Multilateral Cooperation in Tax Law

S. 1341. Bilateralism vs Multilateralism

1.1. Overview

Globalization has changed the way of doing business, allowing taxpayers to exploit gaps and frictions that have always been present in existing bilateral treaties. The concept of an ambulatory OECD Model enables the OECD to better address tax issues arising from an economy that evolves over the years. Nonetheless, the OECD Model is not binding, and the effectiveness of its implementation in the tax treaty network is up to OECD member countries.

Hence, the MLI, was designed to modify existing bilateral tax treaties in a swift and coordinated manner, addressing BEPS concerns. Nonetheless, the research for a broad consensus on substantive rules is still perceived as a difficult challenge for multilateralism. Besides, states prefer negotiating tax treaties over a multilateral convention as tax treaties consider the bilateral specificities.

In light of the reasons mentioned above, in literature it is debated as to whether the shift from bilateralism to multilateralism rather implies a blending between these two overlapping forms. The following chapters aim to address the core definitions of bilateralism and multilateralism. This distinction s...