The faltering legitimacy of international tax law

Tilburg University

The faltering legitimacy of international tax law

Peters, C.A.T.

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2013

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Citation for published version (APA):

Peters, C. A. T. (2013). The faltering legitimacy of international tax law. CentER, Center for Economic Research.

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The faltering legitimacy of

international tax law

Cees Peters

© Cees Peters, 2013

The faltering legitimacy of international tax law

PROEFSCHRIFT

ter verkrijging van de graad van doctor

aan Tilburg University,

op gezag van de rector magnificus,

prof. dr. Ph. Eijlander,

in het openbaar te verdedigen ten overstaan van een

door het college voor promoties aangewezen commissie

in de aula van de Universiteit

op woensdag 25 september 2013 om 16.15 uur

door

CORNELIS ARNOLDUS THEODORUS PETERS

geboren op 13 februari 1977 te Helmond

Promotiecommissie

Promotores: prof. dr. P.H.J. Essers

prof. dr. E.C.C.M. Kemmeren

Overige leden: prof. A. Di Pietro

prof. mr. J.L.M. Gribnau

prof. dr. B. Peeters

prof. B. Wiman

In loving memory of my mother.

She taught me how to combine thinking with feeling.

It is my aspiration to transform her lessons into my life and my work.

The faltering legitimacy of international tax law

i

The faltering legitimacy of international tax law

Table of contents

Chapter 1 – Introduction 1

1.1. Motivation to perform this research 1

1.2. Subject of this study 6

1.2.1. A few words on the history of this study 6

1.2.2. The changing pendulum of international taxation 7

1.2.3. Towards an improvement of the legitimacy of international tax law 8

1.3. Research questions and limitations 10

1.3.1. Research questions 10

1.3.2. Limitations 12

1.4. Methodology 15

1.4.1. An exercise of fiscal sociology 15

1.4.2. Normative framework 17

1.4.2.1. Introduction 17

1.4.2.2. A Habermasian perspective on the improvement of the

legitimacy of international tax law 18

1.4.2.3. The contribution of social-scientific knowledge to the

improvement of the legitimacy of international tax law 20

1.5. Relevance of this study 21

1.6. Structure of the book 23

PART A: The changing pendulum of international taxation

Chapter 2 - The state in the changing international society 27

2.1. Introduction 27

2.2. The 'traditional' state-society interaction 28

2.2.1. National paradigms of law and society 28

2.2.2. The external relationships of states 30

2.2.3. Conclusion 31

2.3. The changing state-society interaction 31

2.3.1. Introduction to the changing state-society interaction 31

Table of contents

ii

2.3.2. States as a matter of fact 35

2.3.3. States and the different role of international economic law 37

2.3.4. States and the growing importance of markets 42

2.3.4.1. The countervailing logics of states and markets in the

changing society 42

2.3.4.2. Regulatory competition as a matter of fact and as an idea 45

2.3.5. The evolution of the tax law market 48

2.3.5.1. What is the tax law market? 48

2.3.5.2. The institutional complexity of the tax law market 50

2.3.6. Conclusion 53

2.4. Conclusion 54

Chapter 3 - International tax law in the changing state-society

interaction 57

3.1. Introduction 57

3.2. Different approaches to the study of international tax law 57

3.3. International tax law in the traditional state-society interaction 61

3.3.1. The OECD legal framework dealing with the problem of juridical

double taxation 61

3.3.2. Scope and characteristics of international tax law 64

3.4. The transformation of international tax law in the changing state-society

interaction 67

3.5. Conclusion 72

Chapter 4 - The norms of international taxation in the changing state￾society interaction 73

4.1. Introduction 73

4.2. Norms of international taxation - the traditional presentation 74

4.2.1. Economic efficiency 74

4.2.2. Equity considerations 76

4.2.3. The division between efficiency and equity 76

4.3. Equity norms in the changing state-society interaction 79

4.3.1. Inter-individual equity 79

4.3.1.1. The traditional presentation 79

The faltering legitimacy of international tax law

iii

4.3.1.2. Sociological reflections 80

4.3.2. Inter-nation equity 82

4.3.2.1. The traditional presentation 82

4.3.2.2. Sociological reflections 86

4.3.3. Concluding remarks 90

4.4. International tax neutrality in the changing state-society interaction 91

4.4.1. The 'class' of international tax neutralities 91

4.4.1.1. Introduction to international tax neutrality 91

4.4.1.2. Contemporary evaluations of the international tax

neutralities 92

4.4.1.3. CIN and CEN as autonomous legal concepts 95

4.4.2. The evolution of international tax neutrality 97

4.4.2.1. The second wave of economic scholarship 97

4.4.2.2. The third wave of economic scholarship 98

4.4.3. Sociological reflections 103

4.5. Conclusion 108

Chapter 5 - Interim conclusions 111

5.1. Introduction 111

5.2. International tax law in the changing pendulum of international taxation 112

5.2.1. Analysis of the changing pendulum of international taxation 112

5.2.1.1. The evolution of the tax law market and the

political-economic conflict of international taxation 112

5.2.1.2. The transformation of international tax law as a symptom

of a changing concern with justice 114

5.2.1.3. Reflections on the legitimacy problems of

international tax law 116

5.2.2. Analysis of international tax law 119

5.3. Social-scientific knowledge and the legitimacy of international tax law

in the changing state-society interaction 123

5.3.1. International tax neutrality in the traditional state-society interaction124

5.3.2. ORDO-liberalism and the legitimacy of international tax law 125

5.3.3. The problem of conceptualising international tax neutrality in the

changing state-society interaction 128

Table of contents

iv

PART B: Improving the legitimacy of international tax law in the changing

state-society interaction

Chapter 6 - A Habermasian perspective on the legitimacy of

international tax law 133

6.1. Introduction 133

6.2. Brief introduction to the work of Habermas 134

6.3. A different conceptual model of society 140

6.3.1. Lifeworld and systems 140

6.3.2. Social integration and system integration in the changing

state-society interaction 143

6.4. On the social genesis of law and politics 145

6.4.1. Introduction 145

6.4.2. Language and society: between 'facticity and validity' 146

6.4.3. The sociological need for legitimate law 149

6.4.4. The normative justification of law and the characteristics of law 154

6.4.5. Conclusion 157

6.5. Implications of the Habermasian perspective on legitimacy for matters

of direct taxation 159

6.6. Improving the legitimacy of international tax law with the help of

Habermas’s theoretic framework 161

6.6.1. Habermas beyond the borders and the modest ambition

of this study 161

6.6.2. A Habermasian social-theoretic perspective on the changing

pendulum of international taxation 165

6.6.2.1. The legitimation of taxation and Habermas's model

of society 165

6.6.2.2. A Habermasian perspective on the legitimacy problems

of international tax law 168

6.6.2.2.a. Social integration in international taxation 169

6.6.2.2.b. System integration in international taxation 173

6.6.2.2.c. Conclusion 175

6.6.3. Foundations of a more legitimate legal framework for

international tax law 178

6.7. Conclusion 183

The faltering legitimacy of international tax law

v

Chapter 7 - Social-scientific knowledge in the changing

state-society interaction 185

7.1. Introduction 185

7.2. Knowledge in a web of links: conceptualising and understanding the

autonomy of tax law 185

7.2.1. Understanding taxation within society 185

7.2.2. The taxonomy of the autonomy of tax law 187

7.3. Methodological issues 190

7.3.1. Introduction 190

7.3.2. Methodology and the social sciences 191

7.3.3. The separation within the social sciences 194

7.4. Improving the longstanding alliance between economic research

and legal research in the field of international taxation 197

7.4.1. The alliance of economic research and legal research to obtain

knowledge about taxation 197

7.4.2. The need to study international taxation in a more

endogenous way 198

7.4.2.1. Introduction 198

7.4.2.2. The separation of political and economic considerations 199

7.4.2.2.a. Structural power and the split of international

political economy 200

7.4.2.2.b. The risk of being blind to structural power 202

7.4.2.3. The separation of legal and economic considerations 205

7.4.2.4. Conclusion 207

7.4.3. The need to look beyond a positivist methodology to understand

the economy 209

7.4.3.1. Introduction 209

7.4.3.2. The meanings of 'economic' 210

7.4.3.3. The two identities of tax neutrality 212

7.4.4. Evaluation of the alliance between economic and legal research 214

7.5. Methodological foundations of social-scientific knowledge in the

changing state-society interaction 215

7.6. Conclusion 220

Table of contents

vi

PART C: Future

Chapter 8 – Recommendations 225

8.1. Introduction 225

8.2. A vision of international tax law for the future 225

8.2.1. Introduction 225

8.2.2. The template of deliberative supranationalism 226

8.2.3. Deliberative international tax law 229

8.2.3.1. Introduction 229

8.2.3.2. Meta-theoretic starting point 230

8.2.3.3. Problems of double non-taxation and the consequences

for states 231

8.2.3.4. The creation of a forum for deliberations 233

8.2.3.5. The role of supranational tax law and the function

of the court 236

8.2.3.6. Conclusion about deliberative international tax law 239

8.2.4. Communicative action in the international society of states and

individuals 240

8.2.5. Conclusion 245

8.3. The future of social-scientific knowledge as a source of legitimacy of

international tax law 246

8.3.1. International tax neutrality 246

8.3.1.1. Evaluation of international tax neutrality as a source of

social-scientific knowledge about international taxation 246

8.3.1.2. Improving international tax neutrality 251

8.3.1.3. Recommendations about the application of international

tax neutrality in international tax policy 253

8.3.2. The limits of social-scientific knowledge as a source of legitimacy 255

8.4. Conclusion 258

The faltering legitimacy of international tax law

vii

PART D: Summary and conclusions

Chapter 9 – Summary and conclusions 263

9.1. Introduction 263

9.2. Transformations of international tax law in the light of the changing

state-society interaction 263

9.2.1. The state in the changing international society 264

9.2.2. International tax law in the changing state-society interaction 265

9.2.3. The norms of international taxation in the changing state-society

interaction 265

9.3. International tax law in the changing pendulum of international taxation 267

9.4. Social-scientific knowledge and the legitimacy of international tax law

in the changing state-society interaction 269

9.5. Foundations of a more legitimate legal framework for international

tax law 271

9.6. Methodological foundations of social-scientific knowledge in the

changing state-society interaction 273

9.7. A vision of international tax law for the future 274

9.8. The future of social-scientific knowledge as a source of legitimacy of

international tax law 276

9.9. Concluding observations 277

References 279

Table of contents

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