Chapter Three: Fiscal Globalization

V. Global Fiscal Organizations

As described above, it is clear that for financially sophisticated individuals, and for most international companies, taxation is a subject that has to be approached on an international, not to say global level. That's a long way short of saying that taxation has become global, of course; but there are tendencies in the direction of such an outcome, eventually.

The remainder of this chapter will be devoted to a review of those international or global organizations which are contributing meaningfully to the generalization or globalization of fiscal affairs. As in other Chapters, the organizations listed are described in greater detail in Appendix One.

The World Trade Organization, which as regards tariffs is clearly a globalizing force, is however dealt with separately in Chapter 6.

The OECD (Organization for Economic Cooperation and Development) is the most prominent international organization as regards tax. It was described in Chapter 1, and its involvement in setting rules for corporate taxation were outlined above.

Although the OECD has only 30 members, including all of the major economic powers other than Russia and China, it has acquired much wider influence in certain subject areas, and especially in taxation, in which it is the only international body with the credibility to make widely acceptable rules.

The OECD's rules and standards on 'permanent establishments', the taxation of e-commerce, double tax treaties (DTAAs), and transfer pricing are already de facto global standards.

Among regional organizations, it is really only the European Union which can be said at this stage to have established any global hegemony, or contributed to global standards, as described in Chapters 1 and 3. It is a commonplace that the EU, with a formidable legal apparatus in the European Court of Justice, has diminished the capacity for independent action of its member states over a wide range of economic fields. Its VAT rules have been widely copied by non-EU jurisdictions when they have introduced VAT. Although the US remains obstinately a 'sales tax' jurisdiction, most of the rest of the world now has EU-style VAT, and it is probably only a matter of time before there is a global, common VAT regime, with only the rates of tax to distinguish between nations. In Europe the VAT regime is already 90% harmonized, and there is a (quite high) minimum VAT rate of 15% across the Union.

It also seems highly likely that there will come to be a common corporation tax base in the EU within the next ten years, although rate-setting itself will remain a national prerogative for a long time to come. This raises the issue of accounting standards, vital in terms of corporate reporting and international investment, with US/European mergers of investment exchanges now becoming a reality.

The International Accounting Standards Board

The ongoing march to universal accounting standards presents one of the clearest examples of globalization, although to the girl in the street it is probably one of the dullest subjects imaginable.

The IASB grew out of a UK standard-setting organization during a 20-year process that culminated in the 1990s. Its standards, which are now known as International Financial Reporting Standards (IFRS) have been adopted by a great majority of non-US countries, including the European Union, Russia, South Africa, Hong Kong, Australia, and Singapore. All publicly traded EU companies had to prepare their consolidated accounts using IFRS as from 2005.

As in so many areas, it is the US which is the stand-out, using GAAP standards (Generally Applicable Accounting Procedures) which differ in some respects from IFRS, particularly as regards the treatment of goodwill. However, a process or reconciliation between IFRS and GAAP has been going on for the last 15 years, and it is by now highly probable that convergence will take place between the two standards within a few years.

Once this happens, it will be possible to say that there is true global fiscal harmonization, at least as regards the presentation of company accounts. Evidently that is something that will have immeasurable consequences for international investment.

The International Fiscal Association (IFA) was established in 1938 with its headquarters in the Netherlands. Its objects are the study and advancement of international and comparative law in regard to public finance, specifically international and comparative fiscal law and the financial and economic aspects of taxation. The IFA now has more than 11,000 members from 91 countries. In 52 countries IFA members have established IFA Branches.

Although the operations of the IFA are essentially scientific in character, the subjects selected take account of current fiscal developments and changes in local legislation. Since the end of the second World War IFA has played an essential role both in the development of certain principles of international taxation and in providing possible solutions to problems arising in their practical implementation. It has been able to do so because its membership consists of high level representatives from both the private and the public sectors, including the Courts, Universities and international governmental and non-governmental organizations and because the Association has maintained over the years high standards in its debates and conclusions. Thus IFA has offered the necessary forum to experts belonging to different sectors of society, where opinions on topics of international taxation can be exchanged with respect for each other's background and responsibilities.


Taxation is not the most popular of topics. Apart from the fact that no-one likes being taxed, it is a 'dry-as-dust' subject in which humour or moral uplift are notably absent. Still, it has intrinsic importance out of proportion to its interest: without taxation, the State could not exist. While it will be difficult to find many words in this work in favour of the State, it was and to some extent still is an inevitable and even beneficial stage in human development; and as long as people want or need some sort of collective action to protect, defend, entertain, marry or bury them, that long will there need to be taxes, in one form or another. What is not true, though, is that taxation needs to be national, either in definition or in execution. This Chapter has shown that, as in other fields, the process of taxation is becoming detached from nation states. It is better for taxes to be levied under transparent, universal rules; and these must inevitably be – will be – global.