Comments on the OECD Proposal for Secret and Mandatory Arbitration of International Tax Disputes

Abstract

The Organization for Economic Co-operation and Development (OECD) has proposed amendments to its Model Tax Convention and Commentary that would establish a system for the mandatory arbitration of tax disputes between two treaty countries when the tax officials of those countries have been unable to resolve those disputes within a two-year period.' The proposal is undoubtedly well-meaning and does address a small but significant problem - the "rare cases" (as characterized by the OECD) of potential double taxation that are unresolved through the existing tax-treaty mechanism.Nevertheless, as discussed below, the public policy goals of this proposed system are at best obscure, and the risks to sound administration of national tax systems are great. The OECD's goal seems to be to please the international business community when the goal ought to be to advance the public interest in a transparent and unbiased system.