Viktória Zsuzsanna Vad: Instruments for international tax harmonization. Nr. 2026/11.
Taxation is a key state-economy area for jurisdictions, the lack of material international harmonization present for a long time can be traced back to the fact that tax issues are closely connected to the issue of state sovereignty. At the legislative level, the international aspect of tax payment is governed by bilateral and multilateral treaties, domestic legislation and international soft law. In the last decades, especially from 2013 onwards, we have seen various harmonization initiatives employing various legal instruments. To define and inspect these instruments, there are characteristics to consider for each one of them. One of these characteristics is classifying as hard law or soft law. In between are the quasi-binding soft law instruments, that gained enforceability through transposition into domestic legislation or implementation pressure either political or economic.
If we look at bilateral treaties, decades of practice and multiple model conventions established the common language of negotiations where misunderstanding on meaning is marginal. A special multilateral treaty (the Multilateral Instrument) is unique in its nature because it integrates modifications stemming from the soft law minimum standards established by the OECD into the hard law bilateral tax treaties. In the standard setting at international level, normative and / or political pressure result in practical effectiveness even without legal enforceability. During domestic implementation, parties are faced by the dilemma of breaching either international soft law or even hard law. While hard law harmonization works from the top to the bottom, employing soft law instruments by the international tax practice supports bottom-up harmonization.
Keywords: taxation, soft law, international taxation, tax harmonization, direct taxation.
The working paper can be downloaded here.
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