Reflections from the Brink of Tax Warfare: Developing Countries, Digital Services Taxes, and an Opportunity for More Just Global Governance with the OECD’s Two-Pillar Solution

Abstract

Starting in 2016, many countries enacted digital services taxes (DSTs), a turnover tax that applies to digital companies regardless of whether they have a physical presence in the taxing jurisdiction. After the Organization for Economic Cooperation and Development’s Inclusive Framework reached final agreement on its two-pillar solution to tax challenges in a global digital economy, these unilateral measures went on pause. This Note reflects on the recent DST phenomenon, reconceptualizing the DST debate as part of a broader discourse on global governance and globalization. Although DSTs first emerged in developed countries in the European Union, this Note analyzes developing country DSTs against the backdrop of vocal U.S. opposition. This Note demonstrates that the DST discourse confirms long-held suspicions of developing countries regarding the international economic law that shapes the course and outcomes of economic globalization more broadly. Nonetheless, this Note argues that the DST debate and the resulting Pillar One solution reflect important positive changes to the archetypal globalization and global governance narratives. Taking stock of these changes, this Note concludes that DSTs are and were a powerful negotiating tool for developing countries in their attempt to reorient the principles of international tax toward a more equitable distribution of taxing rights and to recognize broader tax goals beyond economic profit.