Do international policy standards help countries in the Global South fight international tax avoidance?

Whether and to what extent countries in the Global South should implement tax policy standards and recommendations against international tax avoidance developed by the OECD has generated significant debate among academics and policymakers. In this paper, I show that Colombia’s and India’s engagement with the OECD Base Erosion and Profit Shifting (BEPS) project has not resulted in an increased protection against international tax avoidance in both countries’ tax systems. I arrive at that conclusion through three steps: First, I describe five ideal-typical policy responses that countries adopt vis-à-vis the phenomenon of international tax avoidance taking into account various dimensions such as protection against tax avoidance, administrative intensity, requirement for cooperation by other countries, and effect on non-avoidant taxpayers. I use this framework to show that the BEPS Project establishes a preference for solutions that impose few negative effects on non-avoidant taxpayers but that are administratively costly, while discouraging simpler, but blunter responses. Finally, I analyse how engaging with the BEPS Project has shaped Colombia’s and India’s approach to international tax avoidance, based on interviews conducted with tax practitioners, an analysis of the historical evolution of relevant tax laws, and quantitative indicators of international tax avoidance. The evidence shows that closely following the BEPS project’s recommendations is unlikely to increase the protection against international tax avoidance of countries with low administrative capacity.