Revolving doors in international tax: Do the foxes run the henhouse?

In trying to explain the most recent financial crisis and what is perceived to be ongoing struggles to properly regulate markets and economic behavior, a popular sentiment among political commentators has been to blame ‘revolving doors’. Revolving doors is now a mainstream term meaning professionals’ strategic career moves between the public and private sector. Typically, such moves are interpreted as “regulatory capture” mechanisms, whereby businesses or elites ‘capture’ regulation to their benefit.

In the tax world, we are used to hearing these kind of stories. The media are certainly on the case. Recent examples include US tax rules being ‘written by tax lobbyists‘, a former tax haven adviser leading HMRC’s Panama inquiry and an EU tax commissioner-turned-business lobbyist. Academic tales of regulatory capture by revolving doors have been offered, too, in relation to offshore tax havens, the US tax administration, and elsewhere. At the OECD, the moves of high profile tax professionals to and from top tax adviser firms have also come under scrutiny. For instance, when Jeffrey Owens, former Director of the Centre for Tax Policy and Administration (CTPA), moved to EY; and when Andrew Hickman, former KPMG partner, moved to head up the CTPA’s transfer pricing unit.

Now, the question I want to address in this blog is: Do the ‘foxes’ really run the proverbial henhouse? Do public-to-private/regulator-to-regulatee (and vice versa) career moves signify the ‘capture’ of international tax regulators and administrators to the benefit of businesses and elites and detriment of the average citizen?

And my answer is: Not quite. Not necessarily, not always, anyway. Strategic revolving doors career moves are more than just a capture mechanism, influence carried out on behalf of a powerful group in their benefit. Revolving doors are also (and perhaps foremost) about personal status and professional prestige. And that recognition is important in understanding international policy processes, including in tax. Even more so, in fact, if one wants to change them. (Although the explanation offered here on revolving doors is different from the typical ‘regulatory capture’ story, the revolving doors process might still be seen as giving the same result, e.g.’business-favourable’ regulation. I will get back to that later.)

Revolving doors as a prestige-thing is not quite the usual explanation we get, however. As Andrew Baker’s (2010) widely cited piece on regulatory failures of the crisis notes:

The literature on regulatory capture has also flagged up the issue of ‘revolving doors’ that facilitate the flow of people between public and private sectors in both directions, leading to ‘colonization’ of regulatory agencies and dysfunctional incentive structures for regulators.

Some of the literature on regulatory capture has highlighted how regulators are encouraged to become compliant with industry wishes through implicit promises of lucrative future careers in the regulated industry.

How well does this idea of ‘revolving doors as regulatory capture’ fit reality? I looked at that in an analysis of 100+ tax professionals engaged in the BEPS (Base Erosion and Profit Shifting) reform process, with a focus on Action 13 (transfer pricing documentation and country-by-country reporting). For the full details, I refer to the paper, but in short, I mapped and analysed every career step of these professionals, along with a field investigation to understand the policy process and relationships and esteem of the different professionals. In the discussion below, I highlight a few of the results from the analysis.

Figure 1. The careers of BEPS Action 13 professionals


When looking at the careers of people involved in the BEPS Action 13 process, one might be inclined to take it as evidence that revolving doors do indeed lead to business-favourable regulation – in this case e.g. a ‘watered down’ OECD standard for country-by-country reporting. Indeed, key professionals involved in the process have moved keenly between public and private roles. The list of people that I found central to the policy process, which have also had a least one public-private (or vice versa) revolution include OECD’s Head of Tax Treaty, Transfer Pricing and Financial Transactions Division (also responsible for BEPS Action 13), the BEPS Project Head, and several BEPS Advisors; the Business and Industry Advisory Commitee to the OECD’s (BIAC) tax committee Chair; EY’s Action 13 lobby coordinator; Baker McKenzie’s BEPS 13 coordinator (also engaging on behalf of several US lobby groups); and key national officials from e.g. Germany and Norway. And more key people could yet ‘revolve’ throughout their careers.

But I think there’s another side to the revolving doors’ story in international tax, which is essentially about career management, rather than arresting legislation. Professionals want status and prestige. They want to ‘make their mark’. Many readers will probably recognise that from their own careers. Rather than necessarily ‘carrying out the orders’ of an interest group, people involved in international rule-making may be motivated by broader notions of professional esteem and influence. And it just so happens that work experience from a broad range of work positions – in particular different sectors (i.e. both public and private) – is beneficial towards those ends.

From observing the BEPS Action 13 policy process and interviewing scores of people involved, it emerged that, yes, professionals that have gone through revolving doors are more likely to be influential in the policy arena. They are more likely to be listened to because they can draw on different perspectives and expertise, and they often have better networks in the reform community. It is simply easier to be heard if you know the people in the room, and the people in the room respect your knowledge. But this revolving doors effect isn’t confined to with public-private career moves. The same goes for career moves between other sectors, between professional fields and different work roles.

The list of people that I found important to the policy process, which had not had any public-private revolutions, included for instance OECD’s CTPA Director, BIAC’s Action 13 coordinator (experience includes tax law, strategy, dispute resolution and senior management), Volvo’s Tax Director (experience includes academia, tax law, transfer pricing), the BEPS Monitoring Group’s Action 13 coordinator (experience includes academia, tax law, NGO advisory), and a number of top national officials.

Benefits of status and influence can derive not just from public-to-private hops but from, e.g., moving between transfer pricing, tax economist and management jobs, or from working as both an academic, a tax lobbyist and an NGO adviser. It is the expertise and networks derived from diverse career experience that is important, not necessarily whether that career experience includes public-to-private (or vice versa) moves.

Thus, the motivations of revolving door professionals may not solely, primarily or even necessarily be “doing favours for former or prospective employers”. Rather, they may be seeking to gain a broad base of expertise and diverse network relations in order to improve their professional standing and prestige – which, in turn, may also improve their impact on international tax policy processes.

And that leads me back to the point about the outcome of revolving door dynamics. Although revolving doors moves are not necessarily motivated by ‘regulatory capture’, the phenomenon still means that certain opinions and interests are favoured in the policy process, simply because those advancing such opinions and interests have become knowledgeable and well-respected by going through revolving doors. In the BEPS Action 13 process, for instance, certain tax legal and private sector perspective were particularly prominent, which affected what issues and solutions could be and were discussed.

The lesson that expertise and networks gained through revolving door moves matter for international tax policy processes is important for understanding and engaging with such policy discussions. To put it plainly: If  you want to ‘make your mark’ on these types of technical international tax and transfer pricing policy debates, you need to acquire expertise and network positioning (or create alliances to the same effect) – otherwise you are likely to struggle. And for that, going through ‘revolving doors’ is a good place to start!





  1. Richard Woodward · · Reply

    Reblogged this on richardwoodwardcoventry.


  2. […] is the nature and structure of the consultation itself and what it represents. I have written previously on the actors involved in the BEPS policy processes and consultations and what it means for […]


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