How Nations Share

Every nation has an interest in sharing the gains they help create by participating in globalization. Citizens should be very interested in discovering how well their governments fare in claiming an adequate share of this international income stream, since a government that cannot or will not exert its taxing jurisdiction internationally is potentially missing out on a very large and very productive source of revenue. Yet it is all but impossible for citizens to observe exactly how, or how well, their governments navigate this aspect of economic globalization. The vast majority of international tax law plays out in practice through a series of intergovernmental dispute resolutions that are handled in complete secrecy through diplomatic channels, subject to no oversight by any judicial or legislative body and subject to no scrutiny by the taxpaying public. This Article shows that in thus obscuring public observation of international tax law as it develops, the structure of the international tax regime prevents citizens from comprehensively assessing the quality of their own nation’s tax systems. Without more information to determine what, if anything, one’s government ultimately claims from the massive stream of income created by international trade and investment, it is impossible to use any policy assessment tools, such as standards of economic efficiency and fairness, to talk coherently about the tax system. The Article concludes that at a time when national economic and political fortunes are experiencing high stress, uncertainty, and volatility, we need much better information about how international tax law develops and works out in practice. INTRODUCTION 1408 I. WHY NATIONS FIGHT OVER TAX REVENUES 1412 A. HOW NATIONS AGREE TO SHARE REVENUES 1414 B. TAX AGREEMENTS LEAD TO INTERNATIONAL DISPUTES 1419 C. ODD MAN OUT: THE SIDELINING OF THE TAXPAYER 1423 II. HOW NATIONS RESOLVE THE DISPUTES THEY FACILITATE 1426 A. LET TAXPAYERS FIGHT WITH THE REVENUE AUTHORITY 1427 B. LET TAXPAYERS LITIGATE 1430 C. LET DIPLOMATS WORK IT OUT 1433 D. LET EXPERTS TELL THE DIPLOMATS WHAT TO DO 1437 III. SOFT LAW’S CUSHIONING ROLE 1442 A. THE PROBLEM WITH HARD LAW 1443 † Copyright © 2012 Allison Christians. * Associate Professor, University of Wisconsin Law School. Thanks to Professors Karen Brown, Neil Buchanan, Steven Dean, Mihir Desai, John Ohnesorge, Daniel Shaviro, and Jason Yackee; the participants of the New York University Tax Policy Colloquium, Spring 2011; and the faculty workshop participants of the George Washington University Law School, for their thoughtful comments and suggestions. This project benefited from a generous research grant from the Wisconsin Alumni Research Foundation. 1408 INDIANA LAW JOURNAL [Vol. 87:1407 B. THE PROBLEM WITH NONLAW 1445 C. THE PROMISES AND PERILS OF SOFT LAW 1447 CONCLUSION 1452

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