The rise of global tax multilateralism challenges state sovereignty and economic justice, as neoliberal influences shape its mechanisms and priorities.

For decades, trade multilateralism was a cornerstone of the neoliberal economic agenda. However, over the past ten years, the global shift toward economic nationalism has disrupted this status quo. In its wake, a new frontier of multilateralism has emerged: international tax cooperation.

Driven by the 2008 global financial crisis and reinforced by G20 initiatives, tax multilateralism now shapes the global economic dialogue, signaling a significant shift in priorities for international cooperation.

The Organization for Economic Cooperation and Development (OECD) has long promoted international tax collaboration. The United Nations recently introduced a parallel initiative advocating for fair and inclusive global tax policies. This year, Brazil’s G20 summit spotlighted a critical agenda: taxing the super-rich. Both frameworks aim to tackle tax evasion and avoidance, particularly by high-net-worth individuals. This focus gained traction after the financial crisis when stark inequalities within and between nations became impossible to ignore.

Taxation lies at the heart of modern state sovereignty. It finances essential public goods—education, healthcare, infrastructure—that underpin economic growth. Yet, the progressive tax discourse, emphasizing equitable distribution, clashes sharply with neoliberalism’s market-driven ethos. This tension raises a crucial question: Can the neoliberal agenda shape the trajectory of tax multilateralism?

Tax Arbitration: A Neoliberal Trojan Horse?

Two defining characteristics of neoliberalism have infiltrated the global tax conversation. The first is its approach to arbitration, which has reshaped cross-border tax dispute resolution mechanisms. Traditionally, bilateral tax treaties relied on the Mutual Agreement Procedure (MAP) to settle disputes. However, the rise of multilateral solutions has introduced “Mandatory Arbitration” as the new standard, particularly in OECD countries, since 2017.

Proponents of mandatory arbitration argue that it is a crucial step toward preventing double taxation. Yet this shift also transfers interpretive authority from sovereign nations to transnational panels of tax arbitrators—a move some critics deem “an unacceptable surrender of fiscal sovereignty.”

This phrase, first coined in a 1984 OECD report, cautioned against the adoption of mandatory arbitration. Thirty years later, the global tax regime has embraced the concept it once rejected, reflecting neoliberalism’s enduring influence.

This judicialization mirrors trends in trade multilateralism, where the deadlock at the World Trade Organization (WTO) in the early 21st century paved the way for similar market-friendly arbitration mechanisms. The 2008 financial crisis further bolstered this shift, with international arbitration now serving as a critical reference for cross-border rule of law.

While such mechanisms claim to enhance fairness, they often prioritize the interests of multinational corporations, facilitating a net transfer of public revenue into private hands.

Consultants Without Borders

The second neoliberal hallmark is the expanding role of consulting firms in shaping global tax policy. Since the 1980s, consulting giants have become pivotal public and private sector players, advancing neoliberal priorities like market liberalization, privatization, and public-sector reform. Mariana Mazzucato and Rosie Collington, in their book The Big Con, argue that these firms foster dependency among their clients—be they governments or corporations—while infantilizing state institutions.

Nicknamed “consultants without borders,” the Big Three management consultancies and the Big Four accounting firms have extended their influence globally in the post-Cold War era. In domestic tax policy, the Big Four act as intermediaries between governments and private enterprises, steering public revenue and state spending. However, their client base overwhelmingly comprises private sector actors, raising questions about their impartiality. These firms are also key players in “tax planning” strategies that legally, if controversially, minimize tax liabilities—a practice that underscores their profitability.

On an international scale, these consultancies often enable tax avoidance and, in some cases, tax evasion. Transfer pricing, a cornerstone of international tax practice, exemplifies their expertise in navigating and exploiting regulatory loopholes. Academic investigations and high-profile tax scandals have highlighted their role in facilitating illicit wealth flows to tax havens. In this sense, the consulting industry has become a critical enabler of neoliberalism’s tax agenda.

A Critical Juncture

The rise of tax multilateralism presents a dual-edged sword. While it promises to address global inequality and ensure fiscal justice, its co-optation by neoliberal forces threatens to undermine these goals. Mandatory arbitration and the entrenched influence of consulting firms highlight the persistent tensions between state sovereignty, corporate interests, and public welfare.

As global tax discussions evolve, navigating these tensions without succumbing to neoliberalism’s market-centric priorities will be challenging. The stakes are high: the equitable distribution of public revenue, state sovereignty’s integrity, and multilateral cooperation’s future hang in the balance.