The Potential for Discriminatory Tax Treatment Based on Structural Elements in OECD and UN Based Tax Treaties

Abstract

This chapter focuses on the role of the national treatment obligation under trade agreements in regulating host country behaviour in the trade in services and the lack of any parallel non-discrimination in tax treaties. Specifically, it examines the general provisions in the OECD and UN Model Tax Treaties that are employed by bilateral tax treaty partners in the taxation of non-resident service providers and how these are interpreted and applied. The chapter is framed around three broad questions. First, is there potential for differences in tax treatment between resident and non-resident service providers? Second, is there evidence of differences in the tax treatment of resident and non-resident service providers? Third, do these differences in treatment affect the competitive position of non-resident service providers and can these differences be viewed as discriminatory? The chapter concludes that the manner in which a country interprets and applies the OECD and UN tax treaty provisions that apply to services varies widely and can result in the imposition of very onerous withholding taxes and/or administrative and compliance issues.