Monday, March 21, 2005

WTO rules vs Income Tax Treaties

An interesting paper on the issue of WTO vs income tax treaties was recently published. The discusson has started some years ago about the relationship between WTO rules and income tax treaties. In that regard, some commentators suggest that the international tax regime, which evolved around the OECD model tax convention, should be subjected to and embedded into the framework of the WTO rules. Other commentators view the relationship in a differen way, supporting an international tax regime constructed in compatibility with WTO law, but not subject to its dispute settlement process. Yariv Brauner (Arizona State) has posted an interesting paper called “International Trade and Tax Agreements May be Coordinated, but not Reconciled” Here is an abstract

The article observes that the international trade and tax regimes cannot be simply reconciled or somehow meshed together, yet, it argues that their policies could (and should) be coordinated, with some adjustments made to the present legal constructs. It suggests that such coordination would benefit from the establishment of an international tax organization, which shall be responsible to making the evolving international tax regime more compatible with the international trade regime (but not part of the WTO). The article analyzes and rejects other solutions, primarily the one I call the tax expenditure solution, which is based on the contention, rejected in this article, that the international tax and trade regimes do not conflict, which proponents are willing to subject some aspects of income tax laws to WTO scrutiny as they are, without any adjustments. Finally, the article argues that coordinating international tax and international trade policies may be beneficial to both regimes even apart from the solution of the aforementioned incongruity.


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