Economic Globalization, Neoliberalism and Foreign Direct Investment in Latin America. General Framework for Studying the Impact of Double Taxation Agreements

ESTEBAN SERRANI

Double Taxation Agreements in Latin America. Analysis of the links among taxes, trade and responsible finance

Fundacion SES

Año: 2014; p. 19 - 33

Double Taxation Agreements (DTAs) are fiscal policy instruments used in the international tax policy context. However, these agreements have not been the object of thorough studies from the perspective of developing countries. And this is because these bilateral agreements are meant to ensure that international investments are not taxed twice; that is, that transnational companies do not pay taxes in the country where income is produced (usually a developing periphery country) as well as in the country where the capital originates (normally a developed core country). DTAs have undergone significant development in the last decades, particularly since the 1970s, when as a result of trade liberalization and financial deregulation policies tied to a massive flow of speculative capital into periphery economies, there was rapid global economic growth as well as an increase in international trade and globalization of production, markedly emphasized by financial factors. As a consequence, the legal scope of these agreements is increasingly broader; so much so, that they include a series of political aspects that often overlap with other agreements, for instance, bilateral investment treaties aimed at promoting trade. In this regard, there is growing concern among civil society organizations, both in core and periphery countries, as to the fact that DTAs currently in force may be mechanisms to prevent the adoption of fiscal policies that are progressive and favorable to the most vulnerable populations in developing countries. The power asymmetry between developing and developed countries means that these agreements are very often used as a mechanism intended to disproportionately benefit the most powerful countries, the vested interests of transnational companies, and/or private investors, to the detriment of the national and sovereign interests of developing countries.