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Tax treaties for ‘competitiveness’: a ‘poisoned chalice’ for poorer countries?

POSTED ON January 22nd  - POSTED IN Blog, Tax
Lee Sheppard: don't sign OECD treaties!

Lee Sheppard: don’t sign OECD treaties!

This has been (mildly) adapted from a post written by FG staff for Naked Capitalism and the Tax Justice Network

Tax treaties are an arcane but important part of the international trade and investment system. When a business from one jurisdiction invests in another, the question then arises as to which jurisdiction gets to tax which bits of the income that the investment generates. So countries have for years signed Double Tax Treaties or Double Tax Agreements (DTAs) with each other, to sort out these and other questions. Since the global treaty system began to emerge (after Austria-Hungary signed one with Prussia in 1899), the core aim of the system’s designers has been to make sure that multinationals don’t get taxed twice on the same income: so-called ‘double taxation’. Countries sign them because they think they will attract (and smooth the flow of) inward investment.

This will make their country more ‘competitive,’ the thinking goes.

All of which may sound like perfectly reasonable ideas.  But of course, beneath these reasonable ideas there’s a world of possible mischief.

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