The United Nations has released a publication titled Handbook On Selected Issues in Administration of Double Tax Treaties for Developing Countries.
The handbook contains a series of articles by well known tax experts, such as Mr. Philip Baker, the acclaimed authority on international taxation, who has written a detailed article on Improper use of tax treaties, tax avoidance and tax evasion. He has dealt with the theoretical and practical aspects of treaty shopping and provided authoritative guidance. Similarly, there are other experts such as Ariane Pickering and Peter A. Harris who have written articles on important and topical issues like Taxation of non-resident service providers and Taxation of residents on foreign source income and many more.
The handbook will prove invaluable for all professionals engaged in the practice of international taxation.
Excerpt from the Handbook
Over the past decade, the relationship between the mobilization of financial resources for development and international tax cooperation featured prominently in the outcome documents of major United Nations conferences and summits on economic and social matters. These include the 2002 Monterrey Consensus, the 2008 Doha Declaration on Financing for Development, as well as the outcomes of the 2009 Financial Crisis Conference and the 2010 MDG Summit. In the Doha Declaration, for instance, Member States recognized multilateral, regional and national efforts aimed at improving developing countries™ abilities to negotiate mutually beneficial investment agreements and to promote good tax practices.
Tax treaties play a key role in the context of international cooperation in tax matters. On the one hand, they encourage international
investment and, consequently, global economic growth, by reducing or eliminating international double taxation over cross-border income. On the other hand, they enhance cooperation among tax administrations, especially in tackling international tax evasion.
Developing countries, especially the least developed ones, often lack the necessary expertise and experience to efficiently interpret and administer tax treaties. This may result in difficult, time-consuming and, in a worst case scenario, ineffective application of tax treaties. Moreover, skills gaps in the interpretation and administration of existing tax treaties may jeopardize developing countries™ capacity to be effective treaty partners, especially as it relates to cooperation in combating international tax evasion. There is a clear need for capacitybuilding initiatives, which would strengthen the skills of the relevant officials in developing countries in the tax area and, thus, contribute to further developing their role in supporting the global efforts aimed at improving the investment climate and effectively curbing international tax evasion.
Tax treaties, and model conventions, generally do not include any guidance on how the provisions of treaties should be applied, leaving this matter to the domestic law of the contracting States. Although there is a vast and growing body of literature, and ample supply of training materials dealing with the substantive provisions of tax treaties and the relationship between them and the provisions of a country™s domestic law, relatively little assistance is available regarding the practical application of tax treaties. This Handbook, resulting from a joint project of the Financing for Development Office of the Untied Nations Department of Economic and Social Affairs and the International Tax Compact, is intended to contribute to filling this gap.
How do tax treaty provisions apply in practice? This question is addressed by the ten chapters comprising this Handbook. They were written by international tax experts, benefiting from extensive consultations with numerous experts from the National Tax Authorities and Ministries of Finance of developing countries. The Handbook describes best practices of countries in administering their tax treaties and identifies common denominators to the extent possible. The emphasis is on the practices of the tax authorities of developing countries. Their experts may be in a better position to assist other developing countries with less experience in this area, because they followed a similar path, often not so long ago. An effort is made to keep the material basic and practical and to focus on the procedural aspects of applying the treaty rather than on its substantive rules.
This publication was conceived, written, discussed, revised and published during a seven-month period, thanks to the enthusiasm and commitment of all involved. We hope that it serves to stimulate further discussions on the topic of the administration of tax treaties, including at capacity-development events organized by international organizations active in the area of international tax cooperation.