The interface of international trade law and taxation: defining the role of the World Trade Organisation in the field of international taxation

Abstract

This thesis explores the ill-defined and oft-underestimated relationship between the World Trade Organisation (WTO) and taxation. By adopting a two-pronged approach, the work will (i) examine the extent to which the WTO legal framework exerts influence upon domestic tax law and international tax policy, and will (ii) question whether it is appropriate for the WTO to play a regulatory role in the field of taxation, and whether this role should be expanded or curtailed. The thesis presents an examination of the historical development of international trade law and international tax law, and reveals that these two separate areas of law are closely linked in terms of their underlying principles and historical evolution. The work then goes on to offer a doctrinal analysis of the tax content found in the WTO legal texts and highlights ambiguities therein. Analysis focuses on the General Agreement on Tariffs and Trade 1994 (GATT), the Agreement on Subsidies and Countervailing Measures (SCM Agreement), and the General Agreement on Trade in Services (GATS). Throughout the analysis, attention is placed on the income tax litigation between the European Union and the United States (the Domestic International Sales Corporation and the Foreign Sales Corporation tax breaks), and on future possible tax conflicts. It is found that the WTO plays a crucial role in regulating taxation matters, but that the rules pertaining to taxation are often unmanageably ambiguous, and this may result in unforeseen conflicts with domestic and international tax policy. Four recommendations are offered to resolve this legal ambiguity: a reappraisal of the direct-indirect tax distinction, the clarification of legal texts, the establishment of a WTO Committee on Trade and Taxation, and the development of institutional linkages and dialogue between the WTO and the traditional international tax institutions, the Organisation for Economic Cooperation and Development (OECD) and the United Nations (UN).