We analyse the restrictions on source taxation of services in tax treaties, particularly those based on the model of the Organisation of Economic Co-operation and Development (OECD), and show that their spread has been accompanied by a widening deficit in services trade of developing countries, while the weakening of their attempts to protect their tax base through withholding taxes has resulted i. [...] Significantly, the widening of the net deficit has been more marked for upper-middle income countries, although the data must be treated with caution due to distortions in the attribution and valuation of services income for tax reasons.7 However, the data suggests that this is due to payments for international transport, as well as for telecommunications and computer services, where they heavily. [...] The issue of allocation of taxing rights came much more into focus in the second phase of the BEPS project from 2018, when it began to seriously address the implications for international tax of digitalisation and globalisation of the economy. [...] At the root of all these problems is the failure of the tax treaty models to deal adequately with taxation of income derived from a country from the performance of services. [...] The importance of a longer-term solution is evident from the priority given to negotiations through the UN for measures on taxation of income ‘derived from the provision of cross-border services in an increasingly digitalized and globalized economy’.31 This should entail a shift to a new paradigm, moving away from the one-sided perspectives fostered by the outdated concepts of residence and source.
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- Pages
- 80
- Published in
- Switzerland
Table of Contents
- RP 211 Front Cover.pdf 1
- RP 211 content.pdf 3
- 1. The Imbalanced Design of Tax Treaties 11
- 1.1 Tax Treaties and the Allocation of Taxing Rights 11
- 1.2 Spreading the OECD Standards 14
- Table 1: Comparison of OECD and UN Model Provisions on Source Taxation 15
- 1.3 The Lose-Lose Effects of the OECD’s Residence Standard 17
- 2. Estimating the Revenue Effects 21
- 2.1 Research Methodology 21
- 3. Overall Analysis 28
- Graph 3: Withholding Tax Revenue Losses as a Percentage of Corporate Tax Revenue 28
- 4. Conclusions 31
- APPENDIX 33
- Case Study: Argentina 33
- Domestic Legislation 33
- Argentina Table 1: Rates used to estimate the WT revenue on imports 33
- Treaties 34
- Argentina Table 2: Treaties in Force 35
- Analysis 38
- Argentina Table 4: Tax Revenue Losses by Country (top 10 countries) 40
- Case Study: Brazil 41
- Domestic Legislation 41
- Brazil Table 1: Rates used to estimate the WT revenue on imports40F 41
- Treaties 42
- Brazil Table 2: Treaties in Force 42
- Analysis 47
- Brazil Table 3: Tax Revenue Losses by Country 48
- Case Study: Colombia 50
- Domestic Legislation 50
- Treaties 50
- Colombia Table 3: Revenue Losses by Country 54
- Case Study: Kenya 58
- Domestic Legislation 58
- Kenya Table 1: Rates used to estimate the WT revenue on imports50F 58
- Treaties 58
- Analysis of the Data 61
- Kenya Table 3: Revenue Losses by Country 62
- Case Study: Nigeria 64
- Domestic Legislation 64
- Extensive lobbying by the construction industry due to low profit margins and excessive WT, along with revenue collection pressures led to fluctuations in WT rates during the review period (PwC, 2015). 65
- Treaties 65
- Nigeria Table 4: Revenue Losses by Country 68
- References 70
- RP Back Cover (2).pdf 80
- Blank Page 2
