英国发展研究所-低收入国家税收协定规范与联合国模式的作用：过去、现在和潜力（英）-2023.8

WorkingPaper171

TaxTreatyNormsAmongLower-IncomeCountriesandtheRoleoftheUNModel:Past,PresentandPotential

MartinHearson,

FrederikHeitmüllerand

VincentArel-Bundock

August2023

ICTDWorkingPaper171

TaxTreatyNormsAmongLower-IncomeCountriesandtheRoleoftheUNModel:Past,PresentandPotential

MartinHearson,FrederikHeitmüllerandVincentArel-Bundock

August2023

2

TaxTreatyNormsAmongLower-IncomeCountriesandtheRoleoftheUNModel:Past,PresentandPotential

MartinHearson,FrederikHeitmüllerandVincentArel-Bundock

ICTDWORKINGPAPER171

FirstpublishedbytheInstituteofDevelopmentStudiesinAUGUST2023

©InstituteofDevelopmentStudies2023

ISBN:978-1-80470-144-7

DOI:

10.19088/ICTD.2023.045

ThisisanOpenAccesspaperdistributedunderthetermsoftheCreativeCommonsAttribution4.0Internationallicense(CCBY),whichpermitsunrestricteduse,distribution,andreproductioninanymedium,providedtheoriginalauthorsandsourcearecreditedandanymodificationsoradaptationsareindicated./licenses/by/4.0/legalcode

Availablefrom:

TheInternationalCentreforTaxandDevelopmentattheInstituteofDevelopmentStudies,BrightonBN19RE,UKTel:+44(0)1273606261

Email:info@ictd.ac

Web:www.ictd.ac/publication

Twitter:@ICTDTax

Facebook:/ICTDtax

IDSisacharitablecompanylimitedbyguaranteeandregisteredinEngland

CharityRegistrationNumber306371

CharitableCompanyNumber877338

3

TaxTreatyNormsAmongLower-IncomeCountriesandtheRoleoftheUNModel:Past,PresentandPotential

MartinHearson,FrederikHeitmüllerandVincentArel-Bundock

Summary

Bilateraltaxtreatiesdrawheavilyfrommodelconventionspublishedbyinternationalorganisations.InthispaperweinvestigatetheinfluenceoftheUNmodelontaxtreatiessignedbylower-incomecountries,aswellasthepotentialforspecificmodelprovisionstobemainstreamedinagreaternumberoftreaties.Despiteitsfocusontheinterestsoflower-incomecountries,theUNmodelisoftenassumedtoplayaminorrolecomparedtotheOECDmodel.DrawingfromanupdatedversionoftheICTDTaxTreatiesExplorerdataset,wefindthatasubsetofUNmodelprovisionscanalreadybeconsideredasthenormintreatiesconcludedbylower-incomecountries.AmongtheprovisionsnowuniquelyfoundintheUNmodel,thesearetheinclusionof‘supervisoryactivities’inarticle5(3)a,andthewholeofarticles5(3)(b)and14.TheprevalenceofmanyUNarticlesisincreasing,suggestingthatmoreprovisionscouldjointhesethree.TheinfluenceoftheUNmodelbecomesevenmoreapparentwhenwefocusontheamountofbilateralinvestmentintolower-incomecountriesthatistaxedaccordingtoUNmodelprovisions.

Toassesstheavenuesforfurtherchangewestudycountries’reservationstomodelconventions,aswellastheirrecentnegotiationhistory.Thisallowsustoidentifythoseprovisionsthataremostlikelytobestrongprioritiesforlower-incomecountries,andacceptabletoalargenumberofpartnercountries.Inparticular,UNarticles5(4)(b),5(6)and21(3)areallincreasinginprevalence,havestrongsupportfromlower-incomecountriesexpressedasobservationsontheOECDmodeltreaty,andshowsignificantrenegotiationpotentialfromrecentcountry-levelprecedent.Overall,wefindthatthereissignificantscopeforlower-incomecountriestorenegotiatetreatieswithaviewtoobtainmorerightstotaxincomeatsource.

Keywords:internationaltaxation;taxtreaties;UN;OECD;modelconvention;lower-incomecountries;foreigndirectinvestment;negotiations;reservations.

MartinHearsonisResearchDirectorattheInternationalCentreforTaxandDevelopmentattheInstituteofDevelopmentStudies.Heresearchesthepoliticsofinternationalbusinesstaxation,andinparticulartherelationshipbetweendevelopedanddevelopingcountries.HewaspreviouslyafellowininternationalpoliticaleconomyattheLondonSchoolofEconomics,andworkedinthecharitysectorforadecade.

FrederikHeitmüllerisaResearchConsultantattheInternationalCentreforTaxandDevelopment(ICTD)andaLecturerandPhDCandidateatLeidenUniversity’sInstituteforTaxLawandEconomics.Hisresearchfocussesonpoliciesagainstcorporatetaxavoidance,theinfluenceofinternationalnormsintheGlobalSouth,andtaxpolicyfordevelopment.

VincentArel-BundockisapoliticalscientistattheUniversitédeMontréal,wherehereadsoncomparativeandinternationalpoliticaleconomy.Heisparticularlyinterestedinthepoliticsofinternationaltaxationandforeigndirectinvestment,buthasalsoworkedoneconomicvoting,monetarypolicy,foreignaidandresearchmethods.

4

Contents

Summary3

Acknowledgements6

Acronyms6

1Introduction7

2Literaturereview8

3Aboutthedataused10

4PastandpresentuseofUNmodel13

4.1EvolutionofnumberoftreatiesincludingUNmodelprovision13

4.2VolumeofinvestmentcoveredbyUNmodelprovision16

4.3ImportanceofUNmodeltext19

5PotentialforexpandedimpactoftheUNmodel21

5.1RevealedpreferencesforUNprovisionsthroughnegotiatinghistory22

5.1.1Preferencesofpartnercountries25

5.1.2Preferencesofsamplecountries25

5.1.3Comparisonofreservationsandobservationstomodel

treaties26

5.2Renegotiationindex27

6Conclusion28

Annexes31

References37

Tables

Table1TaxTreatiesExplorerdatasetfieldsandindexcomposition11

Table2PrevalenceofUNmodel-typeprovisionsandspecificUNmodel

wordingintreatiesinforce,202319

Table3Summaryperprovision(topuniqueUNprovisionsintermsof

prevalence)30

Table4Summaryperprovision(topsource-basedprovisionsthatarealso

partofOECDmodel)30

Table5numberoftreatiesthathavearenegotiationpotentialof0.67or31

higherforaspecificclausebycountry

Figures

Figure1Overalltrendsintreatycontent14

Figure2Negotiatingtrendsovertimebyprovision15

Figure3UNmodel-typeprovisionsasashareoftotalinwardinvestmentand

totaltreatiesofsamplecountries17

Figure4ShareofinwardinvestmentcoveredbyselectedUNmodel-type

provisions18

5

Figure5

Figure6

Figure7

Figure8

Figure9

ShareofnewtreatiessignedeachyearthatincludeselectedUNmodel-typeprovisionsandspecificUNmodelwording

Heatmapoftreatyclauseprevalencebypartnercountry,2000-2023Heatmapoftreatyclauseprevalencebysamplecountry,2000-2023Renegotiationpotentialcomparedtocurrentprevalenceinsamplecountries’treaties

Shareofnewtreatiessignedeachyearthatincludespecificphrases

20

23

24

28

36

6

Acknowledgements

WewouldliketothankOkankaOkangaforcontributingtotheupdateofthetaxtreatydataset,aswellastwoanonymousreviewerswhosecommentsgreatlyhelpedimprovethepaper.TheresearchandwritingbenefitedfromfundingbytheUnitedNationsDepartmentofEconomicandSocialAffairs.

Acronyms

ATAF

BEPS

FDI

IBFD

MLI

PE

OECD

UN

AfricanTaxAdministrationForum

Baseerosionandprofitshifting

Foreigndirectinvestment

InternationalBureauofFiscalDocumentation

G20/OECDMultilateralInstrumenttoImplementTaxTreatyRelatedMeasurestoPreventBEPS

Permanentestablishment

OrganisationforEconomicCo-operationandDevelopment

UnitedNations

7

1Introduction

Weoftentalkoftheinternationaltaxregime,whichisgenerallyunderstoodasthenetworkofthousandsofbilateraltreatiesthat‘allfollowoneoftwowidelyacceptedmodels(theOECDandUNmodeltreaties),whichthemselvesarequitesimilartoeachother’,andarebasedoncommonprinciples(Avi-Yonah2007:5).Fromtheperspectiveoflower-incomecountries,however,thereareclearchoicesbetweentheUnitedNations(UN)andOrganisationforEconomicCo-operationandDevelopment(OECD)approachesoncertainaspectsofinternationaltaxation,especiallyintheareaofcross-borderservices.Thisisnotmerelyatechnicalmatter,butapoliticalstrugglebetweenwhatarecommonlydescribedas‘source’and‘residence’countries–importersandexportersofcapitalandservices–overtherighttotaxcross-bordereconomicactivity.Someofthesechoicesarereflectedinthemodelconventions,wherenotabledifferenceshaveemerged.Forexample,revisionstoarticle7oftheOECDmodelshiftthebalancefortaxingrightsawayfromcountriesinwhichmultinationalshavebranches,andtowardsthecountriesoftheirparentcompanies,andtheintroductionofnewarticles12Aand12BintheUNmodelallowsforgreatersourcetaxationoffeesfortechnicalandautomateddigitalservices,respectively.

Itisourcontentionthatthissituationisbetterunderstoodasa‘regimecomplex’,characterisedby‘thepresenceofinstitutionswhosemembershipsandmandatesoverlap’withoutaclearhierarchicalarrangementbetweenthem(AlterandRaustiala2018:330).TheUNmodelconventionisapowerfulfocalpointinaglobalecosystemthatincludestheOECDmodelandagrowingnumberofregionalmodeltreaties–andaworldinwhichlower-incomecountriesareincreasinglyactive,vocalandunitedinglobalandbilateralnegotiations(Hearsonetal.2022;Mason2020).RatherthanunderstandingglobaltaxgovernanceasanOECD-ledregimewithaminorrolefortheUNmodel,weshouldconsideritabipolarsystemcomprisingtwodistinctbutoverlappingregimes.

Tobetterunderstandthisregimecomplex,inthispaperwesetouttodeterminetheprevalentnormswithintheUN-ledregime.ThismeansstudyingthesubstantiveandgeographicalcontoursoftheUNmodel’sinfluenceonbilateraltreatiessignedbylower-incomecountries,asdistinctfromtheOECDmodel.WheredoweobservethestrongestuseofnormsembodiedintheUNmodel,andhowbroadanddeepisdifferentcountries’adoptionofthosenormsintheirtreaty-makingpractice?WealsowanttoknowwherethereisthegreatestpotentialtoconsolidateandexpandtheUN’sroleintheregimecomplex.ForprovisionsalreadyfoundintheexistingUNmodel,thisentailsstudyingthestrengthofsupportamonglower-incomecountries,aswellasthestrengthofanyoppositionfromtheirtreatypartners.WealsoincludesometentativeexplorationofthepotentialfortheUNtoadoptarticlesthathavebeguntospreadorganicallywithintreatiesoflower-incomecountries,principallyinrelationtotaxationofextractiveindustries.

WehavewrittenthispaperinresponsetotheDecember2022UnitedNationsGeneralAssemblyresolutionon‘PromotionofinclusiveandeffectivetaxcooperationattheUnitedNations’.OuranalysisbuildsonpreviousworkconductedfortheUNCommitteeofExpertsonInternationalCooperationinTaxMattersanditspredecessorAdHocCommittee(WijnenanddeGoede2013;WijnenandMagenta1997).ItislargelybasedontheICTD’sTaxTreatiesExplorerdataset,whichisauniquepublicly-availabletoolforhigh-levelcomparisonoftaxtreaties.ItcodestheircontentinlinewithvariationsbetweentheUNandOECDmodels.Whereaspreviouslarge-scalestudiescountedtheprevalenceofUNmodelprovisionsintreatiesinOECDandnon-OECDcountries,wefocussolelyonlower-income

8

countries,anddrilldownintothedatatoseehowithaschangedovertime,andbetweencountries.

Weseektomaketwocontributions.First,wedemonstratethatthenormsrelatingtotaxingrightsfoundintheUNmodelalreadypredominateinmuchoftheworldbeyondtheOECD.Mostforeigndirectinvestment(FDI)intolower-incomecountriesisalreadytaxedaccordingtoUNnorms,thoughthisvariesfordifferentprovisions.Second,thereissignificantpotentialtoexpandtheroleoftheUNmodelbyupgradingexistingtreatiestobeconsistentwithitincertainclauses.Asweshow,relativelyfewpartnercountriesexhibit‘redlines’againstmostUNmodel-typeprovisions,andforsomecountriesthereissignificantpotentialtorenegotiate.

Thepaperbeginswithareviewofliteraturestudyingtheroleofthemodelconventionsandtheimpactofthedistributionoftaxingrights.Wemoveoninsection3todiscussthedatausedinthispaper.Section4thenanalysesthisdatatoconsiderthepastandpresentinfluenceoftheUNmodel–howwidelyareUNmodelprovisionsusedinbilateraltreaties,andhowhasthischangedovertime?ItshowsthattheUNmodel’sinfluenceonthetaxationofinvestmentintolower-incomecountriesisgreaterthanmightbeexpected.Section5isfocusedonthefuture–whatisthepotentialforgreateruseofUNmodelprovisions?Bystudyingtheimpliedandexplicitlystatedpreferencesoflower-incomecountriesandtheirtreatypartners,weidentifytheprovisionsthathavethestrongestsupportamongtheformer,andtheleastwidespreadoppositionamongthelatter.WhatemergesisapictureofseveraltreatyprovisionsthatalreadyrepresentthedistinctivenormativeunderpinningofaUN-ledinternationaltaxregime,orwhichhavethepotentialtodoso.

2Literaturereview

Thereisgrowingdebateaboutthecostsandbenefitsoftaxtreatiestolower-incomecountries(ActionAid2016;BeerandLoeprick2021;BrooksandKrever2015;Eyitayo-Oyesode2020;IMF2014;Kangave2009;LeducandMichielse2021;Pistone2010;Shepherd2013).Inpart,theargumentagainstthemrestsonthemisuseoftreatiestoobtainbenefitsnotintendedwhentheywereconcluded,principallythrough‘treatyshopping’viainvestmenthubs.Yetevenifthisissueweretoberesolved,thebalancebetweensourceandresidencetaxation–theextenttowhichtreatiescurbtaxingrightsovercapitalandserviceimports–posesachallengeforlower-incomecountriesthatareoverwhelminglyintheimportingposition.Theevidenceforaneffectoftaxtreatiesonthevolumeofinvestmentflowingintolower-incomecountriesisdecidedlymixed,whilethecostsfromreducedsourcetaxation–thoughhardtoquantify–arecertain.Asaresult,someauthorshavearguedthatthecurrenttaxtreatyparadigmisinherentlyproblematicforlower-incomecountries.OthersfocusonrebalancingtaxingrightstowardsthesettlementfoundintheUNmodel,ratherthanthatoftheOECD.AccordingtoEricZolt:

Whilethetraditionalfocushasbeenonwhetherdevelopingcountriesshouldenterintotaxtreatieswithdevelopedcountries,thebetterquestionsmaybewhatformthetreatiesshouldtakeandwithwhomdevelopingcountriesshouldenterintotreaties.(Zolt2018:147)

Themodeltreatiesthereforematteragreatdeal,becausetheyreflectdifferentpositionsonhowmuchthesourcestateshouldgiveupitstaxingrightsonenteringintoatreaty.Manylower-incomecountrieshavenegotiatedtreatiesoverdecadeswithouttheirownnational

9

policy.ThisleavestheUNmodelasthemainresourceonwhichtheycandraw,alongsideanyrelevantregionalmodels(Mutava2019).

SeveralstudieshavealreadybeenundertakenontheimportanceoftheimpactoftheUNmodel(comparedtotheOECDmodel)intaxtreatynegotiations.AfirstresearchprojectontheimportanceoftheUNmodelwasundertakenbyWijnenandMagenta(1997)attheInternationalBureauofFiscalDocumentation(IBFD),commissionedbytheAd-hocCommitteeofExpertsonTaxMattersattheUN.Thisanalysedtake-upofdistinctiveprovisionsoftheUNmodelintreatiesconcludedbetween1980and1997.Afollow-upresearchontreatiesconcludedbetween1997and2013wasconductedbyWijnenandDeGoede(2013).Thesestudiesfoundthat,unsurprisingly,theUNmodelwasmostinfluentialinnegotiationsbetweentwonon-OECDcountries,followedbynegotiationsbetweenanon-OECDandanOECDcountry,andleastinfluentialinnegotiationsamongOECDcountries–though‘UNclauses’haveevenbeenincludedinthelatter.Inthe2014study,theauthorsconcludedthat‘specificprovisionsoftheUNModelhaveunmistakablyobtainedasolidpositioninthenegotiationoftaxtreaties’.However,theyfoundgreatvarietyintheinfluenceofspecificclauses.Someenjoyedaparticularlyhighuptake,suchasthepermanentestablishment(PE)provisions,article14,andarticle13(4),whereasmostotherswerefoundlessfrequently.AneditedvolumebyLangetal(2012)investigatestheinfluenceofbothmodelsonnationalpractice.Inhisgeneralreport,PistoneshowsthatseveralUNmodelclauses(inparticularwithrespecttoarticles5,7,12and14)areveryimportantincountries’taxtreatypractice,includingthepracticeofsomeOECDmembercountries.

Severalotherstudieshavesystematicallyinvestigatedthepatternsofretentionoftaxingrightsacrosssmallersamplesoftreaties,oftenusingvariationsbetweentheUNandOECDmodelsastheiryardstick(Baistrocchi2008;Brooks2007;Daurer2014;DaurerandKrever2012;Li2012).Forexample,DaurerandKrever(2012)findgreaterretentionofsourcetaxingrightsinAsiancountries’treaties,comparedwiththoseofAfricancountrieswiththesamecounterparts.FalcãoandMichelrecentlyobservethattheUNarticle8Bonshippingiswidelyusedbyasmallgroupofcountries,mostlyinAsia(FalcãoandMichel2021).Hearson(2018)demonstratesthatpowerasymmetriesandlackofnegotiatingexperiencetranslateintogreaterrestrictionsonsourcetaxingrightswhenlookingatlesspoliticallysalientUNmodelprovisions,suchasthoseonpermanentestablishment.

AnarticlebyAshandMarian(2019)analysestheextentof‘transnationalconsensusonthelegallanguagecontrollinginternationaltaxmatters’,usingadatasetofover4,000bilateraltaxtreatiesand16modeltaxtreatiespublishedbytheUN,OECDandUS.TheyextractthetextintodifferenttopicsfollowingIBFDclassificationandprocessitusingnaturallanguageprocessingtechniques.Finally,theycalculatepairwisesimilaritybetweentreatiesinforceineachyearandmodeltreaties.Theyfindclearevidenceofconvergenceinthelanguageofbilateraltaxtreatiesovertime,whichismostpronouncedinareasrelatedtotransferpricing,taxationofbusinessincomeandmutualagreementprocedures.Thereislessconvergenceindefinitionalissues,doubletaxationreliefandtaxcollectionassistance.Theirfindingsontheroleofthetwomodelsareworthquotingatlength:

WefindtheOECDModeltobethemostinfluentialmodel.IntheyearsfollowingtheadoptionofanewOECDModelthereisacleartrendofconvergenceinnewlyadoptedbilateraltaxtreatiestowardsthelanguageofthenewOECDModel....WealsofindthatmodeltreatiespublishedbytheU.N.havehistoricallyhadlittleobservableeffectintheshort-tomedium-term.However,currenttreatypracticesseemtoalignthemselveswiththeU.N.Modelof2011morethanwiththeOECDModel.Itisthereforereasonable

10

toacceptanargumentaccordingtowhichU.N.taxpoliciesmayhavealong-termeffect,representingaslowshiftfromresidencetosource-basedtaxation,evenamongdevelopedcountries.

(AshandMarian2019:190)

Thisshiftmayalsobeunderstatedbytheanalysisoftextualsimilarity.Asweshowlater,theadoptionbytheOECDofaUNmodel-typeprovision–notably13(4)–mayreducetheuseofdistinctivetextfromtheUNmodel,whichbeliesasubstantiveshiftinglobalnormstowardsthosefirstintroducedbytheUN.

TherecentshiftinemphasistowardstheUNmodelreportedbyAshandMarianmayreflectlimitedtake-upoftherevisedarticle7oftheOECDmodeladoptedin2010,andmanycountries’preferencetoretainarticle14inspiteofitsdeletionfromtheOECDmodel.SinceAshandMarian’sstudy,thedegreeofsimilaritybetweentheUNandOECDmodelshasdecreasedoverall.Inparticular,the2017and2021updatesoftheUNModelConventionintroducedanumberofdistinctivefeatures,suchasarticles12A,12B,13(6)and13(7).

ThebodyofresearchatpresentdrawsconclusionsabouttheuptakeofUNmodelprovisionsintreatiesconcludedbycertaincountries,aswellasinaggregate.Yet,thereisawidevariationbetweencountries’treatynetworks,andacleardifferenceinpreferencebetweendifferentgroups,mostobviouslybetweenOECDmembersandothers.Ifweconsidertreatieswithinabipolarregimecomplex,weshouldstudytheinfluenceofthetwomajormodelsindependentlyinthetreatiesofcountriesmostdisposedtofolloweachofthem.TounderstandtheUN-ledtreatyregimewethereforeneedtofocusontreatiesconcludedbylower-incomecountries,whoseinterestsaregivenspecialconsiderationintheUNmodel.Further,weshoulddrilldownsystematicallyintothetrendsweobserve,tocombinesystem-levelobservationswiththepictureatcountrylevel,andstudyhowthisischangingovertime.

3Aboutthedataused

Whencountriesnegotiatetaxtreaties,theystartfrommodels.Whilesomecountrieshavetheirownmodels,thesearecloselyalignedto–andinmanycaseslargelyidenticalto–themodeltaxconventionsdevelopedbytheUNandOECD.Thisstandardisationgreatlyassistswithnegotiationandinterpretation.Italsomakestaxtreatiesverysuitableforlarge-scalecomparativeanalysis.Inmostcases,thepresenceorabsenceofaphraseorparagraphclearlyindicatesthepresenceorabsenceofthecorrespondingsourcetaxingright.Thecomparativestudiesoftreatycontentcitedabovearepredicatedonthisstandardisation.

TheICTDTaxTreatiesExplorerdataset,updatedinpreparationforthisreport,isthemostcomprehensiveattempttostandardiseandanalysethecontentoftaxtreaties.1Itcomprises2,615bilateraltaxtreaties,331bilateralamendinginstruments,andmodificationsthroughtheG20/OECDMultilateralInstrumenttoImplementTaxTreatyRelatedMeasurestoPreventBEPS(MLI),signedupto15March2023.2Asfaraspossible,thisincludesalltreatiessigned

1

2

Thedatasetwasupdatedforthispaper(toversion2.1.0)withsupportfromtheUNDepartmentofEconomicandSocialAffairs,whileitsoriginaldevelopmentwassupportedbytheWorldBank,IntergovernmentalGroupof24onInternationalMonetaryAffairsandDevelopment(G-24),andActionAidInternational.Itcanbeexploredonthefollowingwebsite:

https://www.treaties.tax/

.

Treatiessignedbeforetheindependenceofacountryfromacolonialpower,multilateraltreaties,andMLImodificationsareincludedinthedataset,buthavebeenexcludedforsomepartsoftheanalysis.

11

byasampleof118countriesdesignedtocoverasmanylow-andmiddle-incomecountriesaspossible,whileexcludingafewupper-middle-incomecountrieswithlargetreatynetworksthatwerebeyondcodingcapacity.Thesampleisthosethatareorwereuntilrecentlylow-andlower-middle-incomecountries,allcountriesinAfrica,andallmembersoftheG-24(samplecountries).3Mosthigh-income(andsomeupper-middle-income)countries,includingmostOECDcountries,arenotpartofthesample,buttheyappearintheanalysisascounterpartstothesamplecountries(partnercountries).ListsoftreatieswerecompiledfromtheIBFD,supplementedwithgovernments'ownlistspublishedonline.

UsingtheUNandOECDmodelsasitsstartingpoint,thedatasetcodesthecontentofeachtreatyaccordingtostandardisedvariationsbetweenthearticles.Eachofthefieldsinthisdataset,listedinTable1,isbasedonaprovisionofthemodeltreaties:adifferencebetweentheUNandOECDmodels,aclausethatisinbothmodelsbutdoesnotalwaysappearinnegotiatedtreaties,oravaluethatthemodelsleaveopentobilateralne