Sovereignty Theory and its Role in Curbing Tax Planning Practices

This study investigates the pivotal role of sovereignty theory in combating aggressive tax planning within the complex global landscape shaped by globalization and the digital economy. Employing a descriptive-analytical approach, data were collected via a questionnaire administered to 92 tax professionals and academics. Statistical analysis, utilizing Pearson correlation and linear regression, revealed a strong positive correlation (r = 0.744, p < 0.001) and a significant impact of sovereignty theory on curbing tax planning practices. Key findings indicate that weak political will represents the primary impediment to the effective implementation of tax sovereignty in developing nations. Conversely, robust international cooperation, particularly in information exchange, is demonstrably effective in combating tax havens and Base Erosion and Profit Shifting (BEPS) without compromising national sovereignty. The research emphasizes the importance of simplifying tax legislation, developing adaptable frameworks for the digital economy, and harmonizing national laws with international standards to enhance tax effectiveness and safeguard national revenues. This study contributes to the literature by empirically validating the enduring relevance of tax sovereignty in an interconnected world and proposing actionable policy recommendations.