Improving the Resolution of International Tax Disputes

Abstract

The dramatic increase in international trade and investments and related phenomena under the general heading of Globalization have multiplied the situations in which international tax disputes can arise, both between taxpayers and governments but also, and in some ways, more importantly, between governments themselves. These disputes may involve transfer pricing issues, differing income characterization rules, disagreement about the existence of a permanent establishment, or more generally, diverging views on the appropriate exercise of potential taxing rights by the source country jurisdiction and the corresponding obligation of the residence country to provide double tax relief.
In the current circumstances, it seems inevitable that the frequency and complexity of international tax disputes will increase and, likewise, the need for some mechanism to solve them is increasingly important. This paper will review briefly the existing mechanisms for dealing with such disputes, looking at their structure and application, and then consider some of the current proposals to modify and improve the procedures, focusing principally on the work at the OECD.