The aims and objectives of double taxation agreements

Abstract

The aims and objectives of double taxation treaties are indeed several. This explains the change of name of the OECD Model Convention as we know it today, since the Convention does 'not deal exclusively with the elimination of double taxation but also addresses other issues, such as the prevention of tax evasion and non-discrimination. Although one may argue that the elimination of double taxation is the primary objective of such a treaty, it has been seen how there do remain several other reasons for having a double taxation treaty with another State. It is fundamental that a taxpayer cannot be compelled to pay tax twice. This concept has been upheld ever since, and all States agree that it would be unfair to charge tax in such a manner. Double taxation treaties have a primary function of serving this purpose. Besides eliminating double taxation, double taxation treaties also grant legal certainty Knowing where one is going to be taxed is fundamental. Regulation of double taxation is nothing more than establishing which State has jurisdiction to tax. With the help of a double taxation treaty there automatically exists a degree of certainty as to where and how taxation shall be paid. Double taxation treaties contain several Articles. Co-operation between tax administrations is fundamental in eliminating tax evasion. Double taxation treaties provide for such cooperation. Financial services are extremely mobile and it is in nobody's interest that harmful activities move from one committed jurisdiction to another that fails to meet the required standards of transparency and exchange of information. The fact that a large number of onshore and offshore financial centres have committed to the same principle demonstrates the vast improvements done aimed at ultimately achieving a level playing field.