Can Anyone Be Trusted to Enforce National Treatment Disciplines With Respect to Tax Measures?

Because the traditional non-discrimination article of tax treaties seemingly provides protection against only the most blatant discrimination against non-residents and non-nationals of a taxing State, governments may be emboldened to adopt “anti-abuse” rules that are in reality disguised trade barriers. On the other hand, trade disciplines in non-tax agreements may include protections against discriminatory taxes that non-specialist courts interpret in expansive ways, contrary to the wishes of tax authorities. An OECD project in the mid-2000s was an opportunity for governments to re-think the piecemeal nature of the traditional non-discrimination article in tax treaties and develop a coherent national treatment system that takes into account legitimate tax policy concerns. Instead, the project resulted in a mishmash of changes that largely blessed the various discriminatory practices that governments had adopted to that date.

If tax authorities want to continue to play a leading role in developing international tax policy, they should consider whether a tax treaty approach that borrows concepts from non-tax agreements would better balance the interests of governments and taxpayers than the current version of Article 24 (and the Commentaries thereon).