We have also clarified the delicate concept of the place of effective management, which is the Tiebreaker test to solve cases where companies have a dual tax domicile, and we have provided an alternative provision that moves away from the place of the effective management test and refers the case to the mutual agreement procedure. A project on transfer pricing aspects of corporate restructurings is now under discussion online at www.oecd.org/ctp/tp/br. Please provide your comments by February 19, 2009. 3. Start of work on a multilateral VAT instrument (VAT). It is remarkable that 141 countries around the world have VAT, but there is no agreement on many important issues, such as the place of consumption. Take the 2008 update, which has just been approved with a series of interesting amendments based on OECD reports in recent years. For example, it introduces a binding arbitration clause to resolve difficult unresolved issues through the so-called agreement procedure, with broader and clearer comments on how the mutual agreement procedure itself works. In order to avoid double taxation, which has significant distorting consequences on cross-border trade and investment, countries have developed an extensive network of bilateral tax treaties.
However, in the absence of internationally agreed norms and an easily accessible set of draft provisions, negotiations on such bilateral agreements between countries would be extremely difficult and their application could give rise to divergent interpretations. This case study focuses on the coordination of internationally agreed standards to eliminate double taxation of income and prevent tax evasion. These standards are reflected in the network of more than 3,500 bilateral tax treaties that are concluded and interpreted and applied on the basis of these standards, which need to be constantly refined and adapted to new situations. When the OECD published its first draft model agreement in 1963, only a few dozen tax treaties were in force. Since then, the OECD Model Agreement has facilitated bilateral negotiations between countries and allowed for desirable harmonization between bilateral agreements, to the benefit of both taxpayers and national administrations. More than 3,000 global tax treaties are based on the OECD model, which is regularly updated. The full version of the OECD Model Agreement, including articles, commentaries, third country positions and historical notes, will be published next year. For two reasons, the situation becomes more problematic when it comes to resuming later versions of the comment.
Since subsequent commentaries may be based on different formulations in the articles of the OECD model — that is, articles that the two States have never actually signed — the courts may not be willing to follow the commentaries, as the corresponding articles have never been approved by the Government of that State. Second, courts will find it more complicated to rely on the VCLT, as states have not bilaterally negotiated subsequent comments, making it difficult to say that there is a subsequent agreement. Can the OECD Model Agreement, which will celebrate its 50th anniversary this year, continue to play its role in helping to make international taxation fairer and more manageable? Probably yes, although there are challenges. Conflicts of qualification may also be resolved through the cartel procedure described in Article 25(3) of the current OECD model. . . .