2. A History of Lower-Income Countries in (and out of) Global Tax Governance

While the tax treaties that are the focus of this book range from those signed in the 2010s to some that are fifty years old, the models on which they are all based date from earlier still. It was in the 1920s and 1930s that the basic design of the international tax regime was laid out, combining the decentralized, bottom-up approach of hardlaw bilateral treaties with topdown softlaw standardization through multilateral models.1 Key concepts that now constrain countries’ ability to tax multinational companies were also developed at this time, fi nally set in stone with the creation of the OECD model treaty in 1963. Throughout this century of negotiations, the tension between capitalimporting lowerincome countries and capitalexporting higherincome countries has been a consistent theme. Yet the center of gravity of the regime we have today, even taking into account the UN model treaty’s greater emphasis on lowerincome countries’ taxing rights, is much closer to the position articulated by higherincome countries than by lowerincome countries. This chapter reviews the historical rec ord, combining original archival research with existing accounts to give a po liti cal economy perspective on a story that is familiar to tax history scholars. It demonstrates that higherincome countries’ domination of the international tax regime results from their stronger preference for cooperation among themselves, which drove repeated and insurmountable firstmover advantages. Today’s international tax institutions were not primarily designed for lowerincome countries but by and for higherincome ones. They resemble those countries’ own tax systems and a consensus that formed among a transnational community of experts from the Global North. 2 A HISTORY OF LOWERINCOME COUNTRIES IN (AND OUT OF) GLOBAL TAX GOVERNANCE