Why do governments commit to multilateral tax cooperation? Bureaucratic politics, international tax policy, and the OECD/G20 Inclusive Framework on BEPS

The past decade has seen a remarkable proliferation of multilateral tax cooperation efforts at both the Organisation for Economic Cooperation and Development (OECD) and the United Nations (UN). These developments stand in stark contrast to expectations of both scholars and practitioners, who were sceptical of the possibility for multilateral tax cooperation beyond the diffusion of model rules and best practices. This scepticism had been informed by a profound dilemma of multilateral tax cooperation: due to the close link between taxation and Westphalian conceptualizations of national sovereignty, governments are usually reluctant to commit to multilateral governance frameworks in international taxation that might constrain their policy space. Yet, both the OECD’s Inclusive Framework and the current negotiations to establish a UN Framework Convention on International Tax Cooperation have seen an impressive uptake by countries across the world. Why do governments commit to multilateral tax cooperation regardless of these concerns? This thesis explores this question from the perspective of bureaucratic politics and argues that a government’s stance towards multilateral tax cooperation reflects the outcome of bargaining processes between different governmental stakeholders, each of which holds distinct priorities and thus assesses the potential benefits and detriments of multilateral tax cooperation from a different angle. While existing scholarship on multilateral tax cooperation primarily focuses on OECD countries and ‘tax haven’ jurisdictions, this thesis studies the drivers of multilateral tax cooperation in the Global South. Building on novel qualitative data from three countries in South and Southeast Asia, this thesis finds that the key explanation for different stances towards multilateral tax cooperation is the institutional configuration of bureaucratic bargaining processes that enables different ideas about multilateral tax cooperation to shape the policy decision. In particular, the case studies of Bangladesh, Sri Lanka, and Vietnam show that it is primarily two aspects of domestic institutions in lower-income countries that explain different policy outcomes: first, the degree of institutional separation of revenue from investment policy, and second, the relationship between bureaucratic stakeholders and political principals. The thesis makes three contributions. First, it conceptualizes international tax policy as distinct issue area and identifies the role that multilateral tax cooperation plays in achieving different underlying policy objectives in international tax policy. Second, by using novel data to explain international tax policy decisions of governments in South and Southeast Asia, the thesis adds to an emerging literature that studies the politics and political economy of international tax policy but has largely neglected lower-income countries. Third, speaking to theories of bureaucratic bargaining, the thesis illustrates how models of bureaucratic bargaining can be applied to non-Western contexts as well as to issue areas other than foreign and security policy.