The multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting - an evaluation of Australia's reservation to permanent establishment Article 12

  • Lyudmila Ivanova

Student thesis: Master's Thesis


The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“the MLI”) was created to swiftly modify existing double tax agreements to implement anti-BEPS measures. BEPS refers to tax planning strategies used by multinational enterprises that exploit gaps and mismatches in tax rules to avoid paying tax. One such measure addressed in Article 12 of the MLI is the avoidance of a Permanent Establishment (“PE”) through commissionaire arrangements. While Australia is a proponent of the BEPS Project and a signatory to the MLI, it has reserved on the entirety of Article 12, meaning that the updates to the PE definition as it pertains to commissionaire arrangements will not apply to any of Australia’s double tax treaties.

This study explores whether Australia’s reasons for reserving on Article 12 stem from its implementation of the domestic Multinational Anti-Avoidance Law (“MAAL”), which targets avoidance of PE unilaterally. In understanding Australia’s reasons behind the reservations, the study first looks at the history of Australia’s approach to PEs. It then compares Australia’s approach with that of the UK, which has similarly reserved on Article 12, and which Australia followed in the introduction of domestic PE avoidance legislation.

The study contends that while both countries have chosen to address PE avoidance through domestic measures, such an approach reduces the effectiveness of the MLI and threatens the BEPS Project by creating inconsistencies between tax treaty and domestic law, increasing the risk for double taxation and uncertainty in the international tax treaty landscape. Additionally, this thesis contends that Australia’s reservation in light of the MAAL breaches the Vienna Convention, and accordingly, makes recommendations on how Australia can improve its position as a party to the MLI, a member of the OECD and a proponent of the global fight against BEPS.
Date of Award8 Feb 2024
Original languageEnglish
SupervisorMichelle Markham (Supervisor) & Stephen Holmes (Supervisor)

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