International tax policy and double tax treaties pdf
Tax treaties | Martin HearsonTime and time again, we read emails and documents from lawyers and multinational corporations asking to use treaties between Mauritius and countries in Africa, Asia and the Middle East to reduce taxes paid to the other countries. There are about 3, of these bilateral agreements around the world. The main function is to carve up the right to tax businesses and people who earn money across borders and divide up that tax between two states. Tax treaties really came into being about years ago as business started to become more international. Businesses started to find they were receiving tax claims by multiple states for the same money.
Back in I was in touch with Nairobi-based Tax Justice Network Africa, as they prepared to take the Kenyan government to court over its tax treaty with Mauritius, signed in The treaty seemed a pretty poor deal for Kenya, lacking adequate anti-abuse protection, preventing Kenya from imposing withholding tax on technical fees, and restricting its ability to impose capital gains tax, which it was in the process of introducing. It has taken more than four years, but on Friday the High Court ruled, and it has declared the ratification of the treaty in Kenya to be invalid. This is a landmark case, because tax treaties are usually technical instruments that undergo only cursory parliamentary scrutiny, if any at all. For a civil society organisation to challenge one in court, let alone win, is quite astonishing. TJN-A argued that the treaty was unconstitutional for two reasons: in content terms, the treaty would lead to an unacceptable loss of revenue; in process terms, it should have been subject to public consultation and approval by parliament. The court actually sided against TJN-A on both counts, stating among other things that it should have provided figures for the revenue lost which should make it untenable for governments to refuse to do the same and that consultation with Kenya Revenue Authority constituted adequate public participation.
Many countries have entered into tax treaties also called double tax agreements , or DTAs with other countries to avoid or mitigate double taxation. Such treaties may cover a range of taxes including income taxes , inheritance taxes , value added taxes , or other taxes. For example, European Union EU countries are parties to a multilateral agreement with respect to value added taxes under auspices of the EU, while a joint treaty on mutual administrative assistance of the Council of Europe and the Organisation for Economic Co-operation and Development OECD is open to all countries. Tax treaties tend to reduce taxes of one treaty country for residents of the other treaty country to reduce double taxation of the same income. The provisions and goals vary significantly, with very few tax treaties being alike. Most treaties:. The stated goals for entering into a treaty often include reduction of double taxation, eliminating tax evasion, and encouraging cross-border trade efficiency.
Tax, development and international relations
Tax Treaties, Part 1
International Tax and Public Finance. This paper examines bilateral double taxation treaties, with an emphasis on information exchange among tax authorities. A major objective is to understand which countries are more likely to sign a tax-relief treaty and when information-exchange clauses will be added to a treaty. A simple model with two asymmetric countries and repeated interactions among governments is used. The paper shows that no information exchange clause may be added to a tax treaty when there is a reciprocity requirement, when there is a high cost of negotiation, when there is a cost of providing information, or with one-way capital flows.