The Professional Ethics of US Tax Treaty Interpretation

Abstract

The use of tax treaties to obtain Double Non-Taxation for multinational firms as part of aggressive tax avoidance planning is not always ethical conduct for U.S. tax professionals. Under the guidance of the Organization for Economic Co-operation and Development (OECD), international standards of tax treaty practice are trending toward substantive methods of interpretation more typical of U.S. tax treaty drafting and interpretation. In a growing number of cases, the use of formalist planning techniques that apply tax treaties without a substantive review may not constitute ethical attorney conduct. This paper explains in detail the interpretational methods underlying the use of tax treaties to obtain Double Non-Taxation. Because tax treaty interpretation is an art and not a science, wide discretion is available to the tax planner. Yet, there are ethical boundaries in interpreting tax treaties to achieve Double Non-Taxation.