International Tax Law and Economic Analysis of Law

peer reviewedAbstract This chapter reflects on the relationship between international taxation and the economic analysis of law. The economic analysis of law is generally concerned with questions of an optimal allocation of resources through the legal system, also referred to as economic efficiency. But economic analysis of law in general has often not concerned itself with international tax questions. If the primary concern for international tax policy is to decide how to coordinate tax claims by different countries, economic analysis is ill-equipped to provide helpful guidance, since the question is, in essence, distributional. Despite this lack of clear outcomes, the application of an economic perspective to the problems of international taxation remains undoubtedly valuable for a proper understanding of the issues at stake. Against this background, the chapter addresses four core questions of international tax law that lend themselves to the application of this perspective: the definition of double taxation and its impact; the (lack of) economic foundations for the allocation of (source) taxing rights among states; the use of relief mechanisms and the meaning of ‘neutralities’ in international tax law; the problem of international tax competition