Abstract
Part I, Chap. 1, showed that there is a theoretical problem due to the fragmentation between direct and indirect taxes. This issue has generated a substantial cost, because the isolation of tax regime has created a problem that has kept growing. Chapter 2 then explored the tax-related cases. The DISC keeps coming up again and again, and no one knows when this costly set of ongoing disputes will come to an end, in the meantime wasting human capital, distracting focus from other important issues, and weakening the WTO more and more. Without a solution, the WTO will continue to suffer, as it has been for almost 40 years, with no satisfying resolution. Chapter 2 also drew attention to some potential problems related to tax rules that may violate WTO rules.
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- 1.
The Vienna Convention on the Law of Treaties defines a reservation as “a unilateral statement, however phrased or named, made by a State, when signing, ratifying, accepting, approving or acceding to a treaty, whereby it purports to exclude or to modify the legal effect of certain provisions of the treaty in their application to that State.” UN Doc. A/CONF.39/27, Art. 2(1)(d) (1969).
- 2.
- 3.
Sweet writes “perhaps the next ‘miracle’ in the evolution of the international tax system will be the development of a network of multilateral tax treaties to deal with, inter alia, the taxation of E-commerce” (Sweet, 1998, p. 2008).
- 4.
See Organization For Economic Co-Operation and Development, Transfer Pricing Guidelines For Multinational Enterprises and Tax Administrations (2001); see, also, Convention on the Elimination of Double Taxation in Connection with the Adjustment of Profits of Associated Enterprises, 90/436/EEC, 1990 O.J. (L 225) 10, (July 23, 1990).
- 5.
Report to the Council on the Work of the Second Session of the Committee, Held in Geneva from May 22nd to 31st, 1930, League of Nations Doc. C.340.M.140.1930.II. (1930), available at http://www.law.duke.edu/shell/cite.pl?10±Duke±J.±Comp.±&±Int’l±L.±43#F64.
- 6.
Report to the Council on the Fifth Session of the Committee, Held at Geneva from June 12th to 17th, 1935, League of Nations Doc. C.252.M.124.1935.II.A.
- 7.
U.N. Department of Economic and Social Affairs, Report of the Group of Experts on Tax Treaties Between Developed and Developing Countries on the Work of its Seventh Meeting, U.N. Doc. ST/ESA/79, U.N. Sales No. E.78.XVI.1 (1978).
- 8.
American Law Institute, Federal Income Tax Project – International Aspects of United States Income Taxation II: Proposals on United States Income Tax Treaties 3 (1992).
- 9.
Also see the OECD news section claiming that the its Model Tax Convention, “used by OECD and other countries as a basis for the negotiation, application and interpretation of bilateral tax treaties, of which there are now more than 2500 in force around the world.” http://www.oecd.org/document/11/0,2340,en_2649_33747_35318475_1_1_1_1,00.html.
- 10.
Avi-Yonah, Tax Competition, p. 5. John M. Olin Center For Law and Economics (2007).
- 11.
Qureshi, p. 8.
- 12.
See, for example, GATS negotiation.
- 13.
Joseph Guttentag, Deputy Assistant Treasury Secretary for International Tax Affairs, “Statement at Finance Committee Hearing on Internet,” 137 DTR L-1 (July 17, 1998).
- 14.
United Nations Model Double Taxation Convention Between Developed and Developing Countries 12 (1980).
- 15.
See Convention Between the Nordic Countries for the Avoidance of Double Taxation With Respect to Taxes on Income and on Capital, Sept. 23, 1996, Den.–Faroe Is.–Fin.–Ice.–Nor.–Swed., 98 TNI 9-25, Jan. 14, 1998, available at LEXIS, TNI File. Three of the parties to the Nordic Convention are EU Members: Denmark, Finland, and Sweden.
- 16.
The nations of the South Asian Association for Regional Cooperation (SAARC) are Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka.
- 17.
Council of Europe-Organisation for Economic Co-operation and Development Convention on Mutual Administrative Assistance in Tax Matters, Jan. 25, 1988, 90 T.N.I. 26-52, Europ. T.S. No. 127, available at http://conventions.coe.int/Treaty/en/Treaties/Html /127.htm.
- 18.
D’Amato (1971, p. 164), citing US Model Treaty, note 18, art. 26, 1 Tax Treaties (CCH) P 210.26 (exchange of information and administrative assistance); OECD Model Treaty, note 17, arts. 26 (exchange of information), 27 (assistance in the collection of taxes), 1 Tax Treaties (CCH) P 200.26-27.
- 19.
- 20.
Avi-Yonah, International Tax Law, p. 168.
- 21.
He contends that bringing the two regimes together in any format without a clearer articulation of the benefits is unwise, because “international tax laws should depend upon well-developed tax policies and not illusory analogies and characterizations drawn from other fields” (Rosenbloom 1994, p. 598).
- 22.
American Law Institute, Federal Income Tax Project: International Aspects of United States Income Taxation II, Proposals on United States Income Tax Treaties 1 (1992).
- 23.
Problems could be expected, of course, as the Doha Round illustrated, but that does not mean the WTO has not earned the trust of many.
- 24.
Reports of the International Law Commission on the Second Part of its 17th Session and on its 18th Session, [1966] 2 Y.B. Int’l L. Comm’n 169, 205-06, UN Doc. A/6309/Rev.1 (1966).
- 25.
Ring, p. 1700.
- 26.
Ring, p. 1700.
- 27.
See a similar suggestion for social exemption made by Rodrik (2007).
- 28.
GATT Article XX.
- 29.
GATT Article XX.
- 30.
This article reads: Non-application of the Agreement between Particular Contracting Parties 1. This Agreement, or alternatively Article II of this Agreement, shall not apply as between any contracting party and any other contracting party if: (a) the two contracting parties have not entered into tariff negotiations with each other, and (b) either of the contracting parties, at the time either becomes a contracting party, does not consent to such application. 2. The Contracting Parties may review the operation of this Article in particular cases at the request of any contracting party and make appropriate recommendations.
- 31.
This article reads:
Article XIII: Non-Application of Multilateral Trade Agreements between Particular Members 1. This Agreement and the Multilateral Trade Agreements in Annexes 1 and 2 shall not apply as between any Member and any other Member if either of the Members, at the time either becomes a Member, does not consent to such application. 2. Paragraph 1 may be invoked between original Members of the WTO which were contracting parties to GATT 1947 only where Article XXXV of that Agreement had been invoked earlier and was effective as between those contracting parties at the time of entry into force for them of this Agreement. 3. Paragraph 1 shall apply between a Member and another Member which has acceded under Article XII only if the Member not consenting to the application has so notified the Ministerial Conference before the approval of the agreement on the terms of accession by the Ministerial Conference. 4. The Ministerial Conference may review the operation of this Article in particular cases at the request of any Member and make appropriate recommendations. 5. Non-application of a Plurilateral Trade Agreement between parties to that Agreement shall be governed by the provisions of that Agreement.
- 32.
- 33.
It is interesting to note that the USA has used it the most among all WTO members. Paragraph 320 of the WTO analytical index cite only the USA “The United States invoked Article XIII:1 with respect to Romania, Mongolia, Kyrgyz Republic, Georgia, Moldova and Armenia. As of 31 December 2002, the United States had revoked its invocation of Article XIII with respect to Romania, Mongolia, the Kyrgyz Republic and Georgia. El Salvador invoked Article XIII with respect to China on 5 November 2001 and Turkey invoked it with respect to Armenia on 29 November 2001.” The index, Volume, 1. 97. http://www.wto.org/english/res_e/booksp_e/analytic_index_e/wto_agree_04_e.htm#articleXIIIA.
- 34.
GATT, art. XIX(1)(a).
- 35.
Joined Cases 21 to 24/72, International Fruit Co. v. Produktschap voor Groenten en Fruit, 1972 E.C.R. 1219, 1227, 2 C.M.L.R. 1, 22 (1975).
- 36.
Article XX, for example, offer countries the right to violate the WTO if the violation is for reasons related to public morals, health, or national security.
- 37.
Article XIII of the WTO.
- 38.
China was one of the original contracting parties of GATT in 1948, but did not participate actively; in 1986, China applied for “resumption” of its membership; it was granted full membership in 2001. Halverson writes: “No country has endured as lengthy an accession process to the GATT/WTO as China, nor has any country acceding to the WTO been asked to take on as many concessions as the price for admission” (Halverson 2004, pp. 319, 323).
- 39.
The World Bank, 2001, p. 1.
- 40.
Koh provided five reasons, including self-interests: (1) Reasons of power and coercion (2) Reasons of self-interest (3) Reasons of liberal theory, both rules and identity (4) Communitarian reasons (5) Legal process reasons.
- 41.
I thank Professor Alford for this comment.
- 42.
“In 55 of the 207 complaints, complaints were withdrawn or abandoned without any ruling having been made, or without any settlement or concession having been achieved” (Hudec 1993, p. 6).
- 43.
The seven cases with negative outcomes after rulings of violation were: 1. United States: Prohibition on Imports of Tuna and Tuna Products from Canada, BISD 29th Supp. 91 (1983). 2. United States: Imports of Sugar from Nicaragua, BISD 31st Supp. 67 (1985). 3. Canada: Countervailing Duty on Boneless Manufacturing Beef, GATT Doc. SCM/85 (1987). 4. United States: Section 337 of the Tariff Act of 1930, BISD 36th Supp. 345 (1990). 5. European Community: Antidumping Regulation on Imports of Parts and Components, BISD 37th Supp. 132 (1991). 6. United States: Antidumping Duties on Stainless Pipes and Tubes from Sweden, GATT Doc. ADP/47 (1990). 7. Canada: Restriction on Imports of Ice Cream and Yoghurt, BISD 36th Supp. 68 (1990).
- 44.
It does not apply to every governmental actions; it applies only to contracts that cross a threshold, which is 182,000.
- 45.
Acquisition Advisory Panel, Report of the Acquisition Advisory Panel to the Office of Federal Procurement Policy and the United States Congress 1 (Draft Final Report, Dec. 2006).
- 46.
Canada, the European Union with its fifteen Member States, Hong-Kong China, Iceland, Israel, Japan, Korea, Lichtenstein, Norway, Singapore, Switzerland, and the United States; see Verdeaux (2003, pp. 713, 716).
- 47.
Government Procurement: General Overview. http://www.wto.org/english/tratop_e/gproc_e/overview_e.htm.
- 48.
Current members are: Canada; the European Communities, including its 27 member States; Hong Kong, China; Iceland; Israel; Japan; Korea; Liechtenstein; the Kingdom of the Netherlands with respect to Aruba; Norway; Singapore; Switzerland and the United States. Nineteen other WTO members with observer status include: Albania, Argentina, Armenia, Australia, Cameroon, Chile, China, Colombia, Croatia, Georgia, Jordan, the Kyrgyz Republic, Moldova, Mongolia, Oman, Panama, Sri Lanka, Chinese Taipei and Turkey. In addition, four intergovernmental organizations, namely the International Monetary Fund (IMF), the International Trade Centre (ITC), the Organization for Economic Co-operation and Development (OECD), and the United Nations Conference on Trade and Development (UNCTAD) also have observer status in the WTO Committee on Government Procurement, which administers the Agreement (Government Procurement: General Overview, http://www.wto.org/english/tratop_e/gproc_e/overview_e.htm).
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Althunayan, T. (2010). The Tax Agreement Option. In: Dealing with the Fragmented International Legal Environment. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-04678-0_7
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