An evolutionary approach to international political economy: the case of corporate tax avoidance

Ronen Peter Palan ()
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Ronen Peter Palan: University of London

Review of Evolutionary Political Economy, 2020, vol. 1, issue 2, 161-182

Abstract: Abstract Corporate tax avoidance is both widespread and diverse in its practical mechanics. The scope of the phenomenon often leads economists to conclude that in the jungle of economic competition, tax planning (or optimisation) is among the necessary tools to ensure the survival of the fittest. This theory is increasingly associated with a Darwinian theory of economic evolution. In this paper, I develop a contrasting framework of the evolutionary political economy of corporate tax avoidance. Analysing core concepts of Old Institutionalist Economics (OIE), I examine the core drivers of corporate tax avoidance in a globalised system of states. The major contrast, I find, is between that of the corporate and legal personality and the institutional environment in which it operates. Historically, each corporate entity has been considered a separate legal person, yet a series of ‘mutations’ of incorporations laws created a widening gap between theory and reality, and these, in turn, give rise to tax arbitrage. Narrowing this gap, however, impinges on another venerable historical institution, the institution of sovereignty and sovereign inequality.

Keywords: Old institutional economics; Tax avoidance; Multionational enterprise; Evolutionary theory; Sovereignty (search for similar items in EconPapers)
JEL-codes: B15 B25 B31 F5 F55 H26 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s43253-020-00017-0

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