International arbitration best way to settle double taxation disputes

  • 13 June 2000

World business tax experts have called on governments to accept compulsory international arbitration to resolve cross-border tax disputes, particularly those arising from conflicting interpretation of double taxation conventions.

The Taxation Commission of the International Chamber of Commerce (ICC) recommended that compulsory and binding arbitration in international tax disputes should be adopted in bilateral or multilateral tax conventions.

The commission, whose members are corporate tax specialists from leading international companies, said that the 29-nation Organization for Economic Cooperation and Development (OECD) in Paris would be an appropriate forum for developing such instruments.

The statement said that, based on ICC’s broad experience in commercial arbitration, members of the commission believed that this form of dispute resolution was both attractive and effective. “It presen ts significant advantages to businesses and governments.

“These include, not only the cost-effective and equitable resolution of tax controversies, but also the enhancement of global economic growth and development through elimination of unintended instances of double taxation.”

The statement drew attention to perceived shortcomings, including delays and procedural conflicts, in the mutual agreement procedure provided in most bilateral tax conventions as a means of resolving disputes about their application.

“Binding and compulsory arbitration can eliminate or alleviate many of these concerns. Arbitration always reaches a conclusion, provides for impartial determinations with proper taxpayer participation, and applies law rather than expediency. While arbitration may also present delays, the process is orderly, predictable and transparent.”