Tax Policy in the OECD: Soft Governance Gets Harder

Chapter 4 deals with tax policy in the OECD. Although the OECD has worked on many problems related to national fiscal systems, its achievements in sorting out international corporate tax practices are most well known. The model international corporate tax treaty, derived from US precedents and developed in the interwar period, has been continually refined to deal with difficult issues such as transfer pricing and electronic commerce. But corporate tax avoidance, particularly by US firms, has propelled a possible new approach - formula apportionment - that could test the OECD's capacity to find common ground for its members and other important states. Moreover, the OECD's recent confrontation with the tax havens suggests an ambivalent posture towards non-members, even as some of them play an ever-larger role in OECD deliberations. The chapter argues that the OECD now practices a kind of global governance in the taxation area, but its legitimacy and competence will be greatly.