The OECD-Model-Convention and its Update 2014

I. S. 176Introduction

The fight against global warming has been a hot political topic for the last two decades and is still getting warmer. Since the introduction of the first emissions trading schemes, the topic has also hit the world of tax law and policy. These emissions trading programmes present a number of domestic and international tax issues. First, there is no uniform treatment of emissions allowances in direct tax matters – not even in the European Union, although the institutional framework is harmonized. Basically, the domestic classification is up to the different states to determine. In such conditions, differences in qualification are more or less obvious.

With regard to cross-border situations, such potentially different domestic law treatment can have an impact on the tax treaty classification, as well. These inconsistencies could potentially lead to a failure to relieve double taxation, which in turn could increase compliance costs and potentially hinder further greenhouse gas reduction. These tax treaty issues have not been part of the OECD Model Tax Convention (OECD Model) itself, nor have they been dealt with in the Commentary thereto – until the 2014 Update. However, ...