Resolving double taxation in a global environment – when might it impact on deal value? Consideration of the availability of mutual agreement procedures and arbitration

Abstract

Multinationals are under increasing scrutiny by revenue authorities across the globe. The heightened risk of tax audits, transfer pricing adjustments and the potential for double taxation mean that it is more important than ever for multinationals to consider what strategies are available to resolve international tax disputes. Inherent tax risk and uncertainty creates unique challenges for oil and gas multinationals as it can impact on deal value where double taxation arises. This is because countries are increasingly behaving like companies – competing to preserve and defend their tax base. With the Organisation for Economic Co-operation and Development’s (OECD’s) Multilateral Instrument pending ratification by the Australian Parliament, this paper considers the availability and practical use of the mutual agreement procedure (MAP) for the resolution of double taxation. Additionally, the paper provides an overview of which jurisdictions have opted to adopt arbitration as a mechanism to resolve double taxation disputes where the MAP has failed.