Searching for the Uncertain Rationale Underlying the US Treasury's Anti-treaty Shopping Policy

Abstract

The US Treasury Department regards treaty shopping as an abuse of its bilateral income tax treaty network and has developed a model anti-treaty shopping article, which it insists on including in all of its treaties. The Treasury has explained that its position is based on the rationale that treaty-shopping inappropriately benefits residents of countries that have not 'paid' for treaty advantages by making reciprocal concessions to the United States and that successful treaty shopping lessens the incentive for other countries to enter into treaty negotiations with the United States. This article examines the exceptions to the US anti-treaty shopping article and finds that, because these exceptions are significantly inconsistent with the Treasury's announced anti-treaty shopping rationale, the Treasury's true rationale is uncertain and its anti-treaty shopping article is, in fact, vulnerable to substantial treaty shopping behaviour.