Organization For Economic Cooperation And Development Model Research Articles

The 1963 OECD Model Tax Convention: Now and Then

This article reviews the importance of the 1963 Organization for Economic Co-operation and Development (OECD) Model Tax Convention in the development of the current international bilateral treaties network and compares its principles to those found in the US model tax convention. It then shows how the 1963 OECD model has laid the foundations for the OECD’s Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) agreed on by more than over 100 jurisdictions. US model, OECD model, MLI, tax treaties, international tax, tax history

Article: A Study of Vietnam’s Double Tax Treaties: Patterns of Treaty Growth and Shifting Treaty Policy

This article reviews the growth of Vietnam’s tax treaties and shifts in its treaty policies over the thirty-year period since the country created opportunities to attract foreign investment. It follows the incorporation of the Model Tax Treaties of the Organization for Economic Co-operation and Development (OECD) and the United Nations (UN) into its bilateral treaties and considers the limited apparent connection between treaties and foreign direct investment (FDI). A particularly interesting finding is the extent to which Vietnam’s treaties from the outset favoured the use of the UN Model provisions with respect to the definition of permanent establishments (PEs) and capital gains on the disposal of immovable property, particularly in its treaties with OECD members. This is ironic as measures from the OECD Model precedents are more likely to be found in treaties with non-OECD members. Nevertheless, it is clear that the treaties overall favour the allocation of taxing rights to Vietnam as a capital importing jurisdiction. These findings, when considered along with the country’s success at attracting FDI, suggest that developing economies can retain taxing rights and attract foreign investment at the same time. OECD Model treaty, UN Model treaty, tax treaties and foreign direct investment, transitional economy, evolving treaty policy

Systematization and Classification of ‘Soft Law’ Sources in the Financial Law of Russia

The aim of this work is to develop a classification of soft law sources in the financial law of the Russian Federation and their systematization. The study revealed the fact that Russian fiscal authorities and courts have increasingly turned to the documents of the Organization for Economic Co-operation and Development (OECD) especially in connection with the taxation issues. The study discloses an important soft-law feature – to transform to the financial law and become legally binding. It was adjusted that there are a large number of soft law legislative acts, regarding transfer pricing and double taxation avoiding have been passed by international organizations and bodies nowadays. These acts are being used a lot in the Russian financial law. The study investigates the most important soft law act – OECD Model Tax Convention and its comments - issued by the Organization for Economic Co-operation and Development (OECD). According to the result of the study, the classification of soft-law acts was carried out. The classification is based on the following criteria: functions, goals, scope (influence), bill passing authorities, types of adopted acts, bill scope. The developed classification and systematization ensure a more efficient and uniform application of the soft law sources in practice. At work there were used general and specific scientific research methods: method of interpretation of the rules of laws, system-structural and formal-legal methods, logical method.

Application of OECD LSE Framework to Assess Spatial Differences in Rural Green Development in the Arid Shaanxi Province, China.

The green development theory proposed by the Organization for Economic Cooperation and Development (OECD) has promoted the harmonious development of the economy, society, and environment in many countries, in particular, it has provided a good option for the coordinative development of economic growth, resource utilization, and ecological protection in rural areas of developing countries. For this reason, we used the OECD model to measure green development in arid, rural areas of China, and also subjective and objective weighting methods to measure the rural green development level of 78 county-level regions in Shaanxi province in 2018. At the same time, the least square error (LSE) method was used to determine the contribution rate of government support, environmental pressure, resource endowment, and quality of life, so as to determine the influencing factors of rural green development in Shaanxi. The results show that the levels of rural green development in Shaanxi province differed internally: the level of green development in the north was strong, moderate in the southwest and northwest, and weak in the center and south. The driving types of rural green development in Shaanxi province are divided into five types: Three Factors I, Three Factors II, Four Factors I, Four Factors II, and Five Factors; the influencing factors of rural green development are varied from county to county. In terms of different regions, different development approaches and countermeasures are proposed respectively. This research provides scientific guidance for local government to formulate green agricultural development policies and to overcome the development difficulties in rural areas.

The Relationship Between Restrictions on the Deduction of Interest Under Canadian Law and Canadian Tax Treaties

The author analyzes the provisions of Canadian tax treaties and those of the Organisation for Economic Co-operation and Development (OECD) and United Nations (UN) model conventions to determine whether they would prevent the application of the restrictions on the deduction of interest under the Canadian Income Tax Act—namely, the thin capitalization rules and rules that deem interest to be dividends. Although the provisions of the model conventions would prevent the application of the Canadian thin capitalization rules, the provisions of Canadian tax treaties have been carefully negotiated to allow the application of those rules. The author also questions whether the provisions of the OECD and UN model conventions should be interpreted to prevent the application of thin capitalization rules, and he concludes that restrictions on the deduction of interest under domestic law should be prevented by the provisions of the model conventions only if those restrictions are discriminatory.

The normative evolution of corporate governance in the UK: an empirical analysis (1995-2014)

PurposeThis paper aims to analyse normative corporate governance evolution in the UK between 1995 and 2014 against the benchmark of Organisation for Economic Co-Operation and Development (OECD) regulatory principles.Design/methodology/approachMethodologically, the authors conduct an empirical, longitudinal data set analysis of the formative years of UK normative corporate governance development between 1995 and 2014. We provide a qualitative discussion of the empirical evidence that links the type of UK regulatory corporate governance development to financial market growth thereby adopting a mixed approach based on quantitative and qualitative research methods.FindingsThe authors find that compared to the OECD model of corporate governance, the UK model is less rigid following a more self-regulatory approach based upon a “comply or explain” paradigm. Thus it is scored below corporate governance systems that follow a compulsory implementation model. However, even with such “low” tilt towards formal shareholder primacy norms, the UK has the best performing financial market. As a quasi-empirical study, the authors suggest that there are several historical and economic reasons for this, which together with a robust rule of law in the UK contribute to this performance – and the law especially the type or tilt is less relevant.Originality/valueThis is the first of its kind empirical, longitudinal data set analysis with qualitative elements that links empirical evidence to regulatory developments in the wider context of UK corporate governance evolution.

A Call to Action: From Evolution to Revolution on the Common Reporting Standard

As a result of technical development and globalization, investing abroad has become much more accessible, and thus, an important channel for transferring wealth and income to offshore locations with the aim to avoid tax obligations at home. In this regard, the automatic exchange of information (AEOI) across countries is a strong weapon to stop cross-border tax evasion. This is why, in 2014, the Organization for Economic Cooperation and Development (OECD) launched its proposal for a global AEOI standard, the so-called Common Reporting Standard (CRS). This article provides a cross-country analysis of the national CRS laws for a sample of 41 countries with the aim to determine whether significant deviations from the original OECD model may hinder the effectiveness of the AEOI. Our key recommendation to the OECD and all participating jurisdictions is to achieve a higher level of standardization when designing CRS locally. Furthermore, international pressure on the U.S. to join the CRS is needed. A global AEOI system having the potential to put an end to cross-border tax evasion can be achieved only with the elimination of all attractive locations for illicit financial flows.

Developments in the Analysis of the Tie-Breaker Rules for Individuals Under Article 4 (1) OECD

Since access to a treaty is dependent on the taxpayer being resident in one of the Contracting States, the classification of a taxpayer as resident becomes of utmost importance. Article 5 of the OECD Model Convention, defines the term ‘resident’, and also provides a series of tests which should apply when a taxpayer is a dual resident. None of the tests put forward in the tie-breaker rules for individuals are defined by the treaty, and the Organisation for Economic Cooperation and Development (OECD) commentaries fail to provide much guidance. For many years, an article by John Avery Jones et al., entitled ‘Dual Residence of Individuals: The Meaning of the Expressions in the OECD Model Convention’ (1981), has been adopted by practitioners in understanding the concepts portrayed in such tie-breaker rules. This article will explore whether the principles put forward in the above-mentioned article are still relevant in todays developed world, and if not, what interpretation should be given to these concepts.

Some Reflections on the ‘Saving Clause’

Action 6 of the Organization for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting project deals with tax treaty abuse and proposes inter alia, the inclusion of a seemingly innocuous ‘saving clause’ as new Article 1(3) OECD Model Tax Convention (OECD MC). This clause is aimed at preserving the taxing rights of the residence State. While it changes little with regard to the basic set-up of the OECD MC in one-taxpayer situations, it opens the doors for both Contracting States to tax their residents specifically in two-taxpayer situations which may arise, for example, in cases involving hybrid entities, Controlled Foreign Companies regimes, and transfer pricing adjustments. This article reviews the background of this new OECD MC provision, its longstanding use in US treaty policy, as well as some aspects of its breadth, impact and – intended and arguably unintended – consequences.

Analysis Method of Transfer Pricing Used by Multinational Companies Related to Tax Avoidance and its Consistencies to the Arm's Length Principle

The purpose of this study is to evaluate about how Starbucks Corporation uses transfer pricing to minimize the tax bill. In addition, the study also will evaluate how Indonesia’s domestic rules can overcome the case if Starbucks UK case happens in Indonesia. There are three steps conducted in this study. First, using information provided by UK Her Majesty's Revenue and Customs (HMRC) and other related articles, find methods used by Starbucks UK to minimize the tax bill. Second, find Organisation for Economic Co-Operation and Development (OECD) viewpoint regarding Starbucks Corporation cases. Third, analyze how Indonesia’s transfer pricing rules will work if Starbucks UK’s cases happened in Indonesia. The results showed that there were three inter-company transactions that helped Starbucks UK to minimize the tax bill, such as coffee costs, royalty on intangible property, and interest on inter-company loans. Through a study of OECD’s BEPS action plans, it is recommended to improve the OECD Model Tax Convention including Indonesia’s domestic tax rules in order to produce a fair and transparent judgment on transfer pricing. This study concluded that by using current tax rules, although UK HMRC has been disadvantaged because transfer pricing practices done by most of multinational companies, UK HMRC still cannot prove the transfer pricing practices are not consistent with arm’s length principle. Therefore, current international tax rules need to be improved.

Change in Financial Literacy in Punjab and Haryana Post-Financial Inclusion Schemes

Financial literacy has become increasingly important over the past decades. There is a growing belief that the individual would need to become more self-reliant in the future. Increased competition and more complex products in the financial services industry leave many people ill-equipped to cope with the sophisticated choices they may need to make. While defining Bhartiya Model of Financial Literacy, Purohit. H (2015) in his new model of financial literacy in Indian context on Ictpost said that Financial literacy can be defined as a small subset of Purusharth which though cannot be understood in isolation yet it deals with the financial knowledge, behavior, attitude, approach choice pattern, emotions, mindset and lifestyle keeping in view that Moksh (oneness with God) and not the material wealth is the top priority, for overall happiness of self, family, society, nation, world and the universe. There are several schemes which have been launched in India under financial inclusion like Pradhan Mantri Jan Dhan Yojana (PMJDY), Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY) and Atal Pension Yojana (APY) so that people can have the knowledge and access to all these schemes. So there is a need that people should have the knowledge of financial products and services and also they should be financially included.NCFE conducted a survey before these schemes were launched, but the question is has the financial literacy improved now? This has to be researched.Furthermore, and most importantly, all the earlier studies have focused upon improving financial literacy using OECD (Organization for Economic Co-operation and Development) model but actually the studies need to take into consideration BMFL (Bhartiya Model of Financial Literacy) in evaluating and creating new knowledge for improving the financial literacy among people. Researches should also evaluate impact of post-financial inclusion schemes (launched by our Hon’ble Prime Minister Narendra Modi) on the financial literacy in the states of Punjab and Haryana.

Tax Treaty Entitlement Issues Concerning Dual Residents

The question whether a dual resident taxpayer is entitled to tax treaties concluded by each residence state with a third state has been controversial. Since 2008, the Organisation for Economic Co-operation and Development (OECD) Commentary on Article 4(1) of the OECD Model states that such a taxpayer would be entitled to only the tax treaty network of residence state as determined by the tiebreaker rule of the tax treaty between the two residence states. While this may be desirable policy, this article examines whether the interpretation espoused by the commentary is legally accurate.

Tax Treaty Entitlement Issues Concerning Dual Residents

The question whether a dual resident taxpayer is entitled to tax treaties concluded by each residence state with a third state has been controversial. Since 2008, the Organisation for Economic Co-operation and Development (OECD) Commentary on Article 4(1) of the OECD Model states that such a taxpayer would be entitled to only the tax treaty network of residence state as determined by the tiebreaker rule of the tax treaty between the two residence states. While this may be desirable policy, this article examines whether the interpretation espoused by the commentary is legally accurate.

Beneficial Ownership Provisions In Tax Treaties Between Developed And Developing Countries: The Canada/South Africa Example

In the years since the Organisation for Economic Cooperation and Development (OECD) adopted its first draft tax treaty in 1963, the world has experienced an astonishing surge in international trade and investment. The tax treatment of these cross-border transactions is affected by double tax agreements. As tax treaty networks will likely continue to expand, concerns about tax treaty abuse might be expected to grow. The extent to which a countrys tax treaty policy favours developing countries - or not - depends upon the extent to which the country is prepared to adopt provisions from the UN model tax convention as opposed to the OECD model. Developing countries, in particular, should carefully consider the design of their tax treaties so as to effectively combat tax avoidance without sacrificing foreign direct investment. To this end, the Canada/South Africa tax treaty is compared and contrasted with these two models. The concept of beneficial ownership is reviewed in this context. It is contended that a general definition in South Africa's Income Tax Act of 'beneficial ownership' would assist in the interpretation of the term for the purposes of South Africa's tax treaties. It is submitted that the scope for the source taxation of passive investment income (viz. dividends, interest and royalties) in the developing country could be magnified through treaty negotiations.

The Concept of Associated Enterprises

The concept of Associated Enterprises is essential for the application of the arm's length principle, which is the internationally recognized tax standard for transfer pricing. The arm's length principle is the underlying principle of Article 9 of the Organisation for Economic Co-operation and Development (OECD) Model Tax Convention (OECD Model) and of transfer pricing laws of many countries. Virtually all tax treaties are based on the arm's length principle. As stated by Article 9 OECD Model, the arm's length principle is applied to Associated Enterprises. The concept of Associated Enterprises consists of three elements: participation in management, control and capital. Despite the importance of the notion of Associated Enterprises, there is a lack of clarity on its meaning, in particular concerning the term 'control'. This study provides an in-depth analysis of the concept of Associated Enterprises in Article 9 OECD Model.

Mandatory Arbitration within Tax Treaties: A Need for a Coherent International Standard

ABSTRACT As businesses expand operations globally, the threat of double taxation on income earned becomes a significant concern. The current Mutual Agreement Procedures (MAP) within the tax treaties frequently fail to provide equitable relief, exposing taxpayers to uncertain outcomes, and cause compliance considerations under Accounting Standards Codification (ASC) 740, Income Taxes. In July 2008, the Organisation for Economic Co-operation and Development (OECD) Model Tax Treaty began including a mandatory arbitration provision for taxpayers failing to reach agreement under MAP. The U.S. Model, while beginning to shift toward including mandatory arbitration in some of the later treaties, still relies on the voluntary MAP proceedings for resolution of disagreements, because any party can elect out of arbitration. Data provided by the U.S. Treasury indicated that a wide range of taxpayer income covered by the U.S. treaties failed to receive partial or full relief from double taxation. The U.S. should consider adopting the OECD Model Tax Treaty's mandatory arbitration provisions for all tax treaties, to remove the uncertainty of double taxation and promote international trade.

EU Cross-Border Leasing and Double Non-taxation

Taxing the leasing of movable assets causes significant practical problems already at the national tax level. Far more complicated taxation problems arise in the scope of cross-border transactions. Regarding the Organisation for Economic Co-operation and Development (OECD) Model Tax Convention on Income and on Capital (OECD Model Treaty), the contracting states have a broad discretion for classifying leasing agreements under the respective treaty articles. Besides, it can be found that actual taxation of leasing transactions often differs from the principles of the OECD Model Treaty. Considering the applicable secondary law within the European Union, in case of international leasing transactions a double non-taxation may occur. The present contribution aims at showing such a taxation gap and indicates possible ways for closing it.

The OECD Discussion Draft on the Transfer of Intangibles (Revision of Chapter VI of the OECD Transfer Pricing Guidelines) – Main Comments

On 6 June 2012, the Organisation for Economic Co-operation and Development (OECD) released a discussion draft on the Proposed Revision of Chapter VI of the OECD Transfer Pricing Guidelines (TPG) and Related Provisions. Intertax publishes the full text of the discussion draft together with the comments submitted by members of Baker & McKenzie Global Transfer Pricing Practice and Global Tax Policy Group. While applauding the document for clarifying a number of important issues related to the application of the arm's length principle to situations involving intangibles, the commentators also believe that the Discussion Draft on several occasions presents departures from the arm's length principle and from the existing guidance in the 2010 TPG. They suggest that the concerns expressed by some countries in relation to specific structures should be addressed within the appropriate legal and policy parameters and that the TPG should remain an interpretative tool of the arm's length principle as set forth in Article 9 of the OECD Model Tax Convention. In addition, they suggest that the guidance in the revised Chapter VI should be balanced and acknowledge that the facts and circumstances of each case ought to be taken into account in a transfer pricing analysis. Prescriptive requirements should not be set as substitutes for comparability analysis.

The Impact of the UN and OECD Model Tax Conventions on Turkish Tax Treaties

Turkey is an appealing country for global investors. The economical importance of Turkey with the defragment of the geopolitical importance will gain deeper dimension and meaning. Since the outbreak of the global financial system crisis, the issue of tax cooperation between related parties has a priority on the international agenda. The Turkish tax regime is an important part of the economy since Turkey attaches a high priority to the encouragement of foreign investment and provides a variety of incentives. Turkey is a signatory to a tax treaty with many countries all over the world. Turkey's tax treaties generally follow the provisions of the Organization for Economic Co-operation and Development (OECD) Model Convention. This study intends to give vision all foreign investors about Turkish Double Taxation Treaties.

Update on the Dutch Fund for Joint Account (‘closed’ FGR): Asset Pooling Vehicle for International Investors and Pension Funds

The Dutch fund for joint account being transparent from a Dutch tax perspect ive (besloten Fonds voor Gemene Rekening (hereinafter 'closed FGR') is a well-established and flexible international asset pooling vehicle for domestic and international investors and pension funds. The attractiveness of the closed FGR as international asset pooling vehicle has been further increased over the last months as the Dutch authorities concluded mutual agreements on its tax transparency with various tax treaty partners and also indicated in their recently updated Policy Note on the Dutch Tax Treaty Policy that they intend to conclude many more similar mutual agreements. Although the closed FGR may already be considered transparent from a foreign tax perspective, confirmation of such classification by means of a mutual agreement provides more certainty. Pursuant to its tax transparency, for purposes of application of the respective tax treaties, all income and gains from the closed FGR's underlying assets are thus allocated to its investors in proportion to their participations in the closed FGR and tax neutrality is achieved. By concluding these agreements, and as the closed FGR may be categorized as a collective investment vehicle (CIV), the policy of the Dutch authorities is in line with the views of the Organization for Economic Co-operation and Development (OECD) expressed in the 2010 Report on the Granting of Treaty Benefits with Respect to the Income of CIVs, which gave rise to amendments in the recently updated Commentary to Article 1 of the 2010 OECD Model Convention. In this article, the author addresses (1) the main characteristics of the FGR, (2) the international tax aspects of the closed FGR, (3) the content of the abovementioned mutual agreements, (4) the views expressed by the Dutch authorities in the updated Policy Note on the Dutch Tax Treaty Policy, and (5) the aforementioned points in relation to the recent OECD developments on CIVs. Furthermore, although the developments initiated by the Dutch authorities are very helpful and promising, the author provides recommendations to further support the closed FGR as international asset pooling vehicle.