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The Politics of Taxing Multinational Firms in a Digital Age

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  • Hearson, Martin
  • Gelepithis, Margarita

Abstract

Taxing multinationals is politically difficult because of the structural power of mobile firms within the global economy, and this structural power is expected to increase in the digital age. Recently however there has been a breakdown in the international corporate tax consensus that structured tax competition over the past century. A new norm of international taxation has emerged whereby states claim the right to tax corporate income based on presence in consumer markets. Our paper explains this unexpected reassertion of state power. Building on previous accounts of large-scale change in policy norms, we show how the emergence of digital business models led to a new tax consensus by setting in train a process of policy contestation that allowed countries to levy taxes on multinationals unilaterally, without fear of capital flight.

Suggested Citation

  • Hearson, Martin & Gelepithis, Margarita, 2021. "The Politics of Taxing Multinational Firms in a Digital Age," Working Papers 17030, Institute of Development Studies, International Centre for Tax and Development.
    • Handle: RePEc:idq:ictduk:17030
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    File URL: https://opendocs.ids.ac.uk/opendocs/handle/20.500.12413/17030
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    References listed on IDEAS

    as
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    3. Maya Bacache-Beauvallet, 2018. "Special issue on taxation in the digital economy," Post-Print hal-02163803, HAL.
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    5. Scheve, Kenneth & Stasavage, David, 2010. "The Conscription of Wealth: Mass Warfare and the Demand for Progressive Taxation," International Organization, Cambridge University Press, vol. 64(4), pages 529-561, October.
    6. Culpepper, Pepper D., 2015. "Structural power and political science in the post-crisis era," Business and Politics, Cambridge University Press, vol. 17(3), pages 391-409, October.
    7. Schmidt, Vivien A., 2002. "The Futures of European Capitalism," OUP Catalogue, Oxford University Press, number 9780199253685.
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