Sharing the First Bite - A New Approach to Tax Treaties
39 Pages Posted: 26 Feb 2008
The existing 'international tax regime' derived from the international tax treaties network and from unilateral domestic legislation of the world's nations. Among several unintended byproducts, the current 'tax regime' enables situations of double non-taxation and tax evasion. The most problematic aspect of the current international tax system is the arbitrary and unfair way the global tax pie is distributed among the world's nations who take part in the common regime. The tax treaties worldwide network shifts tax revenues from developing to developed countries. Essentially, the common excuse presented to developing countries for the discrimination in tax revenue sharing, that is built-in in the tax treaties, is that a greater flow of foreign investment will enter the developing countries and enhance the domestic economy in the long run. Many developing countries are not convinced with this claimed incentive and some of them avoid signing tax treaties with developed countries. The developing countries that do sign these tax treaties with developed countries do so with either very little bargaining power or as a default to the best they can get out of the bad circumstances they are confronted with, mainly under the desire to be part of the global modern market, even in the price of giving up revenues. This paper suggests a new approach to tax treaties: tax revenues from global activity should be shared more equally among developed and developing countries. It suggests that the total global tax pie will be larger if a more equal distribution would take place, and that both countries will benefit by collecting more revenues than under the current system.
Keywords: tax, taxation, international tax, international taxation, treaty, treaties, tax treaty, tax treaties, oecd, treaty model, tax treaty model, international tax treaty model, tax convention, international tax convention, double taxation, double non-taxation, international tax revenews
JEL Classification: K33, K34, H26, H23, H21, H77, O19, R11, R13, E25
Suggested Citation: Suggested Citation