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What are the implications of China’s rise for the US dominance in global tax governance? Will the signs of “decoupling” or parallel standards in other areas, such as technology (e.g., 5G) and COVID-19 vaccine appear in tax policy? Will China go along with the US-catalyzed global minimum tax in Pillar Two and US-modified reallocation of residual profits to market jurisdictions under Pillar One?

This article considers these questions in light of the broader historical and geopolitical context. 11 Section 2 provides an overview of the nature, purpose and legal instruments of international taxation and highlights the significance of the China versus US relationship for global tax governance. Sections 3 – 5 discuss the changing roles of China and US in the past 100 years: the US’s role in creating and expanding the international tax system from 1920s to 1979; China as a norm-taker and the US as a dominant norm-setter from 1980-2007; and China and the US in the context of BEPS 1.0 (2013-2015 G20/OECD Base Erosion and Profit Shifting Project) and BEPS 2.0 (Pillar One and Pillar Two to address challenges of digitalization of the economy). Section 6 speculates about the future by teasing out the areas of convergence and divergence between two countries. The article notes in conclusion that it is unlikely that decoupling would occur in international taxation, but it remains uncertain how China’s role would play out in the next steps of BEPS 2.0 and beyond.


This paper has been submitted for publication in the Bulletin for International Taxation (the 75 Jubilee Edition).