Between sovereignty and complexity: the settlement of tax disputes by the world trade organization

ABSTRACT The analysis of WTO law and the key disputes in ‘trade and tax’ field leads to interesting findings. The relationship between international trade law and domestic tax laws is not easy. First, the emerging picture is the difficulty of the trade regulatory framework and the jurisprudence to draw a clear line between what is permitted and what is not. Legal uncertainty is the word. This uncertainty has its root in the complexity of both domestic tax laws and the legal standards of trade law. Secondly, trade law often significantly impacts on governments’ sovereignty. In a globalized world, this is inevitable. Thirdly, there is an evolution in how trade has had to deal with taxation. The focus has shifted from the traditional cases of favouritism, discrimination and protectionism to more difficult issues connected to key challenges of our times – tax avoidance, level playing field, competitiveness, carbon leakage, the digitization of the economy. More recently, even national security has added to the mix. This complexity in the ‘trade and tax’ relationship raises fundamental questions about the limited role trade law can play in solving taxation issues. The article claims that trade law can only offer partial solutions to key tax issues. By nature, trade law is more suited to regulate specific instances where tax is used as a tool of protection rather than systemic problems arising from the differences in domestic taxation and the lack of established rules to regulate new phenomena like digital services, for which multilateral tax treaties are the first-best.