Page 0020


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

arbitration mechanisms

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.'

Will Thomas

Arbitrating international

tax disputes: what next?



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