OECD Arbitration in Tax Treaty Law

1. S. 72Introduction

It is widely known that cross-border trade and investment are facing a rising barrier due to the increase in double taxation and tax disputes between states. This situation has been discouraging international transactions and has created uncertainty for taxpayers and investors. Notwithstanding the international efforts to address this issue, it is still not clear whether the mechanisms currently employed are efficient enough or not.

In this context, this chapter will approach the principal tool in place to resolve tax treaty disputes, namely the mutual agreement procedure (MAP). The analysis mainly involves MAP developments in recent years, its deficiencies and the possible necessity of a supplementary mandatory arbitration clause to make tax treaty dispute resolution more effective and efficient.

The second section of this chapter presents a broad discussion of what tax treaty disputes are and how the UN and the OECD have addressed (or attempted to address) such disputes through the MAP.

On the other hand, the third section addresses the current shortcomings of the MAP as faced by countries and taxpayers, namely (i) the absence of an obligation that countries actually ...