Weaponization of Taxation: Sovereign Tax Immunity as a National Security Tool

Authors

Vinita R. Singh

Abstract

Amidst calls to reconceptualize taxation as a national security tool, legislators are reexamining how the United States taxes foreign governments. Federal income taxation of foreign governments—what this Article terms “the law of immunity from taxation” or “sovereign tax immunity”—strongly influences whether and how foreign governments pursue investment in the United States. This impact on international business transactions indicates sovereign tax immunity has the potential to be a powerful national security tool. Yet, despite its import, the law of immunity from taxation has been underexplored and undertheorized. This Article steps into this gap in discourse by challenging the way recent legislative proposals seek to wield sovereign tax immunity as a national security tool.

Employing a unique interdisciplinary analysis that bridges the fields of national security policy, tax law, and international law, this Article demonstrates that modifying sovereign tax immunity should not be taken lightly. The law of immunity from taxation is a medium through which the United States expresses its interpretation of the customary international law of sovereign immunity. Certain changes to this aspect of taxation—including those advanced in recent legislative proposals—push the United States into expressing an understanding of sovereign immunity at odds with its own long-held interpretations of international law. Where this occurs, changes to tax immunity risk damaging the legitimacy and development of international law, injuring the United States’ international reputation, harming relationships with allies and partners, and triggering hostile reciprocal action. To the extent legislators seek to leverage sovereign tax immunity to achieve national security goals, these outcomes can overshadow or even undermine their objectives.

But such an eventuality is not a foregone conclusion; through consideration and measured drafting, it can be avoided to great success. This Article concludes by offering a framework for further action that guides legislators in effectively wielding sovereign tax immunity to advance U.S. foreign policy and national security goals.

Rights

© 2025 Brigham Young University Law Review

Recommended Citation

Vinita R. Singh, Weaponization of Taxation: Sovereign Tax Immunity as a National Security Tool, 51 BYU L. Rev. 491 (2025).
Available at: https://digitalcommons.law.byu.edu/lawreview/vol51/iss2/9