Such disputes have historically been resolved
through mutual agreement procedures (MAPs): at
the instigation of an affected taxpayer, competent
tax authorities of Contracting States to a tax treaty
endeavour to resolve by mutual agreement any
disputes arising out of situations of double taxation,
or other differences in the interpretation or
application of the relevant treaty. In this relatively
informal process, the taxpayer has little control
over whether the case is accepted by the relevant
competent authority. Nor does the taxpayer have any
input on the MAP itself, its timing and its outcome.
While arbitration is sometimes available in existing
tax treaties, it is accessible only relatively rarely,
and in relation to a limited scope of issues.
However, recent developments in the field of
international tax suggest increasing interest in
using arbitration more frequently to resolve disputes
under tax treaties. For example, the OECD's new
Multilateral Convention to Implement Tax Treaty
Related Measures to Prevent Base Erosion and Profit
Shifting (BEPS) includes a detailed and harmonised
arbitration procedure (on an opt-in basis). As of
January 2018, 28 of the 78 signatories to the
Convention have already opted in, thus committing
to arbitrate future disputes under tax treaties.
Meanwhile, at EU level, a new set of rules to develop
the resolution of tax disputes (to supplement the
EU Arbitration Convention) has been adopted
through Council Directive EU 2017/1852. This
establishes a new mechanism to address intra-EU
tax treaty disputes in the absence of a mutual
agreement, including via binding arbitration or
other forms of alternative dispute resolution.
Various questions remain as regards states' preferred
form of arbitration ('final offer' or 'reasoned
opinion') in tax treaties, how transparent the
proceedings should be, who the relevant decisionmakers
will be, and how much input in the process
taxpayers themselves will have. However, the
inclusion of more structured mechanisms for
dispute resolution in future tax treaties will likely
create greater opportunities for affected private
parties actively to participate in and influence the
outcome of disputes between state tax authorities.
' The nascent state-to-state
presently envisaged for
international tax treaties may
usefully be informed by
experiences gained, and
decisions made, in the longer
established fields of investment
and commercial arbitration.'
tax disputes: what next?