Размышления женщины о геополитике. Татьяна Александровна Югай

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      Historic background of the modern international tax law

      First concerns about the role of tax havens in money laundering and tax evasion had been arisen as early as at the beginning of 1920^th. Many national and international rules addressing double taxation of individuals and companies have been originated from the principles developed by the League of Nations in the 1920s. However, it took the international community almost a century to join forces in combating tax avoidance via offshores.

      Initially, international legislative efforts were focused on preventing double taxation in order to promote international investment process. During 1923—1927, a group of international experts under auspices of the League of Nations drafted the Bilateral Convention for the Prevention of Double Taxation in the Special Matter of Direct Taxes dealing with income and property taxes, the Bilateral Convention for the Prevention of Double Taxation in the Special Matter of Succession Duties, the Bilateral Convention on Administrative Assistance in Matters of Taxation and the Bilateral Convention on [Judicial] Assistance in the Collection of Taxes. This work led to drawing up the first Model bilateral convention (1928) and later on the Model Conventions of Mexico (1943) and London (1946). Neither of these Model Conventions, however, was fully and unanimously accepted.

      Specifically, the League of Nations group decided that international tax issues should be addressed not by a multilateral global agreement, but at bilateral level. As a result, since the 1920s countries had signed thousands of bilateral «double-tax treaties» that followed the general League of Nations guidelines of source-based taxation and arm’s length pricing, but differed in a myriad of specific ways. While international trade was governed by a multilateral agreement since 1947, namely, the General Agreement on Tariffs and Trade (GATT), to date no such a multilateral treaty exists for corporate taxes48.

      In 1954, the focus of action in the field of international taxation shifted from the League of Nations to the Organization for European Economic Co-operation and further on to the OECD. On 30 July 1963, the Council of the OECD adopted the Recommendation concerning avoidance of double taxation and published a new Model Convention and Commentaries in 1977.

      According to the OECD, «International juridical double taxation can be generally defined as the imposition of comparable taxes in two (or more) States on the same taxpayer in respect of the same subject matter and for identical periods. Its harmful effects on the exchange of goods and services and movements of capital, technology and persons are so well known that it is scarcely necessary to stress the importance of removing the obstacles that double taxation presents to the development of economic relations between countries». Correspondingly, «the main purpose of the OECD Model Tax Convention on Income and on Capital is to provide «a means of settling on a uniform basis the most common problems that arise in the field of international juridical double taxation»49. Since 1963, the OECD Model Convention has extended its influence far beyond the OECD area serving as a pattern for tax treaties between member and non-member countries and even between non-member countries.

      In the mid-1960s, the United Nations renewed its interest in the problem of double taxation as part of its action to promote flows of foreign investment to developing countries. The UN stated that «The growth of investment flows from developed to developing countries depends to a large extent on what has been referred to as the international investment climate. The prevention or elimination of international double taxation – i.e. the imposition of similar taxes in two or more States on the same taxpayer in respect of the same base – whose effects are harmful to the exchange of goods and services and to the movement of capital and persons, constitutes a significant component of such a climate»50.

      In 1980, the United Nations published the UN Model Double Taxation Convention between Developed and Developing Countries, which was preceded by the Manual for the Negotiation of Bilateral Tax Treaties between Developed and Developing Countries (1979). Like all model conventions, the UN Model Convention is not enforceable, i.e. its provisions are not legally binding. The UN Model Convention reproduces many Articles of the OECD Model Convention.

      Ironically enough, the UN and OECD Conventions not only boosted flows of foreign direct investments but also had created a legal basis for massive tax avoidance. Multinational corporations took advantage of legal loopholes and skillfully used aggressive tax planning in order to hide their assets and profits in offshores. That became possible due to concluding bilateral tax treaties on avoiding double taxation. Shortly after successfully creating a worldwide network of more than 3,000 bilateral tax treaties, the OECD committed itself to developing an anti-offshore legislation.

      The Convention on Mutual Administrative Assistance in Tax Matters represents a kind of transitional law from protecting MNEs against double taxation to preventing double non-taxation by the same MNEs. The Convention was developed jointly by the OECD and the Council of Europe in 1988 and was amended by the Protocol in 2010. The Convention provides for administrative co-operation between states in the field of assessment and collection of taxes, in particular, with a view to combat tax avoidance and evasion. This co-operation ranges from exchange of information, including automatic exchanges, to recovery of foreign tax claims51. 106 jurisdictions currently participate in the Convention, including 15 jurisdictions covered by territorial extension. This represents a wide range of countries including all G20 countries, all OECD countries, all BRICS, major financial centres and an increasing number of developing countries.

      However, it was not until the late 1990s that world powers had begun their first coordinated attack on offshore shell games.

      Notably, first measures to prevent harmful tax competition from the part of low tax jurisdictions were undertaken by the European authorities. On 1 December 1997, the EU Council of Economics and Finance Ministers (ECOFIN) adopted the Code of Conduct for business taxation. The Code is the EU’s main tool for ensuring fair tax competition in the area of business taxation. It sets out clear criteria for assessing whether or not a tax regime can be considered harmful. All Member States have committed to adhering to the principles of the Code. The Code of Conduct requires Member States to refrain from introducing any new harmful tax measures («standstill») and amend any laws or practices that are deemed to be harmful in respect of the principles of the Code («rollback»). The Code covers tax measures (legislative, regulatory and administrative) which have, or may have, a significant impact on location of business in the EU.

      The criteria for identifying potentially harmful measures include:

      – an effective level of taxation which is significantly lower than the general level of taxation in the country concerned;

      – tax benefits reserved for non-residents;

      – tax incentives for activities which are isolated from the domestic economy and therefore have no impact on the national tax base;

      – granting of tax advantages even in the absence of any real economic activity;

      – the basis of profit determination for companies in a multinational group departs from internationally accepted rules, in particular those approved by the OECD;

      – lack of transparency52.

      In 1998, the OECD published the report «Harmful Tax Competition: An Emerging Global Issue». The report distinguishes between СКАЧАТЬ