Revisiting the Case of Customary International Tax Law

Dirk Broekhuijsen,Irma Mosquera Valderrama

doi:10.1163/18719732-12341459

Abstract

Abstract Customary international tax law has traditionally not received a lot of acclaim in international tax law literature. However, the infrastructure of international tax law is becoming increasingly multilateral. The recent adoption of the Multilateral Instrument and the creation of the Inclusive Framework, two initiatives related to the OECD/G20 Base Erosion and Profit Shifting Project, have accelerated the width of cooperation on international tax matters. For that reason, the authors (re)consider the existence of customary international law in the area of international tax law. They conclude that, perhaps contrary to the intuition of tax lawyers, the evidence in favour of customary international tax law is building up. The question whether customary law exists within the area of international taxation is therefore not misplaced.

Highlights

The field of international tax law is experiencing a surge in multilateral cooperation
The recent adoption of the Multilateral Instrument and the creation of the Inclusive Framework, two initiatives related to the Organization for Economic Cooperation and Development (OECD)/G20 Base Erosion and Profit Shifting Project, have accelerated the width of cooperation on international tax matters
An aspirant for customary international tax law comes in the form of one of the minimum standards against aggressive tax planning included in the Base Erosion and Profit Shifting (BEPS) Inclusive Framework and in the MLI: the aim to tackle tax treaty abuse and tax treaty shopping

Summary

Introduction

The field of international tax law is experiencing a surge in multilateral cooperation. At the time of writing (June 2020), 137 jurisdictions have committed to the implementation of the BEPS 4 Minimum Standards.[8] With multilateral cooperation becoming more and more present in discussions, formation as well as the implementation of new rules of international tax law, and with increasingly wider forms of acceptance of “minimum” international tax law standards across the world (including non-OECD and non-G20 countries), it is time to (re)consider the existence of customary international tax law, which has traditionally not had much support in academic literature.[9] An aspirant for customary international tax law comes in the form of one of the minimum standards against aggressive tax planning included in the BEPS Inclusive Framework and in the MLI: the aim to tackle tax treaty abuse and tax treaty shopping It provides an important outcome of the BEPS Project, as one of its rules, the “principal purpose test” (PPT), has been widely if not universally accepted by more than 130 jurisdictions.[10] considering the fact that dealing with aggressive tax planning is “new” to international tax law in the sense that it requires multilateral norms to deal with prisoner dilemmatype of situations,[11] has the charm of customary international law increased in the area of international tax law?.

Customary International Law

Objective

The Principal Purpose Test as Customary International Law

Subjective Element

Conclusions and Recommendations for Further Research