Mandatory binding tax arbitration-is this a pathway to a more efficient mutual agreement procedure?

The Organisation for Economic Cooperation and Development (OECD) has recently been exploring ways to improve dispute resolution mechanisms in the realm of international tax, notably through the use of binding mandatory arbitration as part of the Mutual Agreement Procedure (MAP) Article in Double Tax Agreements.

This article seeks to examine whether binding mandatory arbitration would provide an effective mechanism for resolving international tax disputes. It investigates policy concerns with mandatory arbitration, especially sovereignty issues, access to mandatory arbitration and its scope, as well as the interface between MAP arbitration and domestic remedies. The possibility of deferring time limits on arbitration, the appropriateness of the ‘last-best-offer’ or baseball arbitration approach versus the ‘independent opinion’ approach and contentious issues surrounding the appointment of arbitrators will be considered, along with recent developments in arbitration processes.