A taxpayer conundrum: choosing the most advantageous tax treaty dispute resolution mechanism in the wake of the OECD’s BEPS Action Plan - the Mutual Agreement Procedure, Arbitration, or APAs?

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Abstract

…however well the rules are crafted, there will inevitably be situations where disagreements arise; hence, the need to develop procedures through which these conflicts can be resolved.
Improving the tax treaty dispute resolution process is a top priority of the BEPS Project.

The provision of alternative dispute resolution mechanisms to resolve international tax disputes not only pre-dates the tax treaty controversy management tools espoused by the Organisation of Economic Cooperation and Development (OECD) and by the United Nations (UN), but even predates the founding of those organisations.
In its development of draft Model Tax treaties as a way of dealing with the problem of double taxation, the League of Nations in 1923 envisaged a number of alternative mechanisms “with a view
to an amicable settlement” of disputes arising as to the interpretation or application of the provisions of the Convention. If such disputes were not settled directly between the States or by the employment of any other means of reaching agreement, the dispute could be submitted to such technical body as the Council of the League of Nations may appoint for this purpose. This body was to give an advisory opinion after hearing the parties, and would arrange a meeting between them if necessary.
The Contracting States were given the option of being able to agree to regard this advisory opinion as final on an upfront basis, prior to the opening of this procedure.
However, in the absence of such agreement, the opinion would not be binding upon the parties unless accepted by both. They would be free to have recourse to any arbitral or judicial procedure which they chose to select, including reference to the Permanent Court of International Justice, provided the matters were within the competence of that Court under its statute.
Thus, almost a century ago, the League of Nations not only envisaged a forerunner of the Mutual Agreement Procedure (MAP) incorporated into most tax treaties today, but also provided for
alternative dispute resolution mechanisms, including arbitral procedures.
Moving forward to the present day, with international tax treaty disputes on the rise, the focus is once more on the necessity of providing effective alternative dispute resolution mechanisms. This is especially the case in the wake of the OECD’s Base Erosion and Profit Shifting (BEPS) Action Plan,7 published in 2013. This BEPS Action Plan was designed to bring about fundamental changes to the international tax framework. It proposed the design of new international tax standards to address transparency issues and ensure profits were not diverted from the country of value creation to lowtax countries where little or no economic activity occurred. The 15 Actions endorsed by the BEPS Action Plan recommended anti-abuse related innovations and changes to previously entrenched definitions, rules and practices, and the enforcement of more stringent compliance requirements.
Original languageEnglish
Pages21
Publication statusPublished - 9 Sep 2019
EventThe 28th Annual Tax Research Network Conference - University of Central Lancashire, Preston, United Kingdom
Duration: 9 Sep 201911 Sep 2019
Conference number: 28
http://trn.taxsage.co.uk/current-conference/

Conference

ConferenceThe 28th Annual Tax Research Network Conference
CountryUnited Kingdom
CityPreston
Period9/09/1911/09/19
Internet address

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arbitration
action plan
taxes
OECD
treaty
erosion
profit
League of Nations
International Court of Justice
recourse
statute
UNO
abuse
innovation
interpretation
present
management

Cite this

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title = "A taxpayer conundrum: choosing the most advantageous tax treaty dispute resolution mechanism in the wake of the OECD’s BEPS Action Plan - the Mutual Agreement Procedure, Arbitration, or APAs?",
abstract = "…however well the rules are crafted, there will inevitably be situations where disagreements arise; hence, the need to develop procedures through which these conflicts can be resolved.Improving the tax treaty dispute resolution process is a top priority of the BEPS Project.The provision of alternative dispute resolution mechanisms to resolve international tax disputes not only pre-dates the tax treaty controversy management tools espoused by the Organisation of Economic Cooperation and Development (OECD) and by the United Nations (UN), but even predates the founding of those organisations.In its development of draft Model Tax treaties as a way of dealing with the problem of double taxation, the League of Nations in 1923 envisaged a number of alternative mechanisms “with a viewto an amicable settlement” of disputes arising as to the interpretation or application of the provisions of the Convention. If such disputes were not settled directly between the States or by the employment of any other means of reaching agreement, the dispute could be submitted to such technical body as the Council of the League of Nations may appoint for this purpose. This body was to give an advisory opinion after hearing the parties, and would arrange a meeting between them if necessary.The Contracting States were given the option of being able to agree to regard this advisory opinion as final on an upfront basis, prior to the opening of this procedure.However, in the absence of such agreement, the opinion would not be binding upon the parties unless accepted by both. They would be free to have recourse to any arbitral or judicial procedure which they chose to select, including reference to the Permanent Court of International Justice, provided the matters were within the competence of that Court under its statute.Thus, almost a century ago, the League of Nations not only envisaged a forerunner of the Mutual Agreement Procedure (MAP) incorporated into most tax treaties today, but also provided foralternative dispute resolution mechanisms, including arbitral procedures.Moving forward to the present day, with international tax treaty disputes on the rise, the focus is once more on the necessity of providing effective alternative dispute resolution mechanisms. This is especially the case in the wake of the OECD’s Base Erosion and Profit Shifting (BEPS) Action Plan,7 published in 2013. This BEPS Action Plan was designed to bring about fundamental changes to the international tax framework. It proposed the design of new international tax standards to address transparency issues and ensure profits were not diverted from the country of value creation to lowtax countries where little or no economic activity occurred. The 15 Actions endorsed by the BEPS Action Plan recommended anti-abuse related innovations and changes to previously entrenched definitions, rules and practices, and the enforcement of more stringent compliance requirements.",
author = "Michelle Markham",
year = "2019",
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A taxpayer conundrum: choosing the most advantageous tax treaty dispute resolution mechanism in the wake of the OECD’s BEPS Action Plan - the Mutual Agreement Procedure, Arbitration, or APAs? / Markham, Michelle.

2019. 21 Abstract from The 28th Annual Tax Research Network Conference, Preston, United Kingdom.

Research output: Contribution to conferenceAbstractResearch

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N2 - …however well the rules are crafted, there will inevitably be situations where disagreements arise; hence, the need to develop procedures through which these conflicts can be resolved.Improving the tax treaty dispute resolution process is a top priority of the BEPS Project.The provision of alternative dispute resolution mechanisms to resolve international tax disputes not only pre-dates the tax treaty controversy management tools espoused by the Organisation of Economic Cooperation and Development (OECD) and by the United Nations (UN), but even predates the founding of those organisations.In its development of draft Model Tax treaties as a way of dealing with the problem of double taxation, the League of Nations in 1923 envisaged a number of alternative mechanisms “with a viewto an amicable settlement” of disputes arising as to the interpretation or application of the provisions of the Convention. If such disputes were not settled directly between the States or by the employment of any other means of reaching agreement, the dispute could be submitted to such technical body as the Council of the League of Nations may appoint for this purpose. This body was to give an advisory opinion after hearing the parties, and would arrange a meeting between them if necessary.The Contracting States were given the option of being able to agree to regard this advisory opinion as final on an upfront basis, prior to the opening of this procedure.However, in the absence of such agreement, the opinion would not be binding upon the parties unless accepted by both. They would be free to have recourse to any arbitral or judicial procedure which they chose to select, including reference to the Permanent Court of International Justice, provided the matters were within the competence of that Court under its statute.Thus, almost a century ago, the League of Nations not only envisaged a forerunner of the Mutual Agreement Procedure (MAP) incorporated into most tax treaties today, but also provided foralternative dispute resolution mechanisms, including arbitral procedures.Moving forward to the present day, with international tax treaty disputes on the rise, the focus is once more on the necessity of providing effective alternative dispute resolution mechanisms. This is especially the case in the wake of the OECD’s Base Erosion and Profit Shifting (BEPS) Action Plan,7 published in 2013. This BEPS Action Plan was designed to bring about fundamental changes to the international tax framework. It proposed the design of new international tax standards to address transparency issues and ensure profits were not diverted from the country of value creation to lowtax countries where little or no economic activity occurred. The 15 Actions endorsed by the BEPS Action Plan recommended anti-abuse related innovations and changes to previously entrenched definitions, rules and practices, and the enforcement of more stringent compliance requirements.

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