Limitations to the rule of law argument in international tax law

Abstract

Several concerns that have been raised about new international tax initiatives such as Pillar 2 explicitly or implicitly invoke values related to the Rule of Law. For instance, it has been argued that the international law-making process is undemocratic; that the new rules create too much legal uncertainty; or that they conflict with customary international law or human rights. We argue that in those arguments, Rule-of-Law values such as prospectivity, clarity, stability, democracy and human rights should not be invoked as strict and supreme criteria. Instead, they are based on complex concepts that are open to divergent interpretations, and always require trade-offs with other values and goals. This applies particularly in the international realm that lacks one overarching definition of the Rule of Law. Both ‘thick’ versions of the Rule of Law based on democracy and human rights and ‘thin’ versions based on the legality principle are interpreted differently across countries. Therefore, their international application is hard to separate from power, persuasion and politics.