Special Features of the UN Model Convention

1. S. 618Introduction

The purpose of double tax treaties is to “promote international trade, investment, and development”. However, some people and countries have abused these instruments to gain benefits they were not intended to have, affecting the economies around the world. Developing countries’ economies rely much heavier on corporate income taxes than developed countries since most of their economies have a capital import nature. In this light, developing countries have especially suffered from abusive schemes. Hence, the need for anti-abuse provisions in tax treaties is of the utmost importance for these countries.

There is no universal definition of the term “abuse of treaties”. This term means different things to different people. For this reason, countries have tried to address these issues in a different manner which has unleashed a response from governments to tax avoidance strategies in a highly uncoordinated way at both domestic and international levels. Before the OECD’s BEPS Action Plan (hereinafter “BEPS” or “BEPS Action Plan”), the OECD Committee of Fiscal Affairs (hereinafter “OECD Committee”) and the United Nations Committee of Experts on International Cooperation in Ta...