OECD Looks At Ways Of Improving Cross Border Tax Dispute Resolution

by Ulrika Lomas, for LawAndTax-News.com, Brussels

22 May 2003

The Organisation for Economic Cooperation and Development (OECD) has announced the launch of a new project designed to improve the speed and efficiency with which cross-border tax disputes ares resolved. The multilateral body recently explained that:

'As global trade and investment increases, the possibility of cross-border tax disputes necessarily increases as well. Left unresolved, these disputes can result in double taxation and a corresponding impediment to the free flow of goods and services in a global economy.'

The mutual agreement procedure (MAP) provided for under the terms of OECD model tax treaties has traditionally been the mechanism by which such disputes are resolved. However, the OECD is looking to streamline and improve the procedure, in order to ensure that each case involved in the MAP process will come to a satisfactory conclusion - rather than resulting in ongoing double taxation - within a reasonable timeframe.

To this end, according to the OECD:

'The OECD's Committee on Fiscal Affairs formed a Working Group charged with examining ways of improving the effectiveness of the MAP, including the consideration of other dispute resolution techniques which might be used to supplement the operation of the MAP.'

'The Working Group consists of government officials with expertise in tax treaties and government officials with expertise in transfer pricing. The Working Group is not expected to reach final conclusions but will report the results of its work to the CFA.'

The body went on to reveal that: 'The first meeting has been held and work is underway on gathering information from both business and governments on how the existing MAP is working and how it can be improved.'

Operational issues under discussion reportedly include topics such as the transparency of the procedures, the role of the tax payer in the process, the likely costs involved, and the establishment of a realistic timeframe for settlement. Substantive issues include the scope and purpose of Article 25, the interaction between the MAP and domestic law, time limitations, and the suspension of tax and interest.

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