines the United States’ willingness to show up at the OECD table and … cooperate”).

²⁸⁹ Proposal for a Council Directive on the Common System of a Digital Services Tax on Revenues Resulting from the Provision of Certain Digital Services, COM(2018) 148 final (Mar. 21, 2018) (EU DST proposal).

²⁹⁰ Ruth Mason & Leopoldo Parada, Digital Battlefront in the Tax Wars, 92 Tax Notes Int'l 1183 (2018) (arguing that unilateral digital taxes may discriminate on the basis of nationality in violation of EU law); Ruth Mason & Leopoldo Parada, The Legality of Digital Taxes in Europe, 40 Va. Tax Rev. ___ (forthcoming 2020).

²⁹¹ The Commission adjusted both the taxable revenue streams and the taxable threshold of its proposed digital tax in ways that targeted U.S. companies. For example, the Commission declined to tax fees from subscriptions to digital streaming services. Commentators observed that doing so would have subjected to digital tax not only Netflix, but also the Swedish giant Spotify. See Gary Clyde Hufbauer & Zhiyao (Lucy) Lu, The European Union's Proposed Digital Services Tax: A De Facto Tariff, Peterson Inst. Int'l Econ. Pol'y Brief 18-15 (June 2018). The proposed tax would have applied only to companies with at least €750 million in global turnover, and €50 million in turnover in the EU. These thresholds effectively exempted nearly all EU companies. See European Commission Staff Working Document: Impact Assessment of the Proposed Digital Services Tax, COM(2018) 147 final, at 69 (Mar. 21, 2018).

²⁹² Patrick Smyth, Netherlands and Luxembourg Join Ireland as Wary of Digital Tax, Irish Times (Mar. 23, 2018).

²⁹³ Letter from Sens. Orrin Hatch and Ron Wyden to President Donald Tusk and President Jean-Claude Juncker (Oct. 18, 2018).

²⁹⁴ Editorial Bd., France Starts a Digital Tax War, Wall St. J. (July 16, 2019); William Mauldin, U.S. Launches Probe of French Digital Tax, Wall St. J. (July 10, 2019).

²⁹⁵ See, e.g., Office of the U.S. Trade Rep., Notice of Determination and Request for Comments Concerning Action Pursuant to Section 301: France's Digital Services Tax, Docket No. USTR-2019-0009 (2019) (detailing evidence of discriminatory intent in the French digital tax, including repeated references by the French finance minister to the “GAFA tax” for Google, Amazon, Facebook, Apple). See also Mason & Parada, supra note 290, at 1192 (evidence from Spain and Austria).

²⁹⁶ Office of the United States Trade Representative Ambassador Robert E. Lighthizer, Report on France's Digital Services Tax Prepared in the Investigation Under Section 301 of the Trade Act of 1974.

²⁹⁷ Larry Elliot, UK to Press Ahead with Digital Tax Despite U.S. Pressure, Javid Insists, Guardian (Jan. 22, 2020) (describing U.S. threats of retaliation for digital taxes).

²⁹⁸ See Faulhaber, Lilian V., Taxing Tech: The Future of Digital Taxation, 39 Va. Tax Rev. 145, 156–66 (2019)Google Scholar (detailing a broad range of unilateral tax measures).

²⁹⁹ OECD, Tax Challenges Arising from Digitalisation: Interim Report 149–55 (2018). Australia adopted a similar rule based on the British model. Id.

³⁰⁰ Id. at 137–38.

³⁰¹ Tax treaties address income taxes (and taxes similar to income taxes); they do not cover turnover taxes. As a result, states may, without violating tax treaties, apply turnover taxes to nonresident companies that lack a permanent establishment in the source state. Kofler, Georg & Sinnig, Julia, Equalization Taxes and the EU's Digital Services Tax, 47 Int'l Tax Rev. 176 (2019)Google Scholar (concluding that tax treaties do not bar digital taxes).

³⁰² See, e.g., Mason & Parada, supra note 290, at 1190 (noting the Commission's estimate that an EU-wide digital tax would raise less than $6 billion annually). Tax treaties preclude countries from applying their new nexus rules to companies that reside in their tax-treaty partners, and countries typically have tax treaties with their largest trading partners.

³⁰³ Id.

³⁰⁴ Liz Alderman, Jim Tankersley & Ana Swanson., France and U.S. Move Toward Temporary Truce in Trade War, N.Y. Times (Jan. 21, 2020).

³⁰⁵ This account is consistent with the notion that a single country, by going it alone, can induce cooperation from an otherwise reluctant state. See Azam, supra note 1, at 525–29 (discussing work of Stephen D. Krasner and considering the United States as a go-it-alone actor in international tax). On digital tax and state aid, France and the EU Commission, respectively, would be the go-it-alone actor.

³⁰⁶ Stephanie Soong Johnston, On the Brink of a New Tax World Order, or Chaos?, Tax Notes (Jan. 2, 2020).

³⁰⁷ Stephanie Soong Johnston, U.S. Senators Warn EU Digital Taxes Undercut OECD Progress, 93 Tax Notes Int'l 578 (Feb. 4, 2019).

³⁰⁸ Not limiting its responses to negotiations at the OECD, the United States threatened retaliation against France and other countries for digital taxes. See, e.g., Ana Swanson, U.S. Announces Inquiry of French Digital Tax that May End in Tariffs, N.Y. Times (July 10, 2019).

³⁰⁹ See Dagan, supra note 10, at 988 n. 105.

³¹⁰ OECD, International Direct Investment Statistics Yearbook (2018) (United States is the world's largest capital importer, including portfolio flows); World Bank, Households and NPISHs Final Consumption Expenditure, at https://data.worldbank.org/indicator/NE.CON.PRVT.CD (indicating the United States as top consumer market in the world).

³¹¹ Keith Rapoza, India Poised to Be Third Largest Consumer Economy, Forbes (Mar. 21, 2017) (listing China and India as the world's largest consumer markets after the United States).

³¹² IRC §§ 245A (effective exemption); 951A (minimum taxation of foreign income).

³¹³ There is much more to the impact of the Tax Cuts and Jobs Act of 2017 than I can relate here.

³¹⁴ See, e.g., Robert Stack, 22d Annual David R. Tillinghast Lecture on International Taxation (NYU School of Law), YouTube (Sept. 22, 2017), at https://www.youtube.com/watch?v=zcdeiTL-gFE (recounting some of the difficulties of using a multilateral treaty to update bilateral treaties).

³¹⁵ As discussed above, such bilateralism also suits powerful countries. See text accompanying note 51 supra.

³¹⁶ These include country-by-country reporting, information-sharing about tax rulings, transfer-pricing documentation, disclosure of aggressive tax-planning positions, and peer review of harmful tax practices and dispute resolution procedures.

³¹⁷ OECD Work Program, supra note 237, at 7 (explaining BEPS 2.0 as motivated by concern among the Inclusive Framework countries that proliferation of unilateral measures will “adversely impact global investments and growth”).