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Tax treaties have existed for well over a century and have undoubtedly improved
the legal framework for the exercise of taxing powers on cross-border economic
relations. They are usually bilateral in scope and result from the negotiation
of package deals that have yielded a highly diversified constellation of
agreements. Since the 1920s the desire to achieve internationally accepted tax
treaty practice has led international organisations to undertake activities in
this domain, aimed at developing a reliable and policy-sound tax treaty
framework that states would be able to take into account when concluding their
own bilateral treaties. However, it was only after decades of activity by the
Organisation for Economic Co-operation and Development (OECD) and the United
Nations (UN) in this field that a convergence in the content of tax treaties
could be seen. Meanwhile, the number of bilateral tax treaties around the world
as well as their complexity have been increasing dramatically, giving rise to a
highly varied set of rules in the absence of a proper customary international
tax law and opening up room for a considerable growth in international tax
planning. Some academics have successfully supplemented the efforts of the
international organizations by writing works that have guided the evolution of
scholarly legal debate over the interpretation of tax treaty clauses following
the Models. However, the international academic legal thinking on tax treaties
has so far generally focused only on such clauses, neglecting those that depart
from them. Clauses deviating from the Models have been relegated to the area of
regional dialogue or even to each country's national tax scene and have then
been examined solely with a view to ascertaining their consistency with the
respective national tax treaty policy. From the time the editors began to carry
out interdisciplinary research activities with other scientists on international
tax coordination and tax treaties, further repercussions have become evident. In
particular, due to the needs of economists to streamline the information they
analyse for the purpose of obtaining results from their research, they sometimes
equate tax treaties with the clauses contained in the Models, simply assuming
that no relevant differences exist with the bilateral treaties actually in force
around the world. This book aims to fill a gap in legal tax literature by
providing an innovative scientific support for establishing the boundaries of
the influence of the OECD and UN Models on the drafting and interpretation of
bilateral tax treaties around the world.
This book provides an analysis of bilateral tax treaties concluded by thirty-seven jurisdictions from five continents and empirically ascertains the impact of the UN and OECD Model Tax Conventions on bilateral tax treaties. It therefore fills a major gap in the international tax literature, which has so far either studied the sole Model Tax Conventions or focused on bilateral treaties in the context of the tax treaty policy of single countries, and sets the pace for a new methodology in the analysis and interpretation of tax treaties. A general report outlines the key points of the analysis, highlights current trends and predicts future developments of multilateralism and global tax law. This is an essential resource for academics, tax authorities and international tax practitioners who find textbooks based on Model Tax Conventions insufficient.
Tax treaties have developed considerably throughout the twentieth century, based on the assumption that states need an agreed legal instrument to coordinate the exercise of taxing powers and thus minimize overlaps and the negative influence of taxation on cross-border economic activities. In particular, the impetus for international tax coordination grew steadily in the second half of the twentieth century under the auspices of international organizations, such as, in particular, the OECD and the UN. The OECD and the UN continued the technical activity undertaken in the framework of the League of Nations and drafted their Model Tax Conventions, which are currently the main source of tax treaty clauses around the world. Such Models are the outcome of technical activities carried out in working parties, which include representatives from the tax authorities and from business, and are usually regarded as the set of tax treaty rules that most consistently reflects the international tax policy of the member countries. Accordingly, the Models are generally regarded as the best available tax treaty practice. This reputation has enhanced their implementation in bilateral tax treaties over the past decades, showing that international tax law in fact shares a common substance to a much greater extent than it may appear in the absence of a proper international customary tax law. This structural peculiarity makes such Model Tax Conventions the soft source of international tax rules, which then find their normative dimension in the bilateral tax treaties that include them.
Over the past decades this structural peculiarity has gradually expanded to a global dimension. The era of global law and worldwide free trade with decreasing tax barriers for cross-border activities makes states very concerned about the need to have a global tax system which is able to compete with best practices and offers an attractive legal environment to internationally mobile capital. This is even more the case since harmful tax regimes started being dismantled and global fiscal transparency picked up.