Between Coordination and Sovereignty: The Illusion of Multilateralism in International Tax Law

A widely accepted view in contemporary tax literature is that international taxation is increasingly shifting toward multilateralism. This article argues that the current evolution reflects not the emergence of a truly multilateral system, but a fragmented architecture layered onto an enduring bilateral core. The coexistence of OECD-led initiatives and the UN’s push for a more inclusive framework reveals not convergence, but structural tension rooted in sovereignty. Latin America, meanwhile, remains caught between participation and limited influence on the ongoing initiatives.

1. Multilateralism as Narrative

Multilateralism has become the dominant narrative in international tax discourse.1 From BEPS to the Two-Pillar Solution and the UN Framework Convention, the language of cooperation suggests a system moving toward global coordination. But this narrative is, at best, incomplete. What we are witnessing is not the replacement of bilateralism, but its adaptation. The system is becoming more complex and layered—not fundamentally multilateral. International tax law evolves incrementally, responding to economic change rather than following a coherent institutional design. The relevant question, therefore, is not whether multilateralism is advancing, but what kind of multilateralism is emerging.

2. The Persistence of Bilateralism

Bilateral tax treaties (DTTs) remain the structural backbone of the international conventional system. DTTs have been a common feature over the past century and, from the first agreement concluded between Germany and Austria in 1899, have grown to more than 3,000 treaties worldwide today. Their resilience is not accidental. DTTs allow states to retain control, negotiate selectively, and limit systemic exposure. While often criticized for fragmentation and inconsistency, these features reflect political choices rather than design flaws. The strength of the treaty network lies in its adaptability, not its coherence. Bilateralism has persisted for so long because it aligns with the underlying logic of tax sovereignty. In their basic structure under the Models, DTTs contain (i) complete distributive rules that determine which State has the right to tax specific items of income or capital, and (ii) incomplete distributive rules, where taxing rights over a given item of income or capital are concurrent, in which case provisions are established to eliminate or mitigate double taxation at the level of the taxpayer’s State of residence.

3. Why Multilateralism Has Always Struggled

The ambition to create a multilateral tax system is not new. It has been present since the early twentieth century—and repeatedly deferred.2 The first multilateral tax treaty was signed in 1922 (the Southeast European Tax Treaty), although it never entered into force as such.

The 1923 Report of the Tax Experts to the League of Nations (Bruins, Seligman, Stamp and Einaudi) did not resolve whether a multilateral convention was a viable means to eliminate double taxation. The 1928 Report of the Committee of Technical Experts acknowledged its desirability but stopped short of recommending it. Subsequent efforts – within the United Nations (1930s), the OEEC (1948), and later the OECD (1961) – met a similar fate, with the OECD issuing its first Model Convention in 1963 on a bilateral basis. Moreover, the 1992 revision of the Commentary to the OECD MC reaffirmed the impracticability of a global multilateral tax convention.

The European Union has not developed a multilateral tax convention model, although an indirect multilateralization has emerged through the CJEU’s harmonization of bilateral treaties via the fundamental freedoms of the Treaty of Rome (notably free movement and non-discrimination).

The reason for not adopting a multilateral solution after many attempts is structural. The allocation of taxing rights goes to the core of state sovereignty. This makes comprehensive multilateral solutions inherently difficult to achieve, and this is so because international tax coordination operates under structural constraints derived from the coexistence of competing jurisdictional claims rather than a unified legal order. Even regional experiences confirm the point: cooperation is possible, but convergence on distributive rules remains elusive.3

 4. The Emergence of Fragmented or Limited Multilateralism

What we observe today is not full multilateralism, but something more limited: fragmented multilateralism or multilateral tax treaties for specific aspects of international taxation.4

4.1 OECD: Coordination Without Transformation

The OECD’s recent initiatives reflect a pragmatic strategy regarding multilateralism: The MLI is a multilateral instrument of limited scope whose purpose is to modify existing DTTs simultaneously to implement treaty-based BEPS measures. It enables the updating of DTTs in a uniform and efficient manner, but it does not, per se, create new tax attribution rules. Pillar I introduced a partial reallocation of taxing rights through a targeted and extraordinarily complex mechanism, and The Multilateral Convention to Implement Amount A (MLC) serves to implement that limited goal. Pillar II established a minimum taxation through coordinated domestic implementation. In this context, The Pillar II STTR MLI aims to incorporate the Subject to Tax Rule (STTR) into DTTs in the context of in-scope multinational enterprises.5 As Devereux and Vella suggest, these reforms are better understood as negotiated compromises than as a coherent systemic redesign.6 In this sense, the current architecture reflects what has been described as a model of coordination without integration, where common standards emerge without the creation of a fully-fledged multilateral legal system.

4.2 Where Multilateralism Works—and Why

Multilateralism works well precisely where it avoids the politically sensitive question of taxing rights. Instruments such as the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, or the MCAA–CRS (Common Reporting Standard) have achieved broad adoption because they focus on cooperation rather than redistribution.7

Once the issue becomes distributive—who gets to tax—consensus quickly erodes. This is not a temporary obstacle, but a structural limitation of the system.

5. The UN Approach: Inclusion vs. Coherence

The United Nations has proposed an alternative path through the Framework Convention on International Tax Cooperation (UN-FCITC).8 Its appeal lies in inclusiveness, aimed at responding to longstanding concerns about the imbalance of representation in OECD-led processes. Yet inclusiveness introduces its own tensions: While a broader negotiating table increases legitimacy, simultaneously makes agreement more difficult. Greater participation does not necessarily produce more coherent outcomes,9 and the risk is not merely slower progress, but deeper fragmentation.

The UN Framework Convention has the advantage of placing developed and developing countries on an equal footing (something the OECD Inclusive Framework failed to achieve), while at the same time posing the risk of becoming an extremely hostile forum for developed countries, potentially hindering the adoption of solutions acceptable to both groups if certain stakeholders, such as the South Centre and ATAF, continue to advocate for far-reaching innovations, such as taxing services at the place of use based on proposals to expand Article 12A of the UN Model (sometimes referred to in the literature as ‘Article 12AA’), although no such provision has been formally adopted.10

6. Latin America: Between Voice and Influence

Latin America is increasingly present in international tax discussions, often advocating for source-based taxation and more inclusive governance. However, presence does not equal influence. The region remains fragmented and lacks coordinated positions. As a result, it risks participating in rule-making processes without significantly shaping their outcomes. This gap between voice and influence reflects a broader structural constraint: Influence in international tax law depends not only on participation, but on coordinated bargaining power. A more coordinated regional approach in Latin America is feasible through existing institutional stakeholders. However, a firm decision in this regard is essential to ensure that the region can speak with a single voice.

Potential actors and their respective roles would include, inter alia: (i) CIAT (Inter-American Center of Tax Administrations), providing technical leadership; (ii) ECLAC (UN Economic Commission for Latin America and the Caribbean), contributing institutional legitimacy within the UN system; (iii) the Inter-American Development Bank (IDB), facilitating regional tax dialogue and providing technical and financial support for common Latin American positions; (iv) SELA (Latin American and Caribbean Economic System), fostering political coordination and internal convergence; (v) regional integration frameworks such as MERCOSUR, and the Pacific Alliance, also contributing to political articulation and convergence. Moreover, other less formal and/or articulated stakeholders have developed lately and might contribute to the objective, including the Regional Platform for Tax Cooperation in Latin America and the Caribbean (PTLAC), launched at the Cartagena Summit in 2023; an emerging Latin American Tax Coordination Caucus, acting as an informal group within the UN Intergovernmental Negotiating Committee; and a technical alliance (AFTA–LATAM), focused on the taxation of services, expanded source rules, limits on harmful tax incentives, and dispute resolution.

7. A Geopolitical Game

International tax law is no longer a purely technical field. It reflects broader geopolitical dynamics.

The divergences between OECD and UN approaches mirrors competing interests between developed and developing countries. As the growing divergences between the US and Europe reflect competing interests on taxation over manifestations of the new economy, DSTs and retaliatory measures, and tariffs.

In this context, the expectation of a comprehensive global agreement appears increasingly unrealistic.

8. Conclusion: Multilateralism as Constraint, Not Transformation

The evolution of international tax law does not point toward a unified and workable fully multilateral system, at least over the short run. Rather, it reflects a structurally constrained process of coordination in which sovereignty, not coherence, remains the organizing principle. In this sense, the current status of international tax law is best perceived not as a system moving toward multilateralism, but as one in which restricted multilateral instruments operate as functional correctives within a fundamentally bilateral order, without altering its jurisdictional logic.

The emerging system is layered: bilateral treaties as its foundation, multilateral instruments as partial overlays, and multilateral bodies and regional blocs reflecting geopolitical realities, rather than genuine legal integration.

In the current situation, multilateralism in international tax law does not supplant bilateralism; it merely corrects it at the margins. The challenge, therefore, is not pursuing an ideal of full multilateralism, a goal that remains elusive, but to manage a system whose limits are structural—and enduring.

• 1

  Rixen T., Bilateralism or Multilateralism? The Political Economy of Avoiding International Double Taxation, European Journal of International Relations, 2010; Garcia Anton, R., The 21st Century Multilateralism in International Taxation: The Emperor’s New Clothes? World Tax Journal, June 2016

• 2

  Gombolz, Multilateralism in Tax Treaty Law, Part I, Chapter 1, Introduction; Part II, Chapter 3, The emergence of Multilateralism in Tax Treaty Law; and Chapter 4, Comprehensive Multilateral Tax Treaties; International Bureau of Fiscal Documentation (IBFD), 2024.

• 3

  Id. Chapter 4, where regional experiences—such as the 1922 Southeast European Multilateral treaty, the Andean-CAN Pact , the Caribbean Community (CARICOM) agreement, and the Nordic Convention for the Avoidance of Double Taxation are detailly analyzed.

• 4

  OECD, Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (2017), Explanatory Statement; Zornoza Perez, Multilateralism in International Taxation: Is it really the future? in Research Handbook on International Taxation, Yariv Brauner, ed., Edgar Publishing, 2020.

• 5

  OECD/G20 Inclusive Framework, Global Anti-Base Erosion Model Rules (Pillar Two) (2021).

• 6

  M. Devereux & J. Vella, Implications of Digitalization for International Corporate Tax Reform, Intertax, vol. 46, issue 6/7, 2018.

• 7

  OECD/Council of Europe, Multilateral Convention on Mutual Administrative Assistance in Tax Matters (2010), Explanatory Report. As regards tax transparency see Pistone P. Coordinating the Action of regional and Global Players during the Shift from Bilateralism to Multilateralism in International Tax law, World Tax Journal, February 2014; Mosquera Valderrama I. Legitimacy and the Making of International Tax law: The Challenges of Multilateralism, World Tax Journal, 2025

• 8

  United Nations, Terms of Reference for a UN Framework Convention on International Tax Cooperation (2024). A UN Resolution in 2023 decided to initiate the drafting of a Framework Convention. An ad hoc committee of 20 members later prepared the Terms of Reference (ToR), adopted by the General Assembly in December 2024. The Intergovernmental Negotiating Committee is currently holding periodic, substantive meetings based on three workstreams: the Framework Convention; the taxation of income from cross-border services; and tax disputes resolution. See also, Quinones N. The UN Framework Convention on Tax Matters and a new Hope for Multilateralism and Simplification in the Area of International Taxation, Kluwer International Tax Blog, April 3, 2024.

• 9

  Konrad K., and Thum M., The Better Route to Global Tax Coordination: Gradualism or Multilateralism, Canadian Journal of Economics, May 2021

• 10

  See Teijeiro G.O., The United Nations Framework Convention Model (UN-FCITC): Some Brief Reactions to the Current Nairobi Meetings, LinkedIn article, November 20, 2025