AuthorBrauner, Yariv

INTRODUCTION 490 I. THE MULTILATERAL INSTRUMENT (MLI) 498 A. Is the MLI Inclusive? 502 1. Setting the Agenda 503 2. Original Movers 504 3. Joiners 505 4. Covered Tax Agreements 506 5. Reservations 507 6. Issues of Substance 510 7. The Future of the MLI 511 II. COUNTRY-BY-COUNTRY REPORTING 511 A. How Inclusive is CbCR? 513 III. THE INCLUSIVE FRAMEWORK 515 A. Origins and Design 515 B. Inclusivity 519 1. Setting the Agenda 519 2. The Freedom to Join the Framework 520 3. The Resources Gap 525 4. Gather, Divide, and Conquer: The Production of the Inclusive Framework So Far 527 IV. CONCLUSION: INCLUSIVITY AND THE INTERNATIONAL TAX REGIME 533 A. The International Tax Regime 535 B. Exit and Voice in International Taxation 539 C. CONCLUSION: THE WAY FORWARD 543 INTRODUCTION

The beautiful, serene Kyoto hosted on June 30, 2016, the inaugural meeting of the first international tax forum, named the Inclusive Framework (1) Eighty-two countries' representatives met in the ancient Japanese Imperial city known for its feng shui to overcome the aftermath of the public and media discontent with the international tax regime following the global financial crisis of 2008. (2) The original response to this discontent was led by the Organization for Economic Co-operation and Development (OECD) in the form of the Base Erosion and Profit Shifting (BEPS) project. (3) The leadership role of the OECD in the project was seemingly natural because the OECD had been the caretaker of the international tax regime and its most dominant entity since the end of World War II. (4) The OECD crafted the "soft law" regime without legitimacy, and naturally with the interests of its own members (and its own institutional interests) in mind. (5) It faced little resistance prior to the turn of the millennium, (6) yet inherent technical deficiencies in the international tax regime, (7) geopolitical changes (8) and globalization (9) presented serious challenges to its dominance. (10)

The G20 organization (11) was recruited therefore by the OECD to build up the political power behind the BEPS project. (12) The project resulted in few substantive changes to the norms of the international tax regime, (13) yet it has dramatically altered the tax compliance environment faced by multinational enterprises (MNEs). (14) More importantly, it succeeded in preserving the dominant position of the OECD over the international tax regime. (15) The focus of the global tax discourse has shifted to fighting what has been perceived as abusive tax planning by MNEs, (16) obscuring that the fundamental problems that triggered the BEPS project and the critique of the actions of the OECD as the caretaker of the international tax regime have not been resolved.

The BEPS countries (members of the OECD and the G20 organizations) quickly realized however that their desired focus on aggressive tax planning required cooperation with countries beyond their exclusive membership. (17) The BEPS project's outcomes included therefore three mechanisms to recruit more countries for the effort: (18) Country-by-Country reporting, (19) the multilateral instrument (MLI), (20) and the Inclusive Framework. (21)

Country-by-Country reporting (CbCR) is perhaps the single most significant doctrinal achievement of the BEPS project. An idea that had been initiated by civil society and opposed by the dominant OECD countries, but at the same time viewed by tax experts as inevitable, (22) CbCR required MNEs to report relevant tax information about their global operations, broken down to single countries, which made "stateless income" (23) (i.e., income not reported as associated with any single jurisdiction) problematic for these MNEs, and put pressure on politicians to effectively tax the entire global income of these enterprises. Naturally, the reporting was intended to include operations in all countries, and for the most part to be available to all countries' tax authorities even though the original report is filed with the home jurisdiction. (24) Nominally, the report is confidential and available only to the relevant tax authorities, and only for the purposes of "risk assessment," i.e., to assist them in making a decision to audit or not to audit the taxpayer, (25) yet it is highly doubtful that that would be the case in reality. (26) In any event, CbCR could not work without the involvement of essentially all countries, because it should include information about the global operations of MNEs broken down by countries (all countries), and therefore it is de facto a harmonized universal measure.

The MLI is another product of the BEPS project. The original BEPS action plan included Action Item 15the goal of which was to develop a multilateral instrument (a treaty) to implement the (then future) BEPS recommendations through a single, swift amendment of all relevant tax treaties. (27) The idea was that effective reform could not tolerate regular renegotiations of all relevant tax treaties, a process that might have taken years and would have likely faced many practical and political difficulties that would make the entire project irrelevant. (28) Although the MLI was established to implement the BEPS recommendation, it included provisions that permitted it to potentially expand beyond its narrow original charge and have arguably made it the first multilateral tax treaty. (29)

Finally, the Inclusive Framework, although not a direct product of the BEPS project, was effectively its consequence. (30) Similarly to the MLI, it was established to implement the BEPS agenda and to advance it where it had not achieved finality in terms of recommendations or dictates. (31) Its mandate was wider than that of the MLI because the MLI was limited to treaty changes and therefore to tax treaty provisions. Further, the Inclusive Framework could more naturally venture to areas where no consensus had been achieved during the BEPS project, most notably the solution for the challenges presented by the digital economy. (32) The Inclusive Framework's wide, essentially open, agenda and its stated inclusivity, both in nominal terms (all countries were invited to join) and in substantive terms (its effect goes beyond tax treaties and therefore may be relevant also for countries with few or no treaties), allegedly made it the most universal international tax forum, with twothirds of the world's countries as members.

Nonetheless, the BEPS origins of the Inclusive Framework, its reliance on the OECD, its limited actual agenda and various administrative features have raised questions about the authenticity of the inclusivity of this framework. (33) A key difficulty in raising (and responding to) these questions is the lack of a clear measure of inclusivity. Different people may differ in their views of what may be sufficient inclusivity. It is not even clear what the OECD meant by inclusivity "on an equal footing" when it produced the framework. (34) In a recent article, Christians and van Apeldoorn explored the meaning of this phrase, generally supporting the notion of more inclusivity in the international tax regime on various grounds, yet criticizing the opacity of the abovementioned processes that according to them hinders the inclusivity processes from reaching their potential. (35) This Article generally accepts Christians and van Apeldoorn's arguments and normative stance, (36) but takes the next step, not only highlighting and protesting the obscurity of the goals set by the OECD, but examining the claim of inclusivity based on a variety of indicators and available data that together portray a clearer picture of this new institution. This methodology is dictated by the opacity of the OECD and its processes: the unclear (and undeclared) reasons for the OECD's call for inclusivity on equal footing, and the consequential lack of a pinpoint measures of success (and therefore of accountability) in achieving this goal in the Inclusive Framework. (37) The Article concludes that based on these reasonable indications a claim for genuine, meaningful inclusivity of the framework is exaggerated and leaves much to be desired. The direct implication of this shortcoming is that the legitimacy that the OECD has been pursuing for the post-BEPS international tax regime, and the corresponding cooperation it has been seeking from the developing world, are unlikely to materialize soon.

The rest of the Article proceeds as follows: Part I examines the MLI and its contribution to the inclusivity of the international tax regime; Parts II and III similarly analyze the inclusivity of CbCR and the Inclusive Framework, respectively; Part IV concludes, exploring the implications of this Article's findings for the future of the international tax regime.


    The concept of a multilateral tax treaty has been on the international tax policy agenda for a long time, (38) yet, until the conclusion of the MLI, the idea had not materialized. (39) The initial idea for an MLI appeared in the BEPS Action Plan's Action 15. (40) The original work on BEPS Action 15 focused on the feasibility of such an instrument, based on public international law and precedents from other areas of international law. (41) This work produced a report, concluding that an MLI is desirable and feasible. (42) The report was approved by the OECD's Committee on Fiscal Affairs (CFA) in June 2014. (43) The OECD then proceeded to constitute an ad-hoc group (MLI Group) to work on the MLI's drafting. (44) This action was based on a mandate approved by the CFA and endorsed by the G20 inJanuary 2015. (45) The mandate stated that all countries may participate in the MLI group and that participation did not require later signature. (46) The final Action 15 report was released in 2015 together with the other final BEPS report, and included mainly the mandate and the 2014 report. (47) It further included a toolbox for future implementation of an MLI with measures...

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